Leaving Home
This week….Leaving Home?
Kind of an emotive issue I would like to discuss this week, so please bear with me. Like every other white middle-aged male in this country I have wanted to leave South Africa for a long time. In my case it has been since 1975 so I can’t really blame any wanderlust on the new government. Having said that, maybe it’s time to revisit the issue and make some rational, rather than emotional, decisions.
After visiting more than 40 countries in the past 20 years – and having spent time in the most popular overseas destinations for SA emigrants – I really, really want to stay here. Despite 1 primary problem, this country remains an exceptional place to live and work, and a fine base from which to attack the rest of the world commercially. I have realized that I don’t want to go – I simply love to travel, and this is one of the best bases for travel anyone could wish for.
“Change” is just another word for opportunity – and South Africa is all about change. Much of it is uncomfortable; a lot of it is not immediately understandable; and a great deal is pretty farcical – but if you take the time to delve behind the headlines – it represents opportunity. A few weeks ago I muttered about the comatose Rand representing an invitation to export stuff – especially services – but we still complain about it rather than welcoming it. We allow it to get us down instead of firing us up.
Tish came back from Washington a few weeks ago – to my immense relief. Washington is the seat of the US government – and they have worse power failures each day than we have each week in Johannesburg. This is apart from being an awfully expensive place to live – even if you’re earning in US$.
We South Africans tend to be running away from something – rather than running towards something. It’s not necessarily better overseas – but it certainly is different – with a different range of challenges. I am an African, and I have begun to realize that I always will be. Whether I live in Canada or Australia or Ulan Bator I will never feel as though I belong there. As a simple example - I can never be president there – which I can here [although it’s a pretty long shot!].
Here are a few of my reasons for staying:
Quality of life; good roads; ESKOM and a quality power grid; low cost of living; high relative income; entrepreneurial flexibility with few rules; it’s really easy to shine amongst the morass of poor service; it’s easy to sell overseas with such a cheap Rand; hotels [and accommodation] are really inexpensive; excellent health services; magnificent weather; superb beaches; the best looking women in the world [OK that was a little sexist]; a plethora of tastes and textures unmatched anywhere else [biltong, boerewors, droewors, Crosse & Blackwell, Mrs Balls, Marie Biscuits, Tennis Biscuits,…]; the low cost base for international expansion; my friends; my family; low cost, high quality, clothing; superb red wine at very low prices; low cost furniture; lots of unskilled people – who allow us to excel; DSTV gives me access to the world; Internet gives me immediate access to almost anything, almost anywhere.
I have no doubt that I could think of a few more but right now I have to make a decision. Should I have a glass of that superb red wine, or should I head for the gym to ogle some of the best looking women in the world? Difficult choice.
On the negative side – is it dangerous? I guess so. The Cape Flats has long held the record for the most dangerous residential area in the world. But, to be honest, if my kids were starving to death [a daily reality for many of us] I would also be stretching the rules to feed them. So the question isn’t – where can we go? Surely the question is – how can we help? And I reckon that if we’re bright, bold and hardworking enough to run our own firms, then surely we’re bright, bold and hardworking enough to find some solutions instead of constantly highlighting the problems.
Bottom line for me is simple. Keep your entrepreneurial brain here – even if you decide to keep your money offshore! This remains the land of opportunity.
The best year of your life…
Welcome back. And welcome to 2002. No matter what last year was like for you, this year is going to be faster and more exciting than any year you’ve ever had. How do I know that? Just look at how much faster everything has been getting these past few years, and you will see what I mean. And all of this means more stuff to worry about!
In fact, the massive glut of information threatens to suffocate us if we don’t take a few simple steps.
Firstly, decide where you want to be at the end of this year. And write it down in your diary. That’s the focus. A little like a ships captain deciding that he wants to get to Rotterdam. That’s the goal for the year. If you don’t have a goal for the year – then I can guarantee you won’t get there! And if you don’t write it down, chances are strong you won’t get there either. You will have forgotten your goals by the middle of next week!
Then work out where you are right now. That’s the result of just one thing – your imagination thus far. You might think that it is the circumstances – the good or bad stuff that has touched your life until now – but that’s not true. Where you are now is the result of your rising above all those circumstances and running with them [or not, as the case may be].
And then work out what you need to get from NOW to THEN – how to leverage everything you have now to get to where you want to go. And then switch on the engines and drive!
From that point onwards, ignore the excess information that simply makes you worry more. Every time I read a local newspaper I want to emigrate – the events in SA are so sad, violent or farcical – and there are so many of them – that I get scared. Then I worry. But the reality is that I can’t do much about them – but I can change my own circumstances.
