The Feasibility of a Freelancing Business in Uncertain Times

Business start-up planning has been extensively covered over the past twenty years and longer, and without understating its importance or re-inventing the wheel, perhaps it has been overplayed. Much training is available on the Internet, including templates and guidelines provided by banks and the SA Department of Trade and Industry. To start a freelancing business can be a challenge – and then some. Thus, following a business plan infrastructure with the use of a project planning tool is the best route to follow.

Why perform a feasibility study?

The feasibility study is a vitally important step in the well-known business planning process, not only pre start-up. In fact, it is the most important step because, if the business idea is not feasible, there is no point continuing with it. There are often more reasons for the business to fail than to succeed. Many renowned business analysts believe that only one in forty new businesses succeed and materialise in accordance with their original plan. Another good time for doing a feasibility study is when a business needs to be restructured to increase profitability, improve production, reduce production costs and overheads, increase sales/services income, expand the market reach, and many other valid reasons.

In the normal scheme of business planning, one deals with deciding on what type of business entity one wants to set up such as a Sole Trader, a Partnership, a Private Company, a Close Corporation, and then the drafting of various reports are needed in order to gauge the feasibility and to make the right decisions going forward.

What information do you need to prepare a feasibility study?

The list of matters to be decided and the necessary analyses needed follows, such as are usually covered in the typical business plan.

  • The services or products to be offered.
  • Establish the professional standards and qualifications required to operate as a freelancer in your field of expertise.
  • The equipment and tools needed.
  • Start-up expenses, including legal and business analysis services.
  • Initial capital requirements.
  • The target market to be accessed and establish whether there is space for you in it.
  • The economy relating to that market, current demand, future growth opportunities.
  • Determine what barriers exist at present which may hinder your success.
  • How best to promote your products or services.
  • Distribution channels and agencies.
  • Operational plan.
  • Legal environment and statutory requirements
  • Establish a system of record keeping
  • Bank services needed – a separate bank account for the business is strongly advised.
  • If staff need to be employed, establish the Human Resource policies and SARS requirements.
  • Do the costing of each product and service very accurately.
  • Calculate selling prices based on all costs plus mark up.
  • Establish the total you personally need to earn per month. When an hourly rate will be charged for your work, you will need to calculate your hourly rate. 
  • Compare your prices to those pertaining to the freelance industry of your services.
  • Draft the projected financial plan, a detailed budget for twelve months.
  • Draft the projected cash flow for twelve months.
  • Draft a Break-Even analysis.
  • Draft a starting balance sheet.
  • Draft a SWOT Analyses – Strengths, Weaknesses, and Opportunities.

Some business plans have the feasibility study way down in a list similar to the above list, but perhaps a better view is that most of these tasks need to be done in order for the feasibility or viability of a business plan to be ascertained.

Assistance and collaboration

For an aspiring freelancer, these are all important steps to follow. It is also important to search for organisations and associations that provide vital services and advice for those in the various freelance fields. Let’s take as an example SAFREA (the Southern African Freelancer’s Association). They advocate for and support freelance workers in the communications fields. They also provide resources, tools, training, and networking to strengthen freelance careers. Their network includes hundreds of talented writers, editors, proof-readers, graphic designers, illustrators, researchers, translators, photographers, and other experts in media and communications. Another good example would be Project Management South Africa for freelance and professional project managers.

Membership associations like these are great for collaborating with fellow freelancers and professionals for professional advice, current industry standards relative to their professional fields, the current going rates for different work, up to date market research, training courses, and to finding available work.

As noted earlier in this article, the Internet is packed with valuable information such as from the DTI, SARS, the banks, and other websites through which one can glean the necessary information and assistance in one’s quest.

Freelancing is normally a challenging type of business to operate, but as business start-up and functionality are even more so during the pandemic and state of disaster, it is very important to ask your accountant for guidance and for help in drafting an accurate feasibility study and business plan. Wasting time and finances in going it alone would not be the preferred route to take.

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Employee Health and Wellbeing: A Strategic Priority for COVID-19 and Beyond

It goes without saying that no company, small or large, can win over the long run without energized employees who believe in the mission and understand how to achieve it.

Jack Welch, former CEO of GE

The health and wellbeing (HWB) of employees has a substantial impact on business success and sustainability, and this has never been more pronounced than during the lockdown.

Employee HWB is vital for a company to sustain itself during the lockdown, but making your employees’ HWB a strategic priority creates a competitive edge that will be crucial for success now and beyond COVID-19.

Why is employee HWB a strategic priority?

Employee HWB delivers significant benefits, which are well-documented and widely-known. These benefits, some of which are listed below, provide a company with a competitive advantage in a very constrained economic environment.

