# General Business Category > Entrepreneurship and Business Management Forum >  Starting a business

## ians

I have decided it is time to move from hobby to business.

Where do I start,

SARS,

how do you go about it and what do you have to register?

There will be no employees for the first couple of months as i grow, but i will need to employ staff to do the dirty work in time in time, we will get to that part as this thread progresses.

Books,

We need a very simple set of books to manage the cash flow.

One of the banks offer a package, I think it is FNB. Any suggestions

I have to register:

sole prop 
CC 
company PTY 

I would say a sole prop because it is so small at this point in time, but as it grows we can worry about other registrations.

So how do you go about registering as a sole prop?

Now this is where it starts getting tricky, a bank account with an affordable rate for what i need.

For now,

Deposits from customers,
eft payments ( cost money) to suppliers for goods to manufacture the products, need to determine how many as we grow. What i am doing with my other little business is using a credit card for payment instead, much cheaper. One of the reasons why i think having a credit card instead of a cheque account might be a better option, money can be deposited from the customer directly into the credit card and payments to suppliers for mthe credit card saving lots of money. There will be no debit orders etc.

as it grows so we will employ and the transaction will increase, but for now i am at a point were i want the cheapest rate (fees) and best interest rate, bottom line.

Then we need to look into marketing etc, but i will get to that in time.

I need to use this new venture to experiment and hopefully assist to pull the other company into line.

Cheque, savings or credit card to start? I would think a credit card would be a good start, the reason i say this, it has a yearly fee and it cost me nothing to pay suppliers. I dont want to open accounts this must be a strictly cash in...payment structure. So if there is no money coming in then I dont anything, as soon as a deposit is made the product is manufactured and delivered. 

I need to make sure i am correct in saying as a sole prop you should be able to open any type of account because it is you as the individual who is liable for any losses etc. 

Please feel free to correct me or point me in the right direction. The idea of this thread is to help me learn how to do things right from the beginning. It will also help to show others who are sitting on the fence wanting to start something but are just not sure what to do or how to go about it.

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## wynn

Start as a 'sole prop' don't register with anybody VAT ETC. open a 'Gold Cheque Account' with FNB (most services are free) and trade away until you get a bit of history under your wings, then start thinking about all the paperwork.

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## Greig Whitton

> Then we need to look into marketing etc, but i will get to that in time.


In my opinion, marketing comes first. Put together a sound marketing plan (i.e. research the market opportunity that you want to exploit, profile your ideal customer, craft your value proposition, identify best-fit marketing channels, etc.) Everything else can come afterwards.

Your success (or failure) will hinge on your marketing, not on your choice of bank or whether you are trading as a sole prop or a CC.

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## Blurock

> In my opinion, marketing comes first. Put together a sound marketing plan (i.e. research the market opportunity that you want to exploit, profile your ideal customer, craft your value proposition, identify best-fit marketing channels, etc.) Everything else can come afterwards.
> 
> Your success (or failure) will hinge on your marketing, not on your choice of bank or whether you are trading as a sole prop or a CC.


I have to agree with Greig. Marketing is not selling. Marketing is gaining information; how big is the market, what is the slice of that market I am aiming for, who are the main players, what can I do to beat them (price or quality?), what is the pricing structure in the market, what are the supply and distribution channels?

Obviously we can add a lot to the above, but once you have answered these questions, you should understand the potential demand for your product. No use manufacturing purple or psychedelic diapers if the market wants pink.

The next step will be the where and the how. Finance required, systems to be put in place etc etc. I would think that the bank account would be the last consideration.

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## ians

I am not too concerned about marketing at this point. I was the only person making one of the product since about 2008. Since then another person realised there was a market and has taken over the majority of the sales at this point  and recently I noticed another company offering a similar product. I just need to set my mind to it and it will just take a little while and I am sure with all my new ideas will be the leader in the market. The other product I am the only person I know who is currently making this product, in fact all the products out there that I know are mine just being sold by people buy from me. This product also has potential for growth once I start applying myself and introduce new models.

Hence the reason I am going this route. I want to get all the admin sorted first, it will also help me to improve my admin in my current business. 

Something else to consider is no matter if the product I am current going to target works or not at least the ground work is done. Everything is in order.

Which brings me to another topic, the name. I am thinking maybe I should use a name which can be used for other things. If these products fail the name, bank account etc just stay the same and I try something else, if that fails well we just keep trying until it works.

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## ians

Please don't take responses as that is how it is, I want this to be an open discussion and welcome any input. The response could assist me or help me redirect my train of thought. As I mentioned in another thread, sometimes all it takes is one sentence, to realise what I have always thought as correct could be the reason I am still a poor man 😜

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## ians

Wynn I like the way you think. Saturday I have an appointment with FNB to discuss a proposal to reduce my service fees and moving from standard bank to FNB. I am also not going to move all my eggs from one basket to the other. This new venture is going to be a good test. If I like then I move. They are going to have to impress, something which concerns me is ATMs, one thing about standard bank man they have a lot of ATMs. We all know what happens if you draw cash from a different ATM fees fees and more fees.