For example, at the end of this year I want 50% of my income to be in a stable offshore currency – ideally UK pounds. I want to stay in South Africa because Knysna is the best place in the world in my humble opinion [although Vancouver and Melbourne come awfully close]. But to allay my fears of a long term future in this country I want to develop an income stream that is independent of the vagaries of our local economy. [Actually I’ve been wanting to do this for ages – but didn’t have the cahones to get out and do it!]
Last years bungee jump of the Rand prompted me to take them both in hand and jump as well. It’s not 17 times more difficult to earn a pound than to earn a Rand – although I am told that it might be twice as difficult. In my simple mind this means that I will still be 8 times better off earning Pounds.
What this means for 2002 is that I will be focused on helping you export anything. Services, products, ideas, technology, fruit, accounting, law, thoughts, letters, programmes, training, education – anything that will keep you here in SA but help you earn offshore. That’s one of the many things we can do to profit from the current situation. [It will also help SA – but I don’t want to get too altruistic!]
This year will also be focussed on using technology to get more done with less time and money. My business credo – How can I better help more people while earning more money with less effort? Got some interesting ideas to share in this regard over the next few months. [Amazing how inspired you can get lying on your back on the Knysna lagoon while watching the birds!]
One last focus for 2002 - your life partner. This whole process is supposed to be fun, and that’s for your family as well. There’s not much point to it if you end the year stressed and single [and worse –with the kids!]. So right now, won’t you please take 2 Post-It notes. On the one write –“Spontaneous Dinner” and on the other write “Spontaneous Flowers”. [If your partner won’t be impressed by flowers – insert something that really turns him/her on.]
Insert them both into your diary on different days somewhere in January. When you get to that date – be Spontaneous! And as you use each – move them forward a few weeks. You will be amazed at how this simple spontaneity will impress your partner. And you’ll be amazed at how quickly these little notes pop up. [Failing this expect your partner to start getting real unhappy sometime soon. And rightly so.]
You can really help me to help you by posting your questions, queries and thoughts at the Entrepreneurs Forum – rather than emailing them to me. I am finding that I cannot answer them all adequately – especially as many questions are very similar. This Forum allows me [and the Business Entrepreneurial Support Team] to answer most questions in depth – knowing that the answer will be available to anybody else in future. Over time this makes it much easier for all of us to get answers. I hope you agree.
I hope that this year will be the best ever for you – and that each year in the future will be even better. No matter what challenges you face this year, I hope that you will emerge stronger and with a better sense of humour. Let’s have fun together in 2002.
International Business Warriors
I have been inundated with questions these past few weeks - and they all have a similar theme. How do I go about it, and how do I build the database to launch an offshore venture/division/effort?
The major issues seem to be a quesion of where to start. In order to help get you started as quickly as possible, I have combined two seminar developments that we were planning for mid year into an International Business Warriors seminar - which we launch next month.
Firstly, we will look at offshore structures [companies and trusts] that you can set up to compartmentalize the risks - as well as get the best tax advantages. and then we will look at how to rapidly build an initial database of prospects in any international target markets you want to attack.
Specifically, on the offshore side we will look at where to base your enterprise. [Why is the Isle of Man better than the Cayman Islands - or is it? And what's wrong with London anyway?] How to structure the ownership so that you get the most bang for your buck. [[Why is it useful to have all your intellectual property housed in an offshore trust? And where is the intellectual property in your business?] How to get your tax rate on international efforts down to single figures. How to ensure that there is no risk to your local business. And a brief look at most offshore jurisdictions [from Bahamas, via Portugal, to Western Samoa] and how you can use these to add vooma to your international efforts.
Our speaker, Tim Mertons, is a specialist in this field and has already assisted a number of BEST clients to get their offshore structures working.
In this same seminar we will look at how to rapidly create a database of prospects for your international expansion - from the safety of your desk. It’s easy and fun, and awfully effective. Unfortunately, you’ll have to put up with me for that section! We’ll spend an hour on quick research techniques that will produce amazing results for you. These are techniques that are only possible with the internet - and are about as leading edge as you can get in the guerilla marketing world. Since we’re all trying to get as much bang for our buck - you’ll find them astonishingly effective.
I will be in London and Dublin next week - researching how UK entrepreneurs are structuring their businesses and just getting ideas! The quickest way to really get creative is to fill your head with new stuff. [It blows the cobwebs away!] You may find my email responses a little slower, and my cellphone will be off. But one of the miracles of the Internet is that I can still send a live version of this weekly email from London to 17,500 SA business owners - without it costing any more than it does from home!
You get what you ask for!
Interesting thing, this one life we have. You get out exactly what you ask for. For most of us, the reason we get so little is because we don’t ask for more!
In a recent report by the DTI the reason given for so many business failures is the ‘survivalist ethic’ of the SA entrepreneur. As long as we’re concentrating on survival – that’s all we’ll get.
