How do you start a small business in South Africa?

We've got all the info you need to start your small business or side hustle with confidence.

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How do you start your own small business in South Africa?

Small business owners and the self-employed will always face challenges. But there are always reasons to smile – because the good news is that South Africans are resilient, and we somehow bounce back despite the setbacks! Ours is a country where you can make things happen.

You don’t have to be a genius or an influencer for your business or side hustle to suceed. In 2022, anyone can become a household name. As long as you're innovative, brave, tenacious and prepared to take calculated risks.

Are you an underdog? Have you recently been retrenched and can’t find a new job? Have you been sitting on a great idea for a new business?

We've included a guideline for what you could carefully check out before launching your business – and resources to help you on your way to the big time.

But before you get started, we have a few questions.

Do you see yourself owning a small business?

To help you decide whether you’ll run or own a small business, you need to take responsibility for everything that goes with it. So, be honest with yourself. Do you have what it takes to market your business, make sales, do bookkeeping, and comply with government regulations?

It's a lot of work, but we're here to help you every step of the way.

What does it take to be a business owner? 

You should be innovative, self-disciplined and self-motivated. You need to be able to plan and organise well effectivley. Problem-solving ability is essential.

And you need to be able to network – meeting the right people is half the battle when you're trying to get your business off the ground.

Why start your own business?

When you're passionate about something, it's easier to enjoy yourself. Starting a business is often a vocation or a calling for entrepreneurs. They NEED to have their own business. It's hard work, but being your own boss is awesome.

You also help uplift others by creating jobs. That's a big responsibility. But you've got big dreams!

Starting a business is challenging and risky

Starting your own business can certainly be scary. You need to understand the challenges before you can solve them.

Some of the challenges include:

  • Creating your business vision.

  • Securing finances.

  • Finding a physical premises (if applicable).

  • Hiring staff.

  • Competing with similar businesses.

  • Dealing with unexpected crises.

Some of the risks include:

  • Running out of capital.

  • Relying too heavily on staff.

  • Unexpected events (accidents, illness, etc).

Nobody said entrepreneurship was easy! 

Will your business idea work?

This is a good time to yourself some questions:

  • Is there a definite need for your idea?

  • What problem are you solving for your customers?

  • How will you communicate with your customers?

  • Has your business idea ever been tried before?

  • What are the short-term and long-term benefits?

  • Has your idea got any weaknesses? Will that cause problems?

  • Are you confident your business idea is bulletproof? Could it be made better?

  • Would the market (your potential customers) welcome your idea?

  • How stiff is the competition in your industry?

  • Will your potential customers be receptive to your business idea?

  • Do you have a way to test your idea on a small scale?

Do you need inspiration to come up with a business idea?

Explore these business ideas.

Do you understand your customers?

A key part of running a business is making sure that you’re always in tune with your customers – at all times. You can't expect your business to succeed if you don’t offer what people want at the right price.

You can learn more about getting this right by speaking to friends, family, and anybody else that you know could give you good advice*. Also, a bit of online research always helps.

If you've made a decision to start your own business, back that decision by knowing enough about your customers and what they need.

There's no substitute for speaking to real people.

And don't worry about people stealing your idea. Millions of people around the world have great ideas every day. The difference is having the courage and conviction to actually make it happen!

You're ready to write a business plan.

It all starts with a business idea that needs to be unpacked in great detail. You'll need to create a business plan document to help you plan and convince other people why your business will do well.

Your business plan is a road map showing a clear direction, opportunities and potential risks. When you're preparing this document, have your potential investors and your bank (if you have one) in mind.

The business plan must explain what you plan to do, how, when, and why your business will be a great success.

Use a formal, professional writing style in business plan - leave slang out of it.

Here are the other elements your business plan should include:

  • A cover page, clean and professional

  • A contents page

  • A summary or overview of your business plan to give the reader incentive to read the rest of the document

  • A business description that covers the operation, ownership, and product or service. 

  • A marketing plan and strategy that reveals your future customers (target market)

  • A competitor strategy that details about how you will deal with your competition and what you offer that's different or better.

  • A financial plan and strategy that communicates how much money you predict (financial forecasts) that your business will earn and by when. It also includes where you will get funds to start your business and how you will use these funds. 

  • An operating plan and strategy could include details about staff, suppliers, products and services. 

  • Finish your business plan by motivating why your business should succeed and be financed. How you will go from being an underdog to making it big. Attach supporting documents such as credit reports, contracts, legal documents, etc. 

The above is an overview of what could be needed to create a business plan. Take your time and add all of the details needed depending on who will read it. 

Does this sound like a huge, scary job?

Don’t worry, you could find someone to help you. Reach out to people you may know in the industry or someone that could introduce you to them.

Please be especially aware of scammers and unqualified advice. A successful spaza shop owner could give you excellent advice for your future spaza shop as an example.

Accounting firms, your bank or other business consultants could also help you. For example, your bank could let you know what documentation they need to see when applying for a business loan.

How will you manage your business?

It’s important to keep your finger on the pulse with your business operations. Tracking sales, stock, and managing employees are examples of business operations that you should closely watch daily.

Yoco offers customers free use of the Yoco Portal, a free business management software. There are also many other tools in the market to help you manage your business. Why not use the convenient and free Yoco App? T&Cs apply.

How will you fund your business?

The work that goes into funding your business can be complicated. So, speak to the right people to get financial advice.

Certified financial advisers, that are friends or family would have your best interests in mind.