Benefits of Employee HWB 

  • Decreased rates of illness and injury
  • Reduce direct costs, such as providing healthcare
  • Reduce indirect costs, such as absenteeism and reduced productivity
  • Enhanced recruitment and retention of healthy employees
  • Reduced absenteeism
  • Increased productivity
  • Improved employee morale
  • Improved employee loyalty
  • Improved employee resilience during organisational change
  • Improved employee motivation
  • Increased employee innovation
  • Positive impact on business performance
  • Achieved company objectives


“Most successful and innovative organisations today make employee health and wellbeing a key focus of their business strategies. It is not something to which they simply pay lip-service: they spend a lot of time, energy and money in developing workplaces that enhance wellness and consider those to be a crucial component of their organisational business strategies,” says Freeman Nomvalo, CEO of the South African Institute of Chartered Accountants (SAICA). “These companies would therefore probably be more resilient during the pandemic, as employees are able to remain productive due to a supportive workplace environment.”

Employee HWB also provides an opportunity to make a positive difference, playing a leadership role in our communities and in our country.  

According to SAICA’s Health and Wellbeing Advisory Group (HWAG): “Measuring employee health and wellness provides an indication of the wellbeing of the organisation. It is also a direct indicator of the wellbeing of a country’s workforce, making health reporting a national priority and not just a corporate one. Health reporting can help organisations create and promote environments for healthy behaviours, which will extend not only to employees but also to their families. This can result in healthier workforces, as well as healthier cities and countries.”

“Such reporting also meets the government’s call to action for the private sector to partner with the public sector in responding to the challenge of NCDs [noncommunicable diseases]. This helps organisations fulfil their shared value and corporate citizenship obligations, and will have profound positive effects on individuals, companies and societies as a whole.”

So how can a company go about tapping into all these benefits of an employee HWB? As the saying goes: What is measured is managed… 

NCDs
Non-communicable diseases or NCDs, also known as chronic diseases, include cardiovascular diseases (like heart attacks and stroke), cancers, chronic respiratory diseases (such as chronic obstructive pulmonary disease and asthma) and diabetes, and are responsible for a staggering 41 million deaths each year, equivalent to 71% of all deaths globally.  

What is measured is managed…

Reporting on employee health has largely been neglected, but this element of company reporting has never been more important than it is now. 

HWAG believes that companies should report on the following components:

  • Occupational health and safety;
  • Provision of medical benefits for full-time workers;
  • A smoke-free workplace;
  • Mental wellness programme (e.g. Stress management, resiliency programmes, managing depression);
  • Employee assistance programme (EAP) access for counselling and intervention for those already at high risk (e.g. Stress, depression);
  • Family-friendly policies (e.g. Flexible work schedules or working remotely);
  • Access to healthy office design components based on special needs (e.g. Sit-stand desks in case of back pain);
  • Communal spaces where employees can eat, relax, interact with co-workers, or hold private conversations; and
  • Assessments of the health and wellness of its employees, such as a health risk assessment (HRA) survey or biometrics screening assessment or self-reported general health status of employees using a confidential survey or assessment tool.

This list of components also serves as a list of key focus areas. These components, many of which may have only received passing attention previously, may be prioritised and elevated as companies strive to ensure a safe and sustainable working environment for their employees during COVID-19 and beyond.

Integrating these components into the business is vital for sustaining the company and its employees.

Employee HWB: What works best?

A comprehensive survey conducted by HWAG was completed by 172 companies, of which more than 50% are involved in the financial sector, and approximately 70% had less than 500 employees.

What seems to work best for large companies are the core and more traditional issues, including occupational health and safety; medical benefits for full-time workers; having a dedicated person responsible for employee health and wellbeing; a smoke-free workplace; and communal spaces where employees can eat, relax, interact with co-workers or hold private conversations.

Programmes, policies and practices around a smoke-free workplace received the most positive response from smaller companies, followed by the same issues raised by larger companies: regulatory requirements and policies for occupational health and safety, as well as medical benefits for full-time workers.

The survey also points to room for improvement: the majority of companies do not believe it is necessary to get involved in the following areas at the moment: incentives for a healthy lifestyle, physical exercise, reduction of alcohol consumption, tobacco use cessation, sleep management, health coaching, health risk assessment, and the extension of available programmes to family members and other dependants. This is despite the fact that these areas are key to the management of NCDs, which poses a significant threat to workforce productivity.

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How to Protect Yourself and Your Company after the Experian Data Leak

Cyber-security is much more than a matter of IT.