Ask someone where s/he wants to be in 5 years time and the answer you’ll get be either “I don’t really know!”, or something along the lines of “Weeell, I don’t really want a Porsche…”! [Is it any wonder we not only don’t get the Porsche, but we don’t get anything else as well. We don’t think positive thoughts about our future – which may be why they all come true!
Eight years ago I had closed my business [1992], lost my furniture [1993], been in a coma [1993], fallen off a motorcycle and smashed my collarbone [1993], lost all my ‘friends’, collected a couple of million rand in judgements and was reduced to trying to sell life assurance to eat. [Apologies to anyone for whom life assurance is an unforced career choice.] Life sucked!
I recall sitting at the Stellenbosch Spur after receiving yet another unanswerable summons with yet another pathetic day lined up. The Spur was a first choice location because of their bottomless coffee. The caffeine stilled the hunger pangs and you could hide away for hours.
In the middle of all this misery a single thought occurred to me – “there must be something positive in all of this!”. I had an A4 exam pad in front of me and the only thing I could think of was – the next time I make a million rand I will know how NOT to spend it! And as I thought, it was like a floodgate opened, and by the time I had finished writing down all the good things about going out of business I had filled 2 foolscap pages so full that you could barely see the white of the paper!
While the brown stream continued to flow over the next few years [and at times the depth increased sharply!] I couldn’t help but see the plusses in every situation. My spirits lifted and I began to see a magnificent future. After all, if the debts were so large and I needed to earn so much money to meet them, then how much richer wouldn’t I be when the debts were repaid but the income stream continued?
No matter how deep the swamp you’re in, nor how many and varied the crocodiles – don’t just hang in there! Look at the hill on the left – the one with your new mansion and the Porsche in the garage – and start swimming. Or better yet, just float to the top and start walking! Since the problems are all in your own mind, surely it’s just as easy to invent the solutions?
Go kill a crocodile today.
Insanity
Insanity: doing the same things over and over but expecting a different result!
Sit back for a moment, and ponder a few questions. How long have you been working for yourself? How much have you earned thus far? How much is left - honestly?
For most of us it’s a pretty sobering thought to translate all the hours into the pretty sad balance we now have. Yet the reason why most of us are not prospering has nothing to do with how hard we’re working. It’s because our focus is not where the results are. It’s a little like riding an exercise bike. No matter how hard you pedal, you’re still going nowhere. All that you do is build up a sweat and maybe lose a little weight. Sounds like our entrepreneurial lives, doesn’t it?
So if the past years’ worth of effort have yielded such skimpy gains - what makes us think that the next few years will be any different? Surely, if we keep doing what we have been doing, the results must be the same? Or are you, like most of us, waiting for some outside event to save you?
I have lost count of the folk who have told me “I just have to work at this pace for the next 2 years and I will be out of it!” And they struggle for 20 hours a day, getting divorced; having heart attacks; alienating their families; and when the 2 years is over and they’re no closer to being any better it is “I just have to work at this pace for the next 2 years and I will be out of it!” And it simply goes on. Isn’t there something wrong with this picture?
The entrepreneurial recipe we have been sold simply isn’t working! Far too many of us are going out of business. Far too many of us are struggling for years without any proportionate return. We’re making our staff rich, our banks rich, our suppliers’ rich - but we’re not making our families rich.
You would come to these same conclusions if you had as much time to think about it as I do. Or if you met as many struggling business owners as I do. Of course, the question is “Is there a better way?” and there seems to be no shortage of folk with ideas on how you can get rich. But each idea seems to involve you in selling their products, or making them rich first, or doing something different to generate your income.
I am not asking you to do something completely different - merely that you put on a different set of spectacles when you look at your business. How much money is it generating for YOU each month? How much more should it be generating? What are you doing with that money to ensure that you get off the razor’s edge? What are you doing with that money to ensure that you have a future with less stress, rather than running in survival mode each month?
My definition of a business is: How do I better add value to more people more profitably. Each of these issues is important - but the last word is critical. That word is profitably. There is absolutely no challenge in helping others and not getting paid enough for it. The challenge is to help others so that you make a profit - not just covering your costs - but making enough of a profit to make it a fulfilling activity for you to be investing your life into.
So my challenge to you is simple: What will you be doing differently in the next few years to break out of the unprofitable rut that you’re in? [If you're currently making more money than Croesus - then please accept my apologies, but enjoy the fact that you make up less than 4% of the total business ownership in this country.] In the words of Sun Tzu [if you don't know who he was then may I humbly you're not reading enough, or browsing enough bookstores] “To secure ourselves against defeat lies in our own hands.”
What, me worry ..?