A financial feasibility study will show the amount of start-up capital needed, who will supply capital, operating costs, cash flow, and returns on investment. Will you apply for a business loan, or will you save up and use your own money?

Read more about funding your business

Find out more about how to get funding for your business, tips to get funding for your business idea and business loans.

How will your business handle the money it makes?

Your business will offer services or products to future customers who will pay you. How will they pay you?

Do you need to offer them a convenient card machine to use? Yoco offers card machines for every need and at affordable rates. Please browse our range of awesome card machines. Do you need to integrate your card machines into a point of sale (POS) system? Yoco also offers a POS integration option that you could use.

Are you looking to provide your customers with a cool online payment option? Yoco Link is a safe and easy way to get paid if you don’t have a website for your business. Yoco Vouchers are a great way to raise funds and get support from your customers.

Do you have a business website? Yoco Gateway is a safe and convenient way to get paid via your website.

How to get the money to start your business

There are many potential ways to fund your business:

  • You could save up and use that to start your business. 

  • A business loan or a loan from friends or family could also be possible options. 

  • If needed, you could contact banks and other financial institutes for a business loan.

  • Yoco offers flexible cash advances to our qualifying merchants with our Yoco Capital product that could help fund your small business.

Here are some tips that could help you get funding from a bank or other financial institution:

  1. A brief presentation:
    Why should the banker lend you money? Tell him why your idea will work, your financial need, the pay-back date, and the amount of security available. 

  2. Give financial information:
    Provide details about the money your business has made (income statements), and you may need to guarantee a loan. You need to repay your future business loan. So, you will need to explain how long you think it will take to repay the bank loan (cash flow projection).

  3. Make sure you present yourself well:
    Show the financer you’re trustworthy and capable. Highlight when the loan will be repaid in your presentation and reassure the financial institute.

We encourage you to contact the potential business loan provider to find out what is needed for you to apply for a loan.

Registering your business: types of businesses in South Africa

There are a few types of businesses to choose from that could serve your needs. You might know some of the business types already. These are the types of businesses you could start in South Africa:

  1. Sole proprietor
    This is the simplest type of business and many businesses in SA start this way. Inform the South African Revenue Service (SARS) if necessary. Should the business fail, creditors will recover their debt from your assets.

  2. Partnerships
    A partnership results from about 2-20 people agreeing contractually to do business together, split profits, contribute individually, and are liable for debts.

  3. Companies: PTY (Ltd)This applies to most entrepreneurs, especially when their business matures. Such companies are registered with Companies and Intellectual Property Commission (CIPC) and must provide an annual return. Also, CIPC will register your company name on the CIPC’s official website.

Read more about CIPC registration from an accounting business.

CIPC registration - everything you need to know.

Besides the professional image, companies have the advantage of being controlled by accounting reviews, while several people can own the business. Also, personal assets cannot be touched when the company is in debt. 


Registering your business: CIPC registration and taxes

This sounds scary, but there's nothing to worry about if you know what you're doing.

Every underdog needs to keep their cool. Spend time getting familiar with all of the legal jargon and requirements before getting financial advice and registering your business.

Once your company is registered with CIPC, it automatically registers with SARS, while the proprietors register directly as provisional taxpayers.

What does the law require? First, you might need to register your business for tax and other employee-related legal requirements.

You might need to register your business for income tax, Value Added Tax (VAT), Pay As You Earn (PAYE), Compensation for Occupational Injuries and Diseases Act (COIDA), and Unemployment Insurance Fund (UIF), which we’ll describe below:

  • VAT is the 15% extra that VAT-registered companies add to the prices of their goods or services, and they then pay that money to SARS. You will need  to register your business as a VAT vendor with SARS, if the total amount of money your business makes in one financial year (annual turnover) is R1 million or more. 

  • PAYE is the monthly tax that gets deducted off most enployees’ salaries each month and paid to SARS. If your employees earn more than R40 000 per year, you must register the business for PAYE tax contributions. You should also register your business for the Skills Development Levy (SDL) if monthly salaries exceed R500 000 per month.   

  • Any business with one or more full-time employees must register with the Department of Labour and COIDA to protect your employees. Employees that are disabled or get a disease while at work are compensated financially via COIDA.

  • All employers must register their employees with the UIF online or at any SARS office. UIF could pay ex-employees a monthly income for a time while they are unemployed. Your business could pay UIF contributions for all employees to the UIF.

Find out more about municipal by-laws where your business will be located by getting in touch with your local municipality and talking to other local business owners. 

Tax laws often change, so please consult a certified professional to get the most up-to-date information and advice.

Who will manage your business’s finances?

South Africans are resourceful. Many small business owners upskill themselves to manage their business’s finances.

For example, you could study a course and get tips from other business owners that they trust to help them. You can also learn more about managing your business finances on the Yoco blog.

Financial business professional people, like accountants, could assist you with your business's finances, including bookkeeping, tax requirements, financials and anything else relating to the financial aspects of your business. Also, they can help guide you regarding using your funds most effectively.

Who could help you start your own business?

There are many ways to get help creating your new business in South Africa.

We've listed a few of these potential resources below:

So, ready to start your business?

You have the chance to start your own business in South Africa if that is the right move for you. You could also get the support you need to be successful. So, what are you waiting for now? Get in touch to see how Yoco can help you.

Be inspired by these business owners who gave us practical info about starting their businesses.

Disclaimer: *Please get financial advice from a certified financial adviser. This article is for informational purposes only.

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