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## AndyD

If I need cash I can get it at Pick and Pay using my debit card and I don't think it costs anything but I'll have to check.

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## adrianh

A couple of things. I started out exactly the same way as you want to.

1. FNB is ultra ultra $h1t. Their online banking the THE worst, most complicated arse about face system I have ever come across. Their ATMs are even worse, the machines work arse about face compared to other machines and I absolutely despise them. I can give you a list of things if you like why I think their IT systems are totally crap. I have business account with ABSA and I also wanted to change to FNB. It was such a traumatic experience that I eventually gave up and just canned the entire FNB idea.
2. Get a grip on the math that goes into running the business. Nothing complicated, work out what your product costs to make, work out your selling price and work out your profit. Most of all figure out how your cashflow works and how you should set it up so that your cash flow timing doesn't throttle you. You also need to remember that cash flow is the thing that keeps the business running. 
3. You could project how you need to grow as your sales increase. To do this you need to know a number of things, again, how much does it cost, how much can you sell it for, what is your cash flow timing, how long does it take to make a product. Using this information you are able to work out how many products you are able to make per month given all those constraints, maybe you don't have a lot of time, may you don't have enough cash, maybe the cash flow is a bugger up.
4. DON'T work with pie in the sky and wishful thinking, be brutally honest with yourself. If you know that you will only work for 2 hours a week then don't build projections on 5hours a week.
5. DON'T work on best case scenarios, you are far better off working on worst case. What will you do if the cash doesn't come in, if your labour gives you a hard time or whatever. Rather factor in the fact that $h1t happens and that things don't work out as you plan rather than bull$h!tting yourself by making out as if it is all perfect.
6. DON'T get into it if the math doesn't make sense. DON'T wish that you will make lots of cash one day so it is ok to take a fat knock now...pie in the sky WILL bite you hard.
7. Once you have a good grip on the math then work on a little admin system. How will you log your expenditure, your time, your sales, your outstanding work, your progress, deadlines etc. Forget about all the fancy systems right now, just work in a simple way so that you are able to clearly understand your admin method. I'm lucky, I give everything to the wife and she runs it in Pastel so I am able to concentrate on technical matters. If you do not have a person that is competent then you just need to put a method in place to record everything and do the math every couple of days or whenever you buy and sell. 
8. As far as I am concerned one should stay away from marketing unless you are absolutely sure you are able to deliver. We marketed our products and I got 10 times as many orders as I could handle - it is not as wonderful as you might think because you look like a d00$ when you are unable to supply. Rather grow slowly making sure that you are able to deliver on your promises. We totally stopped marketing an entire product range because the demand simply outstrips our ability to supply.
9. DON'T take cash in advance especially for big orders unless you are able to supply within a reasonable timeline. If you do take cash in advance DON'T spend it on other stuff because it is going to bite you. Take the cash and buy whatever supplies you need to complete the job.
10. Be very careful with giving discounts to get business. Remember that the time it takes and the amount of money that you need to make the products doesn't change and you screw yourself in the long term.
11. Don't lick a customers butt, "The customer is always right" is BULLCRAP. People will take advantage of you and screw you over big time if you let them. Stand your ground and stick to your price structure if you feel it makes sense.
12. My motto is this "We manufacture high quality products for high quality people". Don't trade with the rats and the mice. Rather position yourself to supply a product that is excellent rather than cheap. It you were a mass manufacturer spitting out hundreds of products each day into a saturated market it is a different story, but as a little guy making a small number of products you can only sell on quality and service.
13. DON'T think that any business is good business. I am quite happy to turn customers away if I feel that they are going to give me $h!t. I select my customers carefully because I've been bitten so many times by abusers.
14. If you don't know how to do something, ask somebody, no matter how small the issue is or how it might affect your ego. It is far better to get a straight answer that sitting with your finger up your butt not knowing what to do.
15. All them books about making millions are not particularly useful when you are one guy trying to build a tiny little business.
16. Be very very careful about whose opinions you follow. There are lots of people who stand around the braai who are quite adept at shooting you down and talking rubbish. opinions are simply worthless unless they come from decent people who have your interest at heart. Most people waffle on about all sorts of pie in the sky without having been involved in any form o small business. All those wonderful corporate ideas simply don't work when you are the one guy who has to work through the night because the customer is $h1tting himself.
17. Most of all, DON'T do it unless you love what you do and you are willing to keep on at it. By this I don't mean that you should mindlessly bash your head against a brick wall, what I mean is that you should be able to adapt and evolve all the time. If one way of doing things doesn't work then try another and another until you find a way that does.
18. There is no such things as failure or mistakes. There are only lessons learned. Yes I've messed up many jobs and I've p1$$ed a lot of people off in the process but at the end of it all those things have made me better at dealing with it all.
19. Learn to be a smooth talker and keep your secrets to yourself. You'll be surprised how the grapevine works.
20. Treat your suppliers with great respect. Electromechanica and Mantech Electronics have been very good to me over the years because I've made it very clear that I am a little guy with a little money but with lots of ambition.