Isn’t it interesting how much time we spend worrying about stuff? And it’s usually stuff we have absolutely no control over. Once one of these worries gets into our brains it kinda careens around like a drunken taxi driver in one of those massively reliable and roadworthy Toyota minivans with darkened windows proclaiming “Big Boy”, bouncing off the insides of our skulls and crashing into the good thoughts we might occasionally have - like the positive feelings we have about the employment equity act, or our upcoming SARS payment. And even when we CAN do something about this worry, we don’t because we’re too busy worrying to actually do anything!
There is an old adage that those who fail to plan are planning to fail. But how the hell do you get time to plan when there so much action going down each day? So here is a quickie suggestion. Take tomorrow off to do some planning! If that’s going to result in the closure of your enterprise - then it’s more like a razor blade than a business and you’ll be better off anyway doing something else. [If you're an employee, rather than an employer, and the business will fail because you've taken the day off - you might want to bring this fact to the attention of your boss and immediately negotiate an increase in salary and benefits.]
That single day of thought - about where you’re going and how to make the trip more fun - will pay for itself 300 times this year.
The concept of marketing is one of the closest to my heart because the best source of money for any business is … your clients. Unlike a bank they don’t want you to repay them with interest [unless you're really, really bad]. The only way to find more and better clients is via marketing. But marketing requires some thought and planning - usually some time before the results start to flow. Yet our days are tied up with all sorts of daily urgencies, emergencies, crises, and other time-suckers that are usually completely unimportant. But WOW can these attention diverters increase the stress levels today. Next month when you have no sales then the stress levels go into overdrive again and it’s time to get some Zantac. If you can’t do anything about the problems, at least you can feel good about your business sailing into the drug induced bliss of oblivion.
Marketing is the best investment you can make. The reason most of us invest so little time and effort in this activity is that the time you put into it today will usually only bring benefits into the future. Unless, of course, you spend the day doing some internet marketing - and then the time you put into it today brings results by tonight. That’s one of the many reasons why the internet is so exciting.
That’s probably not going to happen because we worry that we don’t have time; don’t have the right skills; don’t have the money to invest; don’t have the right equipment; the equipment isn’t big enough; the equipment is too old; the roof is leaking; don’t forget to get Chinese on the way home; should I get the prawn chop suey or the chicken chow mein; maybe vegetarian would be better because there is always the risk of botulism or salmonella; is this ache in my leg deep vein thrombosis; why do my clothes feel so tight; I haven’t thought about sex for at least a minute and the national average is once every 9 seconds - is my sex drive collapsing; maybe I need viagra; but what about the heart attacks and the blue tongue; oh hell, is that all there is in the account; why aren’t folk buying this month; what can I do about the Middle East situation; why don’t people like my company; … … …?
Apparently we think about 60,000 thoughts each day. I know this because Deeprak Chopra counted them and since he’s written a few books he must be a reliable source. How about we focus a few more of those thoughts each day on preventing humongous hassles tomorrow rather than solving the minor challenges of today? And maybe a little less time worrying about the things we can’t do anything about, and invest a little time into areas where we can make a difference?
Government & Small Business #1
Imagine that you spent 5 years at university, learning all the intricate technology and detail of your proposed profession ñ without a single business course.
What does 5 years at university cost these days?
And imagine that you then set up a small retail store to ply your trade, with sureties to your landlord, and a huge overdraft to buy stock and shop fittings with sureties to the bank.
And imagine that you then employed about 7 staff members to help you in the store because it is a 7 day a week operation.
What would happen if the government intervened and limited your gross profit on any individual sale to just R26-00 ñ no matter how big that sale was? Which means that if I purchase a R1000 item from you, the transaction would work like
this:
R1000-00
Sale to me
+
R26-00
Government legislated maximum profit per item irrespective of price
+
R 143-64
Plus
VAT
=
R1169-64
Equals total paid by credit card
-
R1000-00
Cost of Sale [the stock]
-
R 58-49
Bank gets credit card bank charges [just for this transaction]
-
R 0-50
Telkom gets telephone call from card machine to bank to process transaction because R1000 is above floor limit
-
R 0-50
Telkom gets telephone call to get authorisation because my card is getting full
-
R 143-64
Government gets VAT
=
R 966-51
You get this nett payment
=
R 33-49
You lose this each time you make this sale
Thatís excluding the other indirect costs you face each month:
Shop rental
Staff salaries
o Including PAYE
o SDL
o UIF
Bank charges for the monthly cheques to government
Interest on overdrafts and loans
Accounting fees to pay for the reconciliations that government demands
And all of those other costs associated with running a business but not associated with any individual sale
I know it looks completely unbelievable ñ but it is true! Honestly, how long could you stay in business under these circumstances? And if you chose to continue in your business, what would you do to limit the damage?
