How to prepare your small business for the new BEE codes
In 2015 the old BEE (Black Economic Empowerment) rules fall away and companies hoping to qualify for the maximum number of BEE points will need to rethink their approach. A key change involves a new focus on supplier development. Roche Mamabolo looks at how, as an entrepreneur, you can prepare your business.
As from 30 April 2015 the amended B-BBEE codes come into effect. As an entrepreneur these new codes provide a wealth of opportunities and greater access to markets. However, for many of the entrepreneurs that we assist through our programmes, capacity is the biggest constraint they face.
In many cases corporates have not made use of small and medium enterprises (SMEs) because they don’t have the capacity to deliver the quantities that large organisations require.
So how can entrepreneurs prepare? The first step is to ensure that you do your homework. Research the corporate that you want to approach. How much do they traditionally spend in your area? How can you get onto their supplier database? What sort of services – and how much – do they require?
For example, if your business makes car seats and you want to supply to a large car manufacturer, you first need to establish how many cars they produce per year – and therefore how many seats you’d need to be able to supply. You will also need to understand their turnaround time and technical specifications. In addition you need to think about your pricing and how you’d manage the administrative and logistical aspects. How will you deliver the goods? How will you make sure you have enough equipment and people to fulfil an order?
In short you have to take a detailed proposal to the corporate. You will also need to help them understand what they’d need to do to help you fulfil the capacity they require. For example, be able to say, “For us to be your supplier we’d need three new machines, four more staff members and bigger premises. This is our proposal with a detailed budget.”
Of course the corporates in turn need to feel a level of comfort with you as the supplier. To assure them you will need to demonstrate that this is not a new endeavour for you and that you are a serious business. Do you have experience in their field? Have you ever done a similar job? Do you have references? Are you accredited in your industry or SABS/ ISO9000 approved?
However, while small businesses many not be able to supply capacity now, this doesn’t mean that they’re not willing to be assisted to grow. Through initiatives like our Small and Medium Enterprise & Supplier Development Programmes, we actively work with entrepreneurs to assist them to prepare to supply to new markets and channels.
A further consideration relates to what your business does. To qualify for supplier development assistance your service or product needs to be core to the supply chain and essential for the corporate’s business practice. For example, for a drink manufacturer, the core elements could include the bottles, the raw ingredients in the product, the labels and the like.
Another consideration for small businesses – as not all will be able to meet the criteria and be chosen by a large corporate – is to see where else they can fit in. For example, if 20 businesses apply and the corporate only chooses five, how can the other 15 support those five? Is there room for another supply chain to be created?
While these B-BBEE changes are new to the South African situation similar approaches have been taken successfully in other parts of the word. In Japan for example small enterprises have been able to grow and develop through such legislation, allowing them to become global industry suppliers.
I believe that if corporate South Africa takes these changes to the codes on board it will help to drive the growth of more and more small businesses, create jobs and in turn improve competitiveness.
Roche Mamabolo is a business mentor at The Hope Factory and a blogger. Roche started his career as an accountant by training, and, after completing his articles he worked for various consulting companies. He is passionate about entrepreneurship development and his experience ranges from entrepreneurship research, training on various entrepreneurship topics, mentorship and coaching, organising and facilitating entrepreneurship seminars. Roche holds a B.Com Accounting (Honours) degree, has an MBA and is currently studying for Phd in Entrepreneurship (research paper: Building entrepreneurship eco-system in Pretoria).
The Hope Factory
Founded in 2001, The Hope Factory is an established Enterprise Development Non Profit Company effectively governed by the South African Institute of Chartered Accountants (SAICA). Driven to develop black business owners, The Hope Factory offers a strategic mentorship programme to help entrepreneurs achieve their goals, vision and purpose to grow their business, and to ultimately give back to their community.
The Hope Factory provides an easy, hassle-free way to earn Enterprise Development and Socio- Economic Development points. Through further investment with us, South African organisations can secure assistance with Supplier and Skills Development, as part of the amended B-BBEE Codes.
We exist to grow people, to develop businesses, to impact communities, through our unique mentorship model while adding value to our investors.
For more information visit www.thehopefactory.co.za