South Africa’s entrepreneurial spirit has been crippled by the lack of reliable power, with many SMEs having to close shop due to the rising additional costs of managing a business without electricity.
However, if you have a detailed business plan in place, with realistic goals and a way to combat the inevitable power cuts, then you could find success in this sector without having to worry about too much competition.
A buyer’s profile
You should have a clear understanding of the different dry-cleaning methods, machinery and equipment available on the market. The best starting point is to get experience working at a dry cleaner's; try to work yourself up to a managerial position so that you can learn how to run the business.
You need to have impeccable service and social skills when owning a customer-facing business. None of your staff will have the same level of attachment as you; you should stand behind the counter, get to know your customers and establish yourself within the community.
Do you have a strong business plan, patience and confidence? The price increases for electricity and water have put a big strain on the profits of some businesses. Therefore, to be successful, you need to make sure your prices will cover your fluctuating overheads while also appealing to thrifty customers.
A strong business plan will also look at the end goal that you have for your business. Although it may seem counterintuitive, planning for how you will be able to grow your business to a point where you can sell it and cash in on your investment, will give you a clearer idea of what kind of business will be right for you.
Finance and statistics
There are several ways to finance your business venture if you don’t already have the funds in place; applying for a business loan is the most common. Organisations such as SEFA offer direct loans of R50,000 up to R5 million tailored for SMMEs and co-operatives.
You will need to have a comprehensive business plan to be considered. SEFA offer various types of lending such as bridging loans that help your business meet short-term financial obligations, term loans, as well as schemes that are solely for entrepreneurs with disabilities.
Some vendors may offer financing options, make sure you discuss the finer details with the seller and your solicitors before making an agreement. There are also many dry-cleaning franchise opportunities that offer guidance, support and training for first-time buyers.
Be realistic about the amount of funding you’re likely to secure. The World Bank’s International Finance Corporation found that the funding gap in South Africa has a massive shortfall. In other words, there is a big difference between the funds requested and those that are delivered.
What to look for in a business
Finding the right business to buy is a very vital first step in making sure you are able to make a success of your new venture.
The location is a fixed factor that needs a lot of consideration; you need to have a clear idea of the local demographics, population figures and average household income to determine whether the business will have longevity. Spend time shadowing the current business owner.
Find out what equipment is included in the sale and request an up-to-date service. If any of the equipment needs repairing or replacing, find out the cost involved. You should also ask whether you will be taking over any on-going dry-cleaning contracts with local businesses.
Is there an established, reliable and well-trained team who are keen to keep working once you’ve taken on the business? If so, consider how valuable this is and how much easier it will make the transition. You can evaluate individual performance once you’re operating.
What type of reputation does the business have? If the dry cleaner is renowned and successful, you
should consider buying the brand, company name, copyrights and trademarks. If the business has a bad reputation, factor in the cost of rebranding.
Is it right for you?
While there are challenges to setting up a business in the current economic climate in the country, this does give you the opportunity to find a business for a lower price. If you have the funds, consider getting ahead of the curve and investing in energy-efficient machinery so your laundry business can thrive, even during load shedding.
Carefully consider the best ways that you can run your business in order to keep it efficient and profitable. This will include finding new ways to market your business to your target audience, or even finding new markets to market to.
And, if you are a first-time buyer with limited knowledge of the industry, consider buying a dry-cleaning franchise as opposed to operating independently. Working under an established company will help you to reduce risk, while still enjoying the perks of being your own boss.