In my simple mind (and I know I must be wrong, because our beloved leaders and their committed staff slaved for years to implement these fine regulations) you simply couldnít continue for long. And if you chose to continue, your first action would be to stop selling the big ticket items ñ because theyíre going to put you straight out of business.
And thatís the challenge that your local pharmacist faces right now. Government insists that these new regulations are good for you ñ the medical consumer ñ because they will keep drug prices low. They will ñ but these regulations will also drive 50% of the 2,500 local pharmacies in SA out of business ñ and those pharmacists are going to get deeply injured in the process, as are their employees. Government also assures us that theyíre doing this to relieve the burden on the state medical program ñ but is that really true? What happens when your local pharmacist cannot profitably support your particular disease? Mine is diabetes ñ and almost everything about diabetes is expensive.
I tried using the state services back in 1992, and it cost me a whole day each month to get the drugs I need to stay alive. I really do not want to go back to that. Yesterday I had a medical emergency. The new regulations meant that my own pharmacy in La Lucia Mall (which has just changed hands and become part of the Clicks operation - maybe there is method in all this madness) refused to supply the insulin I needed to get my blood sugar under control. (They had a computer error which duplicated all of my scripts ñ but lost the one I needed last night.) These new regulations so terrify them that they refused to acknowledge the urgency. Maybe theyíll be the winners ultimately because they wonít be losing money supplying me insulin in future, ëcos I wonít be going back.
The next pharmacy I tried didnít stock this particular insulin because they couldnít afford to. [Would you be carrying R1,000 stock ñ costing R150 per
year in interest just so that you could lose another R33-49 when it finally sold to some deranged stranger wandering in?] Then back to my doctor who gave me a script [which I insisted on so that I can laminate it and carry it around in my case] for every single drug that I currently need, before going to a local private hospital to get the insulin I needed. Isnít it interesting how tiny mistakes can escalate so rapidly into full scale crises?
Why am I concerned? Well, I know more about the social habits of the Kazakhstan Welwitchia Weevil [precisely nothing] than government knows about the reality of our small businesses in this country. [So do you.] And as a sufferer of a chronic disease, I know more about what is really happening at street level in my local pharmacy than government does. [So do you.]
Unless this stops soon, I am going to choose to find myself a little spot in paradise where my taxes pay for my drugs, delivered to me by nubile bronzed bikini clad assistants while I sip my beer on a sunny beach near a lagoon unsurrounded by electrical fencing designed to protect my meagre possessions and occasionally fry a migrating duck. [Itís great to dream, isnít it?]
And if I offer to bring with me a thousand qualified [but currently unemployed] pharmacists and 1500 other Business Warriors ñ each employing about 7 persons and each generating real wealth for the economy, what government [except, of course, ours] would refuse such an offer?
Genuinely, unless you have experienced the intense anxiety that a blood sugar event can engender, itís difficult to conceive of how important yesterday was for me. The Russians (back when Russia was the kind of socialist paradise that our current leaders aspired to and which we now seem bent on achieving) used insulin as a truth serum, because when your blood sugar hovers at about coma level you will cheerfully kill your parents to get some sugar.
And if theyíre doing this large government bull in the tiny pharmaceutical china shop routine now, how long before government feels the need to control profits
in your sector of the economy. Or mine. [In fact, theyíve already attacked the Internet industry with that marvelous piece of legislation ñ The Electronic Communications and Transactions Act designed to level the playing fields ñ which weíre all trying to ignore.]
Right now I do not know of a single small business that is completely legal ñ fully up to date with every single tax [including Local District Council taxes], and compliant with every one of the 143 pieces of legislation regulating our roles as small business owners. None of us can afford the staff needed to read, analyse, and comply with PAIA, ECTA, CIPRO, FAIS, FICA, and the host of others ñ all which will be used to penalise us sooner or later ñ yet more attempts to extract blood from the desiccated veins of small enterprise in this country. Now that I think about it, who the hell has time to sell any more?
After all, as ëeverybodyí knows we small business owners are just privateers sucking the lifeblood from the wallets of the workers, and the only folk that have enough judgment to ensure that each citizen gets his/her fair share are the semi elected folk that control our futures. Some of this anti-capitalism prejudice runs awfully deep. ëProfití is a dirty word in the psyche of government. I wasnít kidding about the blood sugar paranoia, was I?
Bottom line, I think that about 50% of all existing pharmacies will close within the next 24 months. Itís simple small business economics. And a lot of well trained folk are going to lose their homes, their cars, and their financial credibility. And about the only thing to do when that happens is to go somewhere else ñ like Australia or Canada - because we truly penalise an entrepreneur in this country when things go wrong.