Stephane Nappo, 2018, Global Chief Information Security Officer of the year

According to official communications from Experian, a consumer, business and credit information services agency, an individual in South Africa claiming to represent a legitimate client fraudulently requested services from it and was simply given the  personal information of clients including cell phone numbers; home phone numbers; work phone numbers; employment details; and identity numbers. Information was also leaked for 793,749 business entities and included: names of the companies; contact details; VAT numbers; and banking details. Experian said that the data had then been placed on a third-party data sharing site on the internet, but added that subsequently that third party had “disabled the links” and that the data had “been removed” after Experian was successful in obtaining and executing an Anton Piller order. This does not, however, mean that the danger is over.

Steps to take to protect yourself and your business

While the breach has been reported to authorities, and South African banks have been working with Experian and the South African Banking Risk Centre (Sabric) to identify which of their customers may have been exposed to the breach and to protect their personal information, the investigation has not yet been concluded. As a result businesses are advised to take numerous steps to prevent any damage that may result from the leak.

The first thing to do is to simply not panic. Despite how bad it sounds the breach does have one very clear silver-lining.

“The compromise of personal information can create opportunities for criminals to impersonate you but does not guarantee access to your banking profile or accounts,” said CEO of the South African Banking Risk Information Centre (SABRIC), Nischal Mewalall.  “However, criminals can use this information to trick you into disclosing your confidential banking details.”

What this means is that you, and the staff who have access to your finances and accounts need to be extremely vigilant when it comes to dealing with phone calls from people claiming to be from banks and financial institutions, or who are eager to get additional details or sell you services that may require you to divulge any further personal information.

The Southern African Fraud Preventions Services (SAFPS) has advised companies and individuals to take the following precautionary measures:

  • Do not disclose personal information such as passwords and PINs when asked to do so by anyone via telephone, fax, text messages or even email.
  • Change your passwords regularly and never share them with anyone else.
  • Verify all requests for personal information and only provide it when there is a legitimate reason to do so.
  • Experian themselves take this advice further, suggesting that anyone who is afraid they may have been affected to “Visit their online bank and financial accounts, and set up any alert features they may have, if they have not already done so. This could help save some time and keep them notified of any unusual events when they occur”.

The company also recommends that everyone checks their credit report as regularly as possible.

“You can check your credit report for free once every twelve months by visiting AnnualCreditReport.com. Checking your credit report can help you identify any unusual activity, such as new accounts, new personal information or inquiries,” says Experian CEO, Brian Cassin.

Additionally, should you suspect that your identity has been compromised, notify your bank and apply immediately for a free Protective Registration listing with SAFPS. This service alerts SAFPS members, including banks and credit providers that your identity has been compromised and additional care must be taken to confirm they are transacting with the legitimate identity holder.

Consumers wanting to apply for a Protective Registration can email SAFPS at protection@safps.org.za.

If you are uncertain as to how to proceed or if you don’t understand any of the processes, get professional help to evaluate and protect your accounts as soon as possible.

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Six Important Business Lessons From The Coronavirus Pandemic

The coronavirus pandemic arrived like a thunderbolt and the unique situations it created found many companies unprepared and disorganised. Around the world, organisations began closing as it was found their emergency planning was not up to scratch and basic functions of the company could not exist in the new world.

Now that we are half a year into the outbreak some companies are still playing catch up and many will never manage. For those who have survived and even thrived, there are plenty of lessons to take away from COVID-19 that will hopefully change the way we do business and future proof our endeavours for the inevitable coming emergencies. We discuss six of the most important business lessons we can all benefit from.

“Given the nature of the crisis, all hands should be on deck, all available tools should be used”

Christine Lagarde, President of the European Central Bank

1. Working from home is possible

Ever since the creation of the internet employees have been pushing for more opportunities to work from home and the vast majority of companies have been resisting it, worried that productivity would plummet or that team culture would suffer. With their hands forced many will now admit that working from home is not only possible but also saves the company money.

Some of the largest businesses in the world are leaning into the trend. Twitter and Square have both notified employees that they may work from home permanently if they choose, while Google and Facebook have extended work-from-home options through to the end of the year.

South African Business and Automation Analyst Grant Buchanan explains, “We are going to see a shift towards shorter and more flexible leases as firms realise they actually require significantly less floor space than before. There will be an emphasis on collaboration spaces and desk sharing and this is going to have an impact on the demand for commercial office space.”

2. Understand your whole supply chain

What the pandemic has made abundantly clear is that businesses do not operate in a vacuum. Your suppliers, in turn, have other suppliers and a disruption to one link in the chain can result in your whole business suffering. It has therefore never been more important to understand just who your suppliers are, how their businesses operate and just what sorts of emergencies may impact them down the line.