Anyhow, these are some of the lessons that I've learned over the years. They may not be right for you or anybody else but they do make sense to me. The hardest lesson was to understand the math and not to think in terms of pie in the sky but rather cold hard facts...as nasty as those facts might be. If your math is wrong or you don't understand the math, you are f*cked from the outset. That is the reason why 99.99% of small businesses don't get funding and why they fail! (as far as I am concerned anyway)

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AndyD (21-Aug-14), BusFact (21-Aug-14), Dave A (30-Aug-14), IanF (21-Aug-14), ians (21-Aug-14), KimH (21-Aug-14)

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## AndyD

> A couple of things. I started out exactly the same way as you want to.
> 
> 1. FNB is ultra ultra $h1t. Their online banking the THE worst, most complicated arse about face system I have ever come across. Their ATMs are even worse, the machines work arse about face compared to other machines and I absolutely despise them. I can give you a list of things if you like why I think their IT systems are totally crap. I have business account with ABSA and I also wanted to change to FNB. It was such a traumatic experience that I eventually gave up and just canned the entire FNB idea.
> 2. Get a grip on the math that goes into running the business. Nothing complicated, work out what your product costs to make, work out your selling price and work out your profit. Most of all figure out how your cashflow works and how you should set it up so that your cash flow timing doesn't throttle you. You also need to remember that cash flow is the thing that keeps the business running. 
> 3. You could project how you need to grow as your sales increase. To do this you need to know a number of things, again, how much does it cost, how much can you sell it for, what is your cash flow timing, how long does it take to make a product. Using this information you are able to work out how many products you are able to make per month given all those constraints, maybe you don't have a lot of time, may you don't have enough cash, maybe the cash flow is a bugger up.
> 4. DON'T work with pie in the sky and wishful thinking, be brutally honest with yourself. If you know that you will only work for 2 hours a week then don't build projections on 5hours a week.
> 5. DON'T work on best case scenarios, you are far better off working on worst case. What will you do if the cash doesn't come in, if your labour gives you a hard time or whatever. Rather factor in the fact that $h1t happens and that things don't work out as you plan rather than bull$h!tting yourself by making out as if it is all perfect.
> 6. DON'T get into it if the math doesn't make sense. DON'T wish that you will make lots of cash one day so it is ok to take a fat knock now...pie in the sky WILL bite you hard.
> 7. Once you have a good grip on the math then work on a little admin system. How will you log your expenditure, your time, your sales, your outstanding work, your progress, deadlines etc. Forget about all the fancy systems right now, just work in a simple way so that you are able to clearly understand your admin method. I'm lucky, I give everything to the wife and she runs it in Pastel so I am able to concentrate on technical matters. If you do not have a person that is competent then you just need to put a method in place to record everything and do the math every couple of days or whenever you buy and sell. 
> ...


Sounds like you've been there and got the tee shirt but you'll need it in 4XL to get all that post on it.  :Wink: 

I think the thing with the math is you've got to truely understand your expenses and truely understand what constitutes salary and what constitutes profit. Your point about kidding yourself is very valid as well, there's many small business owners that are constantly in a state of denial and don't see the elephant in the room because they simply don't want to.

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## IanF

Adrian great post. 
Never be scared to fire your customer. You want customers who value your time as much as you do. When they look for little problems which are not important then you know they don't have the money to pay. 
Then learn from that to improve and recover the extra time it takes to perfect.

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## ians

Adrian I like the way you think. I agree with all your points. 

Just like no. 21 to your list.

When you find something wrong on a site or an item a customers brings you especially if it was built or installed by some else, don't make a fuss about, no matter how f$&)(  up it is rather just keep quite and offer a solution with a quote. Chances are you will get to fix it, but if you go on about what kak the other person did you might find yourself without work, as you mentioned word gets around.

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## ians

I thought I don't market my current business, the one which pays the bills at the moment, but the reality is every time I leave my workshop and do anything be it on site or even a site meeting, I either promote or destroy my company image. The project I have just completed was proof of that, as project completed so the quote requested rolled into my inbox. I would have had to grow by 6 teams to keep up, unfortunately I didn't get 1 because I just don't have the manpower. It not a bad thing right now as I am trying to fix old and make sure things are right with the new.

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## ians

I find as a one man operation, it is difficult to be the only person making all the decision which couldn't have been that bad considering I am still at it after 23 years. Having this forum to throw things out there and hear what others have say or have experienced just make it a little easier.