These poor folk will do anything to keep it alive, but I donít see how theyíre going to get it right unless government sits down and works through the numbers from a commercial, rather than a political, perspective. How will that impact on you when your child has a medical crisis and you cannot get the drugs she needs?
And which industry are our beloved leaders focusing on next? Yours? Mine? Are we, dear brothers and sisters in commerce, going to hang around like Zimbabwean farmers waiting for new tenants? If Petes Weekly suddenly stops arriving in your InBox, you will find me drooling outside the empty shell of a shop that used to be a pharmacy. Otherwise, next week will probably be a somewhat more relaxed view on life as the Prozac kicks inÖ
September 22nd, 2004
- Umhlanga Rocks.
Government & Small Business #2
“Pharmacies are in trouble because government is forcing them to sell at a loss and that is going to put them out of business. Who will be next?” That was the point of last weeks email. [If you missed it, you will find it on the Petes Weekly website.]
May I please share with you the responses I received, because they are
fascinating?
There were a few main themes coming back at me, and their messages were consistent. Firstly, the folk who feel that pharmacists deserve it after ‘creaming it’ for so long.
Maybe they do, but in the minds of the powers that be - we have all been ‘creaming it for too long’. The folk who read this weekly are overwhelmingly white, previously advantaged individuals. And the overwhelming view amongst the previously disadvantaged seems to be that we have each been making this money at their cost. Instead of seeing the economy as a growing pie with enough for all, they see it as a finite amount, and if we are prospering it must be because someone else is starving. This means that there are no guarantees that our individual industries will not be targeted next year.
In my mind, getting the SME community to agree on any particular direction is like herding tomcats. And that’s one of the core reasons why we are so vulnerable to organised labour/government/large business. We have no voice because we choose not to. The Business Warrior community is part of my effort to build such a voice.
Secondly, the few folk who decided that I am an unimportant speck in the universe and that I should not keep threatening to leave South Africa just because I do not like the way things are going. Right now we still live in a democracy, and a wonderful one it is. That allows me to say what I want if it bothers me. [Heck, you can say what you want as well!] And the setting of price controls in the pharmaceutical industry scares me enough to speak out. As someone who invests almost R60K each year to just stay alive [hospital plan + insulin + blood pressure tablets + regular checkups + blood glucose strips], I believe that it is a very bad move.
Right now South Africa is the best place on the planet to live, in my humble opinion. But if I have to sit in a government hospital/clinic for a full day each month to get the medicine I need to stay alive - then it won’t be. Is it unpatriotic to say that? I understand that government is planning a complete national health system from 2007 onwards, based on the UK and Australian models. This would allow them to determine exactly what drugs SA can afford, rather than what is best for my particular situation. Based on the current service delivery of our civil service, how effective would this be? Honestly? Is it unpatriotic to say that I am uncomfortable with that? I don’t know. But my reality is that I am deeply uncomfortable with it.
We South African small business owners tend to be very quiet in public about issues that bother us. Contrast this with Australia, the UK, even Norway - where those in power get slated each time they do something silly. I recall seeing Aussie Premier Howard being grilled on TV when last I was there - in a way that
I have never seen a public official questioned here. Yet as soon as any one of us criticizes our government - or any individual within it - we are deemed unpatriotic. Is it more patriotic to stay silent and fume over a beer with a few mates - where it doesn’t do any good?
Which reminds me, there is a fight brewing between DoE [Department of Education] and DoL [Department of Labour] in which it is envisaged that ANY ‘accredited’ training after school will have to come from your local university or
technikon - thus sidelining all the thousands of folk offering specific eduction in things like film-making, IT, programming, sales, internet marketing, etc. And what are we going to do about it? Probably just yawn and go about our daily business because these trainers too have been living off the fat of the land for too long.
Thirdly, the folk who have chronic diseases like mine. [In medical terms 'chronic' means long term.] Most of those on expensive drugs have the same reaction I have. Even those on cheaper drugs are finding that the new regulations are making their drugs more expensive.
This edition of Petes Weekly is brought to you courtesy of Business Warriors - a community of small business owners who want to help you solve your challenges by offering great products, great services, and exceptional value. Please go here to search the database of Warriors before you decide to support a corporate who won’t take your business personally, or seriously. They are not responsible for the content, however, and do not necessarily share my opinions. That is all my responsibility.
Fourthly, the folk who wrote to simply say “Spot On!” Thank you for taking the time to say that. In amongst all the folk who did not enjoy the issues I raised last week, your emails were heartening. And finally, the ex-Zimbabweans. They scared me enough to buy a few books of Zimbabwe’s post independence progress and read 700 pages quickly. Let me tell you why.
