How the small business support services can be used by a new business – an example.
In our previous page we discussed how the business support services could be used by an existing business. If you need to know more about what we mean by business support services then please take a look at this page. On this page we are going to present an example of how a new business can use the business support services to drastically reduce their start up costs and sometimes even start their business at no extra cost.
The example below is based mainly on a real life situation, but we have added additional information from other projects to give you a clearer and more comprehensive example.
Example 2: New business startup using the business support services
Around 2003, John was already employed and wanted to start his own business, but was reluctant to resign from his safe job in order to do so. He also wasn’t sure how well his products would sell, but he did have a supplier lined up and wanted to sell these products online. How could the Small Business Owner Network help him get his business started while he carried on working in full time employment?
After a few discussions, we set up the following arrangement:
John registered his own company with CIPRO at the time but it is now called the CIPC and he opened a bank account and registered with SARS for tax. John was the only director of the company that he created. There was a small cost involved for doing this and you have the option of not registering a company. Have a look at this page for more information about whether you should register a company or not.
John chose to spend a little money on getting a basic website set up. It basically had product pages and some company information and contact detail pages. There were no frills or shopping carts or anything sophisticated on his website. These days you can do this part yourself by using a simple WordPress site, with your only costs being registering a domain name and some hosting for a few months, which you can do for under R200.
John also had a chat with an importer of the products he wanted to sell. They agreed to help him out bu=y giving him wholesale discounts for small quantity orders for the first year. Hopefully after a year his sales would be up and he would qualify for the discount without requiring a special deal.
John was now done. He tweaked the website occasionally and added a bit more to the product range but he pretty much left the business unattended for three months or so.
After three months, the website started to receive some views and then a few enquiries came in. John would deal with these queries in the evening after work by email. At month four he received his first order. John used the customer payment to buy stock from the supplier and he arranged delivery to the customer. Now that he was receiving orders, we could help.
John was assigned to an existing business in Johannesburg and when the next order came in a few days later, this is what his new business service partner did:
- A pro forma invoice / quote was sent to the customer so they could pay for the order.
- Payment was received and verified.
- An order was placed with the supplier.
- A payment was made to the supplier.
- The goods were collected from the supplier and delivered to the customer.
- An invoice was given to the customer for their purchase.
- The profit made on the sale was split between John and the company in a previously agreed ratio.
This process was then repeated several times over the next three months until orders were coming in frequently enough that the company started holding stock for John so that they did not have to collect from the supplier each time but could instead take from their own stock. Customers were also able to collect their orders now should they want to do so.
All this was happening behind the scenes while John continued to be employed full time. He was now earning a share of the profits made on each sale, much like a commission and yet was having to do very little work. He was only required to occasionally answer questions about the products that the company was not able to answer. This was done by email after hours, and took maybe 15 minutes a day on average.
John had his business. He chose the products to sell, he decided on prices, he ran the business as if he were a full time CEO, except the daily operations were taken care of.
For more information on how these business support services could help you, please let us know a bit more about what you still need to get your business going by clicking here. Hopefully we can make a plan and get you going .