The bank for example, I will go listen to their proposal and see if I can save money and how their system works, then if I think there is possibility make a decision. I have accounts already operating so it just a matter of fine turning, as a business the bottom line is not always the best choice. Simple things like ATM locations, internet banking experience and customer payment methods are things I am looking at. I am just very concerned about my highly confidential and personal information which keeps getting lost at Standard bank, like like copies of my ID, surely the bank has a safe place to keep this kind of information and records, it a bank. If you can't trust the bank to keep things safe who can you trust?

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## Justloadit

When I factor my costing, I take my salary as part of the expense to manufacture. I then place the mark up on the final amount. At some point in the future, you want to get out of being the worker, and employ someone to take over, if you have not taken this into consideration from the onset, then you will never be able too.

What I have done is, that I have taken all the expenses to run the business every month, including wages and salaries, insurance, telephone, staff refreshments, etc, just like a trial balance with only expenses excluding the cost of stock and materials to manufacture, but include consumables, and averaged this cost across the number of hours you expect to work in one month, in my case I have taken my business hours, 160 hours per month. Divide the total run cost by the number of hours, and it gives you a very good indication what you hourly running cost is. You will be surprised how high it actually is. Now once you can work out how long a job takes, you know what it costs to manufacture, now add in the raw materials cost and you have a pretty good idea on the actual cost.

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Dave A (30-Aug-14)

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## adrianh

> Sounds like you've been there and got the tee shirt but you'll need it in 4XL to get all that post on it. 
> 
> I think the thing with the math is you've got to truely understand your expenses and truely understand what constitutes salary and what constitutes profit. Your point about kidding yourself is very valid as well, there's many small business owners that are constantly in a state of denial and don't see the elephant in the room because they simply don't want to.


The math is hard because we look at it from the wrong perspective. We look at it purely in terms of "profit". Of course profit isn't cash in hand and cash in hand keeps you alive. It took me a long time to realize that simply churning money over has no value. Turning over R1,000,000 and spending R1,000,001 to make the money isn't particularly useful. 

I've truly learned so many things and still learn every day:

1. Banks are parasites. Although it is nice to use cards and EFT you are better off running as much cash as you can. If the customer pays you R3K in cash and you then pay your supplier or Pick & Pay using that cash you save on all the associated fees. I am not saying trade under the counter, I am saying that you should try to avoid the banks as far as possible.
2. The one thing that I've had to come to grips with is calculating actual manufacturing cost. I can now project practically any job in advance with a 10% accuracy.
3. Another thing that ties in directly with point 2 is "opportunity cost". Ok, let's say you can earn R150 per hour working art your day job or R300 doing something for customer A or R 10 for customer B you should be brutally honest and do the work that ads the most value, not only financially but in the long term. I was always told that if you trade and you are not making any tangible money you are better off spending the entire day watching videos. The reason for this is that you burn yourself out accomplishing nothing.
4. There is another very important fact that you need to keep in mind about "opportunity cost" I will give you an example from my business. If I do a very complicated job once off for a customer and it takes me a long time to do I run the risk of making money in the short term and adding no value in the long term. When I evaluate the work that I am getting into I try to make sure that the time spent can be re-used in some way in the future. If I spend one hour developing a product that I can sell 500 times then that hour is better spent doing the development work (provided of course that you have enough cash not to have to bring cash in for that hour. The approach that I took at the outset was very problematic because I spent all my time developing products and no time selling them. That is not useful either because you die of hunger whilst creating your masterpiece.
5. Bread and butter money is always something to keep in mind. Develop a couple of easy to manufacture things that you can spit out and sell easily. That way you create a small ongoing income stream while you work on the bigger things.
6. Be very careful of big companies. I got stung many times by taking on big orders at low margins. The effect that it has on the business is that you work your butt off, you don't make real money and the bugger pay you on 30 day terms etc.
7. I don't give terms at all anymore, pay me COD or go away. A customer of ours gave a craft shop R7K of stuff on consignment. The shop closed down and she couldn't get anything back.
8. Talking about T-shirts. We made some custom T-shirts only to get the spelling wrong, the sizes wrong or even the colours wrong. I no longer do custom work unless I am very very sure that the customer isn't going to give me a hard time. You are far better off steering clear of stuff where customers can change their minds.

I can rattle on an on but the bottom line is simply that you have to roll with the punches and that you shouldn't take misfortune to heart. It is a long hard road but it is very rewarding even if you don't make a fortune. I love being able to say that I am in control of my destiny, even if that control is rather hap-hazard most of the time.

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## adrianh

> When I factor my costing, I take my salary as part of the expense to manufacture. I then place the mark up on the final amount. At some point in the future, you want to get out of being the worker, and employ someone to take over, if you have not taken this into consideration from the onset, then you will never be able too.
> 
> What I have done is, that I have taken all the expenses to run the business every month, including wages and salaries, insurance, telephone, staff refreshments, etc, just like a trial balance with only expenses excluding the cost of stock and materials to manufacture, but include consumables, and averaged this cost across the number of hours you expect to work in one month, in my case I have taken my business hours, 160 hours per month. Divide the total run cost by the number of hours, and it gives you a very good indication what you hourly running cost is. You will be surprised how high it actually is. Now once you can work out how long a job takes, you know what it costs to manufacture, now add in the raw materials cost and you have a pretty good idea on the actual cost.