Experience is a wonderfully personal thing that allows us to identify future problems quickly, and deal with them before they become crises. That’s why I have done so much consulting. People trust me because I lost everything in 1992, and I can now easily see the holes in most businesses and business plans.
But experience is nothing more than a very personal view of recent history. And the reason we learn history is to learn from the mistakes of our predecessors and ancestors.
When half a dozen unrelated ex-Zimbabweans raise the same issues via email from different parts of the globe - then I think we should acknowledge their experience in this particular issue. Each of the emails mentioned that price controls started an immense range of shortages in Zimbabwe. Storekeepers could not keep selling at a loss, and simply stopped stocking a whole bunch of goods.
And my point is that these little nuggets of legislation quietly sneak up on us, and if we accept them as being the fate of those groups that ‘creamed it’ in the past, then how long before we ourselves meet the same fate? Which reminds me about CIPRO - www.cipro.co.za - who will soon require that every registered business submit annual financials over the internet - and pay the prescribed fee by credit card. This is in addition to your regular SARS returns. And if you think internet banking is expensive, how about being forced to pay another R450 each year so that YOU can input your own details? Bit of a bugger if you have a judgment and can’t get a credit card, isn’t it?
You see, my entrepreneurial brothers and sisters, we are all in the same leaky boat. Most of us are at the mercy of increasingly onerous legislation that we cannot ignore because we have too much to lose if we do, while those folk with nothing to lose can carry on with impunity. If the words above offend you, then I must ask you to take a step back and look at my writing since 1999. There isn’t much point in sharing thoughts on how to sell better, or how to re-finance your business, if we ignore the huge impact the environment we operate in has, is there?
September 28th, 2004
- Umhlanga Rocks.
A few words on the products and services I recommend - and whose links appear in this ezine and on the Petes Weekly website. If I personally use a product/service and find it adds immense value to my own business or life, then I try to share the benefits. I only do that when I have had a wonderful, seamless experience myself. Of course, this is no guarantee that your experience will be the same as mine, but very few people come back to me on a service issue.
In personally recommending a specific product/service, I am not recommending anything else that the specific supplier might offer - just because I haven’t personally bought it. As in all aspects of life, it pays to think before leaping.
Government & Small Business #3
These are well-trained professionals ñ all members of the Pharmaceutical Society of South Africa. Their 5 years of training in the complex field of drugs and chemistry did not include a single semester [term] of business courses [of any nature]. This means that, like most of us, they are technically proficient small
business disasters.
Everybody seems to be looking at the global numbers and statistics, and not at the individual reality that faces these people as they are squeezed in a vice that we are all ignoring. [A further survey of the emails claiming that they deserve this - shows that almost all of these emails seem to come from employees ñ rather than small business owners. Unless you run your own business, you have no concept of the implications.]
Our government has implemented a set of regulations that has dramatically limited a pharmacists business freedom, as well as their profitability. The legislation is well intentioned but poorly designed. Government is telling them to produce business figures, but these are all small business owners ñ and they [like most of us] simply do not keep the kinds of figures that government wants
before they will reconsider their legislation. [Government seems to think that SMMEs are simply small versions of JSE listed firms ñ with all their resources.] Chances are that the paperwork will not find its way to government, because it doesnít exist.
Lets look at the process for a while. The story I am about to share is based on 12 years of intense experience in helping business owners through this process, as well as my own experience in closing a firm in 1992, so am all too familiar with this path.
The average pharmacist: ï employs about 7 persons ñ and pharmacies are amongst the most BEE compliant small businesses in SA, ï runs an overdraft [secured by a home and life assurance policies, and a personal surety],
ï is VAT registered [secured by a personal surety in favour of SARS],
ï owns a home [bonded] and securing the overdraft,
ï is renting business premises,
ï is married, with 2 kids at school,
ï and probably has not yet finished paying back a study loan,
The bank overdraft is immediately at risk, because banks lend money for profit and on the basis that it will be repaid. Right now there is a mess of dispute about that, so the banks will immediately tighten up their credit arrangements with pharmacies. This means that some will recall the overdraft immediately; some will ask for a reduction in the limit; and a few will wait. No pharmacist will be in a position to comply with either a recall or a reduction. They simply will not able to borrow any money elsewhere because the word ëpharmacistí now means ëtemporarily employedí. Think about it. Would YOU lend money to a pharmacist right now? Why should a bank do so?
The month ends loom and even though sales have been strong, the month end bills seem to take more cash than there is in the bank account. This is because profitability is non-existent. This means that the first month end hurts, while the
second is terrifying. Our hero isnít getting paid. Nor are his/her personal bills.
This means that it is time to retrench a few staff members, who also have a whole range of personal issues and need the job. They need full retrenchment packages, and very specific procedures need to be followed to comply with the Labour Relations Act. There isnít much cash to fund the retrenchment packages, and no cash to buy professional procedural help, and our hero does what all of us little folk do ñ his/her best under these trying circumstances.