Knowing what to expect is half the battle won, as you cannot plan for emergencies you were not expecting. It’s easy to control the issues and items within your own company only to be let down by the actions of others.

Buchanan says it’s important to understand which suppliers you are dependent on for your most critical goods and services. Do you understand how many supply options you have, and do you have plans in place for if they fail to deliver? How capable are your service providers of delivering when they are ill, trade wars kick in, or their key suppliers hit snags? What sort of emergency procedures do they have in place to ensure you will not be negatively affected?

3. Communication and crisis planning is essential

During the scramble of early lockdown a number of companies realised there were flaws in their communication and crisis management systems.

While email works perfectly well in an environment where in-house emergencies can be dealt with on a quick walk across the office, employees at home required other solutions.

Does your company have a way to communicate with all employees quickly and efficiently without relying on email? There are many stories of IT managers breaking curfew to try to fire up servers that had frozen, resulting in significant delays.

The same goes for crisis management. How do you secure your premises and assets? How do you notify your staff? What systems are in place to protect them in the event of a catastrophic incident? And how do you minimise the damage from a future pandemic or related drama?

Leaders need to put plans in place, introduce new technology and train their staff in these new processes before they become necessary.

4. Use the available technology

It’s easy to get caught up using systems that have always been in place. In smaller businesses particularly it’s common to use manual systems for accounting, payroll and other functions, and companies that did this were badly exposed by the virus.

Many smaller, local retailers and restaurants were caught off-guard by the pandemic. Where they should have been at the ready to serve online customers, and provide delivery or curbside pickup to keep afloat, they instead took many months of lost income to get there.

Technological uptake has been phenomenal over the past few months. The need to meet up has seen collaboration apps booming with Zoom experiencing a 1,125% spike, Webex 560%, and Microsoft Teams 108%.

The trick is to take that collaboration app approach across the board, look closely at what solutions are already out there and find innovative ways to use that technology to make your business work away from your desk before the next event strikes.

5. Build relationships with your accountants, bankers and lawyers

Some people only see their accountant, lawyers or bankers during a crisis or tax season but these relationships have recently played an integral part in the survival of many companies.

The COVID-19 business rescue loans were implemented via the banking system, and banks, which are overloaded with applications, are giving first preference to their current customers. Those companies that have a good working relationship with their bankers appear to have more luck with these applications and get them processed faster due the banker’s familiarity with their accounts.

Similarly company accountants and lawyers have been working overtime helping their clients interpret the regulations for obtaining disaster loans and TERS funding, as well as guiding them on seldom-used aspects of business such as suspending rent payments, delaying vendor invoices, and chasing non-paying customers.

“Understanding our clients’ businesses has been integral over the last few months,” says Robin Gerhold of Gerhold & van Wyk Attorneys in Sandton. “Knowing the details of how they operate has allowed us to tailor solutions and secure aid much more easily, efficiently and ultimately, cheaply, than if we were coming in cold without that information”.

6. Broad-based skills are important

The tendency when hiring is to focus on getting in highly-trained niche experts for each position. The pandemic has, however, shown us that the organisations which were able to rethink their business model and pivot quickly had a much better chance of adapting to market conditions and surviving, and these organisations were also full of employees with broad skills, emotional agility and a wide range of competencies.

It is a well-known fact that companies should constantly be innovating, and the pandemic has shown us just why. Being able to shift quickly relies on an employee base of innovative and creative thinkers who are empowered by company culture to take risks and develop new ideas.

According to one of the world’s leading management thinkers and award-winning Harvard Medical School psychologist Susan David, organisations today, “operate within unprecedented complexity resulting from many forces including technology, globalisation, and strong competition. At present, organisations are also feeling the added impact of the COVID-19 crisis. All these pressures require companies to offer swift responses.”

However, she says, “organisations themselves can never be truly agile unless the people who work within them are agile.”

David advises hiring and rewarding out-of-the-box thinkers and supporting those who are risk-takers.

It’s impossible to ignore the difficulties of doing business in 2020. The lessons learnt this year have been hard won, but by putting them into practice, and reaching out for help when we lack the expertise, we can ensure the next set of challenges won’t be our last.

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Your SME and the Economy – Prepare for the Long Way Back

The South African economy could take as long as seven years to get back to the size of R5.1 trillion it was at the end of 2019 before Covid-19 and the national lockdown.

This forecast is according to Citadel chief economist Maarten Ackerman, who expressed this view during an interview.

Long way back

Christopher Loewald, South African Reserve Bank (SARB) head of economic research, told the Tax Indaba that it was going to take a long time to get back to a real activity level of 100% again.