I need to go through this exercise.....I think that not doing this exercise is the biggest thing that is messing my business up at the moment. <Printscreen...Shreadsheet to do today>  :Wink:

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## SamanthaLeigh

Hi there,
I'm finding this thread rather interesting as I have also just started my own little business. 
I was really hoping that someone would spend more time answering ians question about Tax. He may not need a VAT number yet as he isn't earning enough yet but what happens at the end of the Tax year? 
When I did my Tax this year I saw there was a question of any 'extra earnings', which I would assume you would select yes and then put in the amount. But do you put in just the profits your earned? Or all the money that came into your business? Or do you pay Tax on the money that comes in every month? 
These might be silly questions but I have only ever freelanced in my life and so am now sure how Tax works in business terms.

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## Justloadit

What I find interesting about this thread, is that it is really materializing my findings that I have delved into over the last 3 or 4 months, I have been mulling over what I have been doing wrong, in other words, why is there not a fat bank account with my name on it. The realization has come is that my mark up, even after I have factored all the costs is toooo low. I was working on a 30 to 35% mark up on my so called calculated cost on production runs, but I have pushed it up to between 40 and 50%, and am noticing the bank balance improving every month. I have subsequently worked out that not all jobs go according to plan, and when you have allocated the hours to the job, it invariably takes longer because of external factors, such as late deliveries from suppliers, no stock at regular suppliers so you have to buy out from other suppliers at a higher cost. Another point to consider very carefully is selecting the right customer, I now avoid the customer who always complains that I am too expensive and wants everything yesterday, my words usually are "well you are entitled to find someone else with my blessing". Fortunately I have had other business to allow me to say this, there was a time last year where I had to take on any crappy work, which cost me more in time than in income.

I have also been limiting my time spent in meetings with prospective clients. If I feel that with in the first 5 minutes that there is going to be no business, then I tend to end the meeting cordially. I also tend to get all my correspondence by mail, as opposed to telephonic calls. Telephonic calls take up a huge amount of time and are disruptive. Emails allows me to answer when I am free, and also gets my full attention. I know this is not what customers want to hear, but this is the reality, when you are a small business, and you are the captain of the ship, who doubles up as the first mate and engineer. When the ship is heading towards the bank because of a stuck rudder, believe me that telephone call will make sure you strike the bank so to speak.

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## adrianh

I ran a quick spread sheet looking at the business top down as Justloadit suggested. It is very clear that I am not earning enough per hour. Another thing that I did was to speak to the staff about how long it takes to manufacture particular products. It is interesting to see that some products make R300 per hour and some R70 per hour. We have to deliver some of the high value stuff and some of the low value stuff but I can now plan the number of items that need to be delivered extremely well. This side of the operation can now be planned accordingly. The thing now is to see how much money one can generate from the lasers. Both lasers are terribly under utilized and if we were to get them working earning ever R50 an hour they would generate a good income. 

Lots and lots to think about.....

With rega5rds to tax: I think that if you are earning smallish amounts of money and you are not VAT registered and your clients are not paying money directly into your bank account you simply keep your mouth shut. Once you start dealing with people who are unwilling to work with cash and who want invoices etc then you have to do the legal thing...which I am sure somebody else would be able to tell you.

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## adrianh

> Adrian I like the way you think. I agree with all your points. 
> 
> Just like no. 21 to your list.
> 
> When you find something wrong on a site or an item a customers brings you especially if it was built or installed by some else, don't make a fuss about, no matter how f$&)(  up it is rather just keep quite and offer a solution with a quote. Chances are you will get to fix it, but if you go on about what kak the other person did you might find yourself without work, as you mentioned word gets around.


I agree. I make a point of not shooting the opposition down. I always just say that we serve different markets and that those markets sometimes overlap. I had a interesting one a couple of days ago. I manufacture a kit that will basically change the body of a particular model. The kit is fine but the underlying model is total rubbish and I've had endless trouble with them. There is a product available on the market that is extremely nicely built and really very good quality and is exactly the same product as we build the kit for. I had a customer that really wanted our kit. Given the amount of $h1t that I've had from customers due to the chassis I said to the guy that he would better off buying the other product because it is really good and that my product can't match the quality of the other. We went back and forth about the reason I said that for a bit and he then decided to buy the other one. He came back after having placed the order for the other one and was very taken by the fact that I advised him to rather spend his money elsewhere. I said that I would rather have him buy a good quality product than my product per se.

Maybe this is why I am not filthy rich, I am simply unable to knowingly sell crap to people, even if the crap is something that I make. The product has been removed fro the catalogue so hopefully I won't have to go through the same exercise again.

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## Citizen X

> Maybe this is why I am not filthy rich, I am simply unable to knowingly sell crap to people, even if the crap is something that I make. The product has been removed fro the catalogue so hopefully I won't have to go through the same exercise again.