But this isnít good enough, because the staff have more rights under the current labour legislation than the entrepreneur [who, now that I think about it, has no rights other than the right to pursue a profit]. This means that a CCMA hearing is probably on the cards ñ and since many pharmacists trade as sole proprietors ñ in turn this means that the family home can be auctioned to pay for the procedural penalties, and reward the staff for being fired.
In the meantime, since the bank is squeezing, chances are strong that our hero isnít going to have enough cash to meet VAT and PAYE and SDL and UIF and RSC/JSB payments ñ which result in an immediate bunch of non tax deductible fines. Suppliers are also screaming daily at our hero, and eventually they stop supplying ñ other than for cash. This means that the stock level drops, and expensive drugs are only ordered when requested. [This is already happening, with one private hospital pharmacy no longer stocking the very expensive drugs that transplant patients need, preferring to send them to the local government hospital.]
Our hero has been losing money processing card payments, and tries to charge an additional 5% for card payments ñ to prevent a direct loss on each sale. An irate client contacts the card merchant bank ñ who has a strict rule about the
merchant not EVER doing that ñ and they withdraw his/her credit card facility ñ blacklisting the business with all the other merchant banks, thus ensuring that our hero loses a critical transaction system which hurts sales of all other [profitable] products.
The banks start to pull back vigorously when they see that all pharmacies are truly struggling, and they start to recall overdrafts en masse. Our hero ñ whose overdraft is secured by the family home ñ is forced to sell in order to prevent the
home being attached. Banks are notoriously non-negotiable under these circumstances. This sale invokes Capital Gains Tax and transfer duties, and our hero looks for rental accommodation.
While all of this is happening, our hero is in a long, dark tunnel with no sign of light. Each little legislative glimmer is seized on and held tightly like a child’s security blanket, but ripped away each time government defends their position in court, making a few more attorneys rich in the process. I spent 2 years in such a tunnel, and in my case the government wasnít fighting me ñ so these folk face an awfully bleak future. Their entire reason for existence ñ their 17 years of schooling ñ is being attacked. That raises a bunch of questions in the middle of the night.
This special edition of Petes Weekly is brought to you courtesy of Business Warriors - a community of small business owners who want to help you solve your challenges by offering great products, great services, and exceptional value. Please go here to search the database of Warriors before you decide to support a corporate who won’t take your business personally, or seriously. They are not responsible for the content, however, and do not necessarily share my opinions. That is all my responsibility.
The rent goes unpaid, more staff get fired, and the business eventually closes ñ way too late to save anything. The landlord exercises a tacit hypothec ñ their common law right to seize everything on the premises in payment of outstanding rentals. In terms of the surety our hero signed in better times, the landlord sues for payment of the full outstanding rental ñ in this case 2 years of escalating monthly rentals. The summons just joins the stack of other summonses because our hero cannot find an attorney to help. Not unsurprisingly, any attorney defending such a position would like to get payment in advance ñ but there are no funds left. Our professional hero is living from hand to mouth.
Over the next 6-12 months our hero, jobless, wanders helplessly like economic jetsam between CCMA hearings, surety court appearances, and section 61 appearances [where our hero has to appear to show that s/he doesnít have enough money to eat, let alone pay judgments]. In between the pain, s/he looks for a job, but faces garnishee orders [where the courts demand that the employer deduct direct from salaries in order to meet judgments] on any salary earned.
About a year down the track SARS finally gets into gear and sends our hero a letter assuring him/her that itís now time to pay the outstanding VAT and other
stuff, plus penalties, plus interest ñ and that letter has the same effect as a judgment and does not have to be heard in court. Our hero, on registering for VAT, signed a personal surety in favour of SARS. That has now come home to roost.
At this point not even bankruptcy can help! Personal bankruptcy can wipe out every debt ñ except a debt owed to SARS which will live with him/her until s/he dies. That debt ensures that s/he cannot get tax clearance - which means that no matter what business s/he might ever start again, it will not be able to sell to government or any parastatal or any large corporate. That lack of tax clearance means that our hero will not able to formally emigrate because s/he will not be able to send any money overseas to start a new life elsewhere.
Our hero seriously contemplates suicide during this time, but that isnít a way out either, because the life assurance proceeds from his/her death will not flow to his/her family, but will be used to settle all the death taxes and business debts ñ probably leaving his/her estate bankrupt. In this situation the family gets a mere R50,000!
And the next person that tells me that pharmacists deserve this might as well ask me to take them off this list, because nobody deserves this. Our country, despite government protesting that small business is our future, is hostile to small business owners. