Entrepreneurs Vs Business/Franchise Owners

What’s the difference? The Entrepreneur is the innovator, the person who creates a business from scratch – and once he has established his ideas and got it up and running, probably bores easily and is ready to move on to the next challenge. The details of running the business holds no appeal to our entrepreneur and would rather leave the day to day aspects of running the business to our business/franchise owner. The Entrepreneur is the visionary, the person who saw an opportunity, took the risk and established the business, building it to a point. From here, Buyers and investors and their management team took over, with the goal of running the operation and growing it from strength to strength.

Entrepreneurs are few and far between. Their capabilities, confidence and belief in their goal allow the entrepreneur to establish something from nothing. What most people are looking for, however, is a less risky opportunity: a business they can run, hopefully enjoy, earn a living and with some luck, have free time to spend with their families, and very importantly, something with limited risk. Leave that to the entrepreneurs!

So yes, entrepreneurs play an important however our focus is wrong, as is our understanding of the role of the entrepreneur.

We know that 9 out of 10 new businesses fail within the first two years and yet this is not the case with new franchises. In fact, virtually the opposite applies with franchise businesses. Added to that, each new franchise creates a wealth of employment opportunities.

Don’t we already have the solution to so many of our problems, in franchising? The reason franchises have been such a successful phenomenon worldwide, is because they can offer what the majority of the population is looking for - a helping hand in business. The Franchisor is the mentor, and makes sure the franchisee is successful through following his tried and tested systems.

There are over 600 Franchise Systems available in SA, 2500 in Australia and 4500 in the USA. South Africa’s concentration and resources should be aimed at this market.

Yes, it may have been an Entrepreneur who established new business for Franchising but from there on Franchisors don’t want entrepreneurs as Franchisees. They do however need people who they can train as owners and managers - people keen to follow the established, effective (and successful) systems.

As a country, South Africa urgently needs to train potential business owners in the basics of running their own businesses. We need to identify Franchises that will work well in our country. We need to assist Franchisors still in the ‘growth stages’, providing them with the resources to offer their essential mentorship to their franchises.

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Most importantly, we need to provide the Capital to make this happen.

How do we see the way forward?

First, what does the average South African need to earn in order to have a reasonable life? What are the expenses he has to cover – food, rent or a bond, schooling, transport, and a business loan? Affiliated Business Brokers believes it to be in the region of R25 000 per month.

This figure equates to an established going concern business to the value of between R500 000 and R800 000 with some new franchise operations, especially Food, the set up costs maybe a lot higher but this is where the focus for business loans should be. NOT in the multi-million ranges, which is where the market is concentrating at the moment. Potential buyers with no business experience, no collateral or security, no training or mentorship are being lead to believe they can purchase a business of R5 million. The repayments alone are R110 000 per month without taking his salary into account. A recipe for disaster.

Second, a range of Franchises which are capable of providing a fair income (as mentioned previously R25 000 per month) should be identified and promoted.

Third, financial support should be provided to fledgling Franchisors so they can provide the mentorship to their franchisees. Mentorship is key.

Fourth, training should then be made available to potential business owners to equip them with the basics of running a business. “How to Run Your Own Business” is a good example of what should be provided.

Fifth, suitable potential owners and franchises need to be matched.

Sixth, finance to purchase the franchise and provide working capital needs to be available.

Lastly, an ongoing monitoring of the Franchisor needs to happen to see that the Mentorship is being provided to his franchisees.

Thousands of South Africans are currently unemployed and thousands more will be joining those masses in the course of this year. Urgent action is needed and an urgent action plan should be implemented.

Affiliated Business Brokers is committed to finding an effective way forward, and are putting together a database of the 600 franchise systems in this country and looking at the Australian and USA opportunities as well. ABB has through its network of business brokers 100’s of opportunities for sale around the country. They have also starting a training course on “How to Run your Own Business” which will be rolled out countrywide.

Unfortunately, ABB does not at present have the finance to assist the buyers and franchisors and this is where they need support from government and the private sector. They are looking to establish partnerships with the DTI, IDC, NEF and National Youth Fund to provide a large part of this backing. In addition, they will also look to the large Corporates to provide some of their Social Responsibility Funding to make this happen.

Mike Hindle

Director Affiliated Business Brokers

1979 – Present Durban Area, South Africa

Being a business brokers for the last 35 years, has given me the opportunity of being involved in 1000's of business transactions covering virtually every type of industry. In 1995 I opened my first business broking franchise and built the company up to over 50 franchises across the country, making us the largest business brokerage in the Southern Hemisphere.

Having sold my shareholding in the company in 2010 I moved into business consulting, with the emphasis on setting up a program to assist potential entrepreneurs in training on "How to Run Your Own Business".

My interests are focused on the business environment in South Africa and helping potential entrepreneurs make that giant leap into their own business. My company helps to achieve this by running courses on “How to Successfully Buy and Value a Business” and very importantly on “How to Run Your Own Business”. We can then assist clients in finding the right opportunity.

I am registered with The Estate Agents Affairs Board, a director and honorary member of The Institute of Estate Agents for KZN and past vice chairman of the International Business Brokers Association chapter for South Africa. Past Chairman, Institute of Marketing Management KZN

My main aim is to educate and train potential entrepreneurs in the skills of acquiring and have ownership of their own SME business. Our goal is to select presently employed young people of 25 years and older with at least 5 years experience in the business environment and train them in the art of running their own business. We then help them achieve that dream by choosing a business that matches their profile, assisting in raising the finance and lastly establishing a mentorship program that ensures ongoing success.

We specialise in business valuations, selling of businesses and franchises, mergers and acquisitions, education and advice for potential entrepreneurs and owners of businesses.

Damelin

Diploma, Marketing

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