Adrian, you have integrity! Integrity and a good reputation is priceless....

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## HR Solutions

Adrian I lagree with you - We will also not lower our standards for anything !  We have a certain standard and stick to that.

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## ians

Just want to make another point and keep it short because i am not focusing on contracting (something i have done all my life) in this thread more my hobbies/new ventures which are manufacturing. 

Talking about big companies or main contractors, you need to be very careful when dealing with them if you are small or a sub contractor. I have heard the phrase " we will see you right on the next project" or "We didnt make any money on this one, but next time" 10 years done the line, their wives are all driving the latest SUV, living in multi million rand houses, kids all in private schools and all us sub contractor suckers are still battling along with the same old scrap bakkie ,being promised the world. You need to make a price and stick to it, when the big company start offering to cover your live out allowance by offering you a place to stay and food etc or transportation to and from site and then the last but biggest chunk, they offer to supply the materials and consumables, you might as well pack up and work for the company because all they are doing is shafting you out of pension, medical aid, end of year bounses, leave pay etc etc. 

The lesson to be learnt is if you are self employed, you need to make sure you charge your hourly rate and all the other things that come with it, otherwise you need to increase your rate so that it covers your overheads.

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## ians

Back to business...

Taxes we will eventually get to that, personally i would say get someone in the know to advise you. It may cost a few bob but int he long run, much like using a shopfitter to do all your electrics chances are you gona end coming short.

What are your thoughts about using a credit card to operate the small business? 

The fees are minimal - a yearly fee. I never draw cash from the credit card only use it to pay suppliers by card (cost nothing) and get customer to pay directly into the credit card. This is something i am going to inquire about on Saturday. 

I have done this with my contracting business, closed all the account and pay by credit card for purchases, this way i make sure the price is right at the time of purchase and not the end of the contract when i do the job card. I lost a lot of money on a fair size project last year because of this. Prices quoted where not invoiced and when i went back to fight with the supplier there were a hundred and one excuses.

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## Houses4Rent

> Adrian, you have integrity! Integrity and a good reputation is priceless....


I also managed to built up a good reputation which is the best (and free) marketing ever. If I feel that a prospect's needs can be satisfied by others for less (normal agents) I tell him so rather than pay more for our specialised services. So some then go elsewhere. Fine with me, but its fairly common that they come back to me after they have burnt their fingers elsewhere and then stay with me.

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## adrianh

The lyrics of a song by Toby Keith (strangely enough) has also become a business motto of mine "There is no right way to do the wrong thing" I catch myself often perfecting something that is essentially a waste of time. The most difficult thing for me is to know which is the right thing to spend my time on. The problem I think with being hyper creative is that one tries to design and perfect everything rather than creating and perfecting the correct things for the business and expending the rest of the creativity on other pursuits.

With regard to what JustLoadIt said about working out your required hourly income. I did the exercise and went through the products and I find it striking how easily we could attain those figures if were to set out a very simple plan and stuck to it. I have been told this many times but it never sunk in. My stupid brain needs to work through the process itself to reach the required (obvious) conclusion (that I was told over and over again) This is exactly what I mean about trying to find the right way to do the wrong thing, I have, and keep on designing many many products that don't get sold because there is no plan the cover the basic costs. 

So, ians, just like you said, it takes somebody to make a comment that stirs a thought process in your mind to change the way one sees things.

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## Justloadit

Knowing the actual hourly running cost of your company really makes you look at things differently, a meeting here, a phone call there, and all of a sudden you start thinking that this is now being unproductive, whilst I was on the phone with this customer who will never buy from me, just cost me X Rands. You start evaluating every action, to see if what you are about to do is going to cover that cost. Once you get this right, you will see basic improvements on your profit line, off course you must make sure about the collection of your money.

It also fine tunes the way you do business, it makes you sell more aggressively too, and many times takes out the emotional urge to give a discount because the customer asked.

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adrianh (22-Aug-14)

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## Houses4Rent

Yes and no. Whilst I agree one has to watch to stay productive and efficient one can often never predict that a certain action will yield or not yield. E.g. a call to someone who is perceived to never to buy anything might have a friend who might buy a lot. If it would not be for this informative phone call the friend might never have found out about your products. And then same person who never bought might buy one day too when his own circumstances changed.

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## Justloadit

> Yes and no. Whilst I agree one has to watch to stay productive and efficient one can often never predict that a certain action will yield or not yield. E.g. a call to someone who is perceived to never to buy anything might have a friend who might buy a lot. If it would not be for this informative phone call the friend might never have found out about your products. And then same person who never bought might buy one day too when his own circumstances changed.


You are now referring to marketing. Completely different to manufacturing work. Many times the client wants to talk to the foreman, and not the sales person.

Marketing is another department, which you allocate a budget. This then also apples how you go about marketing.
Sales is another division, and is easy to measure, sales amount versus cost of selling.