During the same event, Ismail Momoniat, National Treasury Deputy Director-General for tax and financial sector policy, said that it wouldn’t be an easy road to get the South African economy back to its 2019 level.

“We need a Covid-19 vaccine, and we need to ensure that sufficient people get vaccinated. I think we need to be careful about talking about post-Covid. I think we are years away from that,” he added.

Advice for SMEs

Economists suggest that small businesses gear themselves for tough times, keep costs low, and ensure they are highly innovative.

“Small businesses need to be lean and mean. They need to have a buffer to get them through difficult times,” Ackerman said.

Every business needed to think carefully about how they expanded, he added.

Make your plans in the context of the forecasts we discuss below…

The local economy has contracted

This advice comes amid a local economy that has stagnated since 2015 and contracted for the past year, including a 51% contraction, on an annualised basis, in the second quarter because of the nationwide lockdown that started on March 27.

Sanisha Packirisamy, MMI Investments and Savings economist, said during an interview, that she was expecting the local economy to contract by 8.1% this year, followed by a muted rebound of 2% in 2021 when anticipated Eskom power cuts will constrain the economy.

Ackerman said that an 8% contraction of the local economy would be the biggest decline since 1920 when there was a 12% contraction.

A worrying sign

A worrying sign was that the outlook for fixed investment and household consumption, both key to the long-term economic health, were both bleak, Packirisamy added.

For 2022 and 2023, she is forecasting growth of about 1.5% for both years.

“We are stretched on the fiscal side, and confidence is extremely muted. We face policy uncertainty and slow structural reform. It is that combination of factors that makes it very difficult for us to grow faster,” she added.

Mild inflation outlook

The inflation outlook is positive.

Packirisamy is forecasting inflation to average 3.2% in 2020 and 3.8% in 2021 before rising to 4.5% in both 2022 and 2023.

Economists forecast that interest rates will stay low.

Packirisamy said that the SARB could cut interest rates further, but interest rates were likely to increase from the second half of 2021.

At the end of 2021, Packirisamy expected the prime interest rate to be 7.5%, and by the end of 2023, the prime interest rate maybe 8.5%.

Credit rating to fall even further

In March this year, Moody’s Investors Service cut the South African government’s credit rating to “junk” status or sub-investment grade, which is the grade that its two rivals, Fitch Ratings and S&P Global Ratings had the country on since April 2017.

“We are probably going to see more downgrades, and by 2023 the country’s credit rating will be two or three notches lower,” Ackerman said.

He said that the government was facing a fiscal crisis, and the only way for the South African state to avoid that was to embark on big expenditure cuts, but the state was baulking at doing that.

Public finances are dangerously overstretched

“Public finances are dangerously overstretched. Without urgent action…a debt crisis will follow,” the National Treasury said in July.

The government budget deficit, which is the amount by which revenue fails to fund expenditure, will widen to 15% during the fiscal year ending March 2021, according to Ackerman.

Then in the fiscal year ending March 2022, the budget deficit will recover to 10%, he expects.

In five to seven years, Ackerman forecasts that government debt will climb to 100% of GDP, he said. By comparison, the National Treasury estimates that national debt will reach 81.8% of GDP by the end of March 2021.

Unemployment rate to soar

According to Packirisamy, the unemployment rate would climb because South Africa was not growing fast enough to absorb the new people entering the labour force.

Ackerman predicts that the rate of unemployment would rise to 35% by 2023 from 30%.

South Africa needs growth of at least 3% before the unemployment rate declined, he added.

How to get out of the debt trap?

South Africa needs to get out of its debt trap by igniting economic growth. In the meantime, it needs to find international or other funding to plug the gap in the state budget.

There are fears that the state might force managers of pension funds to allocate a portion of their clients’ money to fund the running of the government and state-owned enterprises.

But Treasury’s Momoniat told the Tax Indaba that the state was not looking to put in place any prescribed asset regime.

Could an IMF bailout follow the loan?

In July, the International Monetary Fund (IMF) approved a US$4.3 billion loan to the South African government.

The state intends to borrow US$7 billion from multilateral finance institutions, including the IMF, the National Treasury said in early July.

There is a possibility that the South African government will be forced to go back to the IMF in the future for further debt in the form of a wider-ranging bailout.

“I think an IMF bailout would be very positive for markets, because it installs a bit of a policy anchor, and it forces the government to do things that it may not feel comfortable to do otherwise,” Packirisamy said.

About the value of the rand, Packirisamy said that she expected the rand would maintain its long-term depreciating bias because of South Africa’s high level of inflation when compared with its major trading partners and the deteriorating local economic fundamentals.

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