Student entrepreneurs tend to be obsessed with writing business plans, how to access money, register their company, set up a bank account, and with buzzwords such as “business modelling”.
Yet these obsessions, said Dr Johann van der Spuy (above), lecturer in the School of Economic and Management Sciences at Sol Plaatje University (SPU) in Kimberley, didn’t really matter. They were “icing on the cake” and “nice-to-haves”, he said, adding that as academics they played a role in emphasising things which aren’t that important.
Van der Spuy, former director of the Mamelodi Business Clinic at the University of Pretoria, was speaking to a virtual and in-person audience of students and entrepreneurship academics at the fifth Student Entrepreneurship Week (SEW).
SEW is an initiative of the Entrepreneurship Development in Higher Education (EDHE) programme, primarily sponsored by the Department of Higher Education and Training (DHET) and implemented in partnership with Universities South Africa (USAf). SPU hosted #SEW2021, which promotes entrepreneurship as an alternative to employment, and Van der Spuy addressed one of its key aims in his talk titled An Entrepreneur’s Guide to Building a Sustainable Business.
The studentpreneur Van der Spuy has never forgotten
Van der Spuy said students mistakenly think being a successful studentpreneur is about how they talked or dressed. He cited the example of an engineering student who came to him for advice 10 years ago. The student was wearing sunglasses, shorts, flipflops, and a t-shirt, and carrying a packet of cigarettes. His business was importing cheap fishing tackle from China, selling it through an online shop, and marketing it through fishing hobby websites. He was doing so well, he needed advice on how to raise R5000 to R10 000 additional seed capital to buy extra stock.
“The dude did not have a business plan. He used his private bank account, didn’t even have a registered company. He didn’t come dressed up in a suit and he didn’t use big buzzwords. This individual had certain characteristics that made him very entrepreneurial,” said Van der Spuy, who said it is important for students to stop focusing on superfluous things and start realising what makes a successful entrepreneur.
Business plans don’t help
He said students tend to spend months on writing a business plan. “That is a dead document,” he said. “My experience with business documents is that they are excellent, expensive forms of toilet paper”, he said. “Business plans are a bunch of figures, normally sucked out of your thumb”. Worse than that, they often inhibit entrepreneurship because students are so busy refining the document, they miss a window of opportunity.
The student in his shorts and t-shirt had a proposition that investors could take seriously. “But if you walk in with this thick document, and it’s just bullet points and bullet points, jargon, jargon, and more bullet points, does it really add value? I don’t think that’s the way to build a sustainable business,” said Van der Spuy.
A successful business is like a horse race
He compared a business venture to a horse race. The racetrack represented the market, that is, people who are going to buy the product, and the amount of available money. The other horses in the race are the competitors, and the person sitting on the fence on the stand is the financier deciding where to spend their finance. The others on the stand are suppliers, as well as role players such as the government.
The two crucial components to the business, which are vital in determining its degree of success, are the jockey’s skills and competence, and the horse. Although the two are an integral part of the team, they are semi-autonomous – a strong muscular horse might have a jockey who is morbidly obese, suffers from diabetes and hypertension, and wears glasses. “Will that individual be able to drive that horse as fast as somebody in tip-top condition in the physical prime of his life? That’s the question,” he said. The alternative, an exceptional rider but a very sickly horse, is also not ideal.
How to build resilience in a business
Using the example of Formula 1 driver Michael Schumacher in his prime, Van der Spuy identified the factors that play a role in building sustainability.
The pinnacle is where the Ferrari represents the business, with Schumacher as its experienced driver, supported by his skilled support staff in the pitstop who pour the fuel, fix the tyres and maintain the vehicle.
Another scenario, often seen with student entrepreneurs, is a good business idea supported by a team of “your friends you used to party with”. They could be good, average, or bad but they are unproven and untested.
The worst scenario is a business represented by the symbol of a dodgy car, run as a one-man show without a strong support team.
Qualities of a successful entrepreneur
Some businesses are based on ideas with the potential to be very effective in competing in the market but the individuals in charge of them are simply not up to it.
Van der Spuy said he had seen people sitting outside the patent office in Pretoria looking for lapsed patents, that is, looking for good ideas that had never been capitalised on. This was one way to find ideas for a business, which students should realise did not have to involve something they had invented themselves. It could even be a service, and not even an actual product.
He said it is a myth, something that exists in textbooks only, that one person has all the qualities to construct a successful entrepreneur. The pool of characteristics that help an entrepreneur achieve success include a high drive to achieve not only financial wealth, but also recognition, self-fulfillment, and a sense of purpose. Entrepreneurs should also be risk-orientated, innovative, optimistic, have self-control, self-discipline, believe in their own abilities, and be able to tolerate a lot of stress.
Neurotic behaviour played a big part in creating a resilient business. “I sold two businesses because I simply couldn’t take the amount of stress,” said Van der Spuy. “Running a startup literally reduces your lifespan by 10 years. It’s a chaotic process,” said Van der Spuy.
Entrepreneurs have to be open to criticism. They can reduce their neurotic behaviour with therapy and mindfulness exercises but “before you jump into a business, test how well you work with the severe pressure, hostility, conflict, the chaos that ensues in a startup, because chaos will bring out neurotic behaviours.
He said emotional stability is imperative. He painted a picture of an entrepreneur who “loved you one minute and wanted to murder you the next, then the next customer complains and they go cry and lock themselves in the bathroom for two hours, and you’ve got to manage it. Two hours later they get a good phone call, the bank loan has been approved, and everybody goes out for drinks and they buy everyone champagne, and then they go back to the office and something else happens, and they start punching each other. In young businesses, you can’t work on that basis, it’s just impossible to function. You need somebody who can sail a steady ship,” he said.
Skills of successful entrepreneurs
The skill set of successful entrepreneurs is often neglected. It includes personal skills such as the ability to communicate clearly, be a good leader and to motivate others; management skills; practical business skills that can be gained from experience in the field in whatever capacity; and technical skills.
The entrepreneur has to have the technical knowledge of their specific industry. “If you open a pizza diner, but you can’t perform the core business activity which is actually to produce a pizza, you are in a spot of bother. It’s called Pizza Hut, not ‘Thabo’s Pizza Hut for people that want to buy pizza from Lebo, who is going to make it on behalf of Thabo’,” he said.
Why #ReBuilding #AgainstAllOdds are so important
Entrepreneurs aged 18-35 say they are entrepreneurial but don’t have access to finance, skills and support; or marketing, technical and managerial skills. Plus COVID has resulted in restrictions, and South Africa is in a global recession. This makes building a sustainable business more difficult than ever and, said Van der Spuy, highlights the importance of #SEW2021’s themes, #ReBuilding and #AgainstAllOdds.
What is a sustainable business?
Van der Spuy defined a business as something in action, something that’s happening. “It’s movement, it’s poetry, not a stagnant thing that’s hidden in an office or stored on a laptop,” he said.
“And it happens constantly, instead of planning, planning and a rigorous amount of paperwork.”
Questions from participants included: “How do I keep track of my business for myself and for the future? I have no business plan.”
Van der Spuy responded: “Make a business model canvas on one page with your income stream and expenditure. You can put it in a file, look at daily, and can adapt it. It’s easy to see all the functions of the business: the areas where it’s bleeding money or the areas where it’s taking in money. What you’ve got basically is a tap, and a sink, and you can see how much is flowing in and out.”
Gillian Anstey is a contract writer for Universities South Africa.