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## Houses4Rent

Yes and no again. I was just generally referring to your "I was on the phone with this customer who will never buy from me, just cost me X Rands."
I do not know whether you were referring to a sales/marketing call or a call regards product specifications. Now all manufacture, some just do service like me.

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## adrianh

> Knowing the actual hourly running cost of your company really makes you look at things differently, a meeting here, a phone call there, and all of a sudden you start thinking that this is now being unproductive, whilst I was on the phone with this customer who will never buy from me, just cost me X Rands. You start evaluating every action, to see if what you are about to do is going to cover that cost. Once you get this right, you will see basic improvements on your profit line, off course you must make sure about the collection of your money.
> 
> It also fine tunes the way you do business, it makes you sell more aggressively too, and many times takes out the emotional urge to give a discount because the customer asked.


I agree with all that you say. Our income is directly proportional to our productivity and our productivity is derived from our ability to focus single-mindedly on thee appropriate task. I find that I am able to focus single-mindedly on almost anything if I am not disturbed or create my own disturbances with things like phone calls, email etc. I realized this morning that my problem does not lie in being able to create products or to solve problems, but rather in poor selection a which problems to solve. I find it truly amazing how simple it is to improve my current position purely by changing my mind set. My mind set has always been to solve every problem and to create lots and lots of products. This is the change that starts now:

I know which are my most to least profitable products in terms of time taken to manufacture vs profit.

Working from the most profitable - make certain that the best people are enable to manufacture that product as efficiently and fast as possible.
- The line above is the crux of the problem - My most unreliable member of staff manufactures this product and he does so inefficiently. Although he does have methods that allow him to build fairly fast given the constraints that he has, the constrains should be removed. I can think of numerous improvements in the design of parts and assembly methods that would dramatically reduce manufacturing time.

That product will now become my primary product and as such I will set up a clearly documented workflow so that the staff are able to follow a clearly set out plan (manufacturing manual + quality assurance) and targets.

I will do the same with all the products from most profitable to least profitable and I think that what will happen is that the 80% of products that waste 80% of the time are going to get dumped to be replaced with very high profit, low labour cut and pack laser cut products.

Damn.....it's taken me a lifetime to see that being able to solve almost any problem is practically worthless if one continually chooses to solve inappropriately chosen problems.

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## Justloadit

The question here is "why are the those products least profitable?"

Are you attempting to get market share, and have dropped your mark up to do so?

Are you competing with other suppliers into the market, and if so, what is the advantage of attempting to compete, or is their a future plan in whcih investment into this line by virtue of equipment can make the cost lower, so by selling at the current price you are in fact buying market share.

Are you simply selling this product, because currently that is all you can offer in the market place, and it is paying your bills?

Are you simply continuing an old line and helping customers.

Depending on the real reason, then change the selling price to make it more profitable, or simply discontinue the product. I have had to make this difficult decision, but it was for the future of the company. Continuing on that path would be disastrous.

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## adrianh

There are two reasons that the products are not profitable enough:

1. They are not by their very nature.
2. Our manufacturing methods are not efficient enough.

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## Justloadit

> 1. They are not by their very nature.


Then why are you manufacturing this item?




> 2. Our manufacturing methods are not efficient enough.


Fair enough, then you are manufacturing with a purpose, to get volume so that you can invest into ways to manufacture at a better cost price.

I often do this. But only where I can see that there will be an improvement on cost if I can get a decent market share which means number of units per month. This usually transpires where the investment into a tool/mold or other asset will improve the cost of the manufactured item. I have recently done this, with a fountain light. I first calculated the cost of manufacture as if I had the tool, but used a rubber mold to cast the units. I have now invested in an injection molded tool, which saves me about 20 minutes per unit in labour. I have another product in which I am doing the same, but need to get to a 1000 units a month before the tool investment will make a huge difference.

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## adrianh

> I have recently done this, with a fountain light. I first calculated the cost of manufacture as if I had the tool, but used a rubber mold to cast the units. I have now invested in an injection molded tool, which saves me about 20 minutes per unit in labour. I have another product in which I am doing the same, but need to get to a 1000 units a month before the tool investment will make a huge difference.


Interesting. I was very heavily involved with pool lighting a couple of years back. I spent a huge amount of time on Aimflow lights. I had PCB's made and we cast them into Aimflow balls. It got to a point where every man and dog got into it and there was no money in it any longer. 

I include some of the drawings that I did at the time.


Of course I got seriously carried away with the drawings.


My Aimflow ball had 2 pcb's stacked on top of one another. The top one carried the leds and their smd resistors and the lower board carried a 7809 and a bridge rectifier. The balls were able to take a lot of mechanical and electrical abuse. We banged them against walls and the nice thing was the they could be wired up back to front no problem.


You'll recognize this lot I'm sure.


I also made a collar fountain light. I honestly can't remember how we made the base but I clearly remember not making a pcb but rather drilling a bit of Perspex and encasing it in resin.


I never got round to making these but the drawing was a lot of fun because I did it in such a way that I could animate the color change.


We made a couple of waterblades but achieving laminar flow turned out to be rather problematic

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## adrianh

I did a set of fountain lights for a hotel in Cape Town.







I suppose my biggest downfall has always been waaaaay too much creativity and drive to solve technical problems and close to zero management.

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## Justloadit

Great pics and drawings. I am simply doing a simple circular core of LEDs encased in resin, much like what you did for the hotel. Nothing fancy, as that is what is selling at the moment. If there is a demand for other stuff I may look into it.

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## adrianh

The market is saturated with the other stuff and there are so many companies in the game undercutting one another. There is one product that has merit and that is a light orb. It is a  ball that floats on the surface  of the pool with leds at the bottom shining down and and  a solar panel at the top.

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## Justloadit

Sounds great, however the cost of tooling is going to be very high. Another point we need to consider is the size of our local market. I can not see us exporting this, as the Chinese manufacturers will have us for breakfast, as soon as any decent number of sales start, we just do not have the staff to make it cost effective.

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## adrianh

There are two untapped led applications where you could make money. I've never seen anything for the applications. I'll PM you some info.

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## Justloadit

Thanks Adrian, appreciate your input

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## ians

Woke up this morning to find everything in the black, for some of us this is regarded as quite an achievement especially when everything is already covered, material, labour etc. but that's not the good news. The good news is I have a little extra to use as capital to fund my first mass production of goods on Monday and the orders have already started and I haven't even contacted 99 % of my potential market. Best I get that bank account opened soon 😉

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adrianh (01-Sep-14), wynn (01-Sep-14)

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## HermanS

Once again I am getting in on the back end of the conversation, and decided to rather reply to the original thread,  "Starting your own business".

I got home one night, about a month before my daughter's birth, only to find a rather upset wife... (what did I do?)  After prompting a bit she informed me in tears that she was retrenched (again? second time in three years).  Due to procedural unfairness in the process and the help of a labour lawyer, she did not come off too badly.  But still - retrenchment from a senior position (read MBA graduate) with no apparent reason, one month before the birth of you second child.

That is unethical and in principal cruel to say the least.  Therefore I make my point that employers are partly to blame for the state of the workforce and the aggression they feel towards employers.  Please get me when I say that I do not agree with the aggressive nonsensical strikes we have every day.  That is detrimental to the economy, which we can not afford.  I am also of opinion that the ridiculous demands for salary increases fuels our inflation, and does not increase the spending power of the people. 

I am also of opinion that the unions is simply running a business and is in it for the money only.  They rule by fear, and is mostly in use by the ruling party as their own voice to get their message to the masses.  It has always been a very clever tool by the ANC to get their message across. But this point for a different discussion.

After the retrenchment, I decided to venture on my own, I could not live with the retrenchment cycle any longer - when will my turn be, and when will my wife's next on be?

 As we did not have an amazing plan, almost zero money to do what we want to, and not enough technical know how to do something amazing we agreed to go the franchise route.  It allowed us to search through various tried and  tested formulas, and find the most suitable business for us to get into.  It also fell midway between our personalities, with her being very risk averse and me being very risk prone.

Some people will not call it entrepreneurship, but it will at least allow me to go and make my own money - mostly on my own terms.  I think it is a great way of getting out of  the employment cycle, with calculated risk.  The system (in most cases), has worked for other people.  Therefore only you can mess it up, or make it work for you.

SA Franchise Warehouse  (www.safw.co.za) has also started an initiative where to will assist to facilitate funding for certain pre-approved franchises, if you have limited capital available to buy your franchise.

Franchising may not be the most creative way to start a business, but if you have been thinking about it, I urge you - do it!  I will be launching my franchise early January 2015, in a place where I always wanted to live but could never find a job there.

I all honesty - I am quietly sh****ng myself.  30 November 2014 is my last paycheck - I have two small children and a lot to loose. But my excitement is also big - I will do my own thing, on my terms, and provide an income to other people.

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## Justloadit

I wish you the best of success.

Your point 



> Therefore I make my point that employers are partly to blame for the state of the workforce and the aggression they feel towards employers.


I wish to say this, as an employer, 


> "They made me like this"


There are good employees and there are bad employees, unfortunately just as employers, they are all painted with the same brush.

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## HermanS

> I wish you the best of success.
> 
> Your point 
> 
> I wish to say this, as an employer, 
> There are good employees and there are bad employees, unfortunately just as employers, they are all painted with the same brush.


Thanks Justloadit.

Perhaps I should clarify, that I will be leaving the employ of a company that functions on amazing principles (Honesty, Integrity, Respect).  The workers has not been on strike in recent history, even when the rest of the industry has gone.

The company has also shown tremendous growth in the last 6 years (25% year on year average). I hope to take some of these principles with me, when I start my own business, in order to ensure a prospering business, with (relatively) happy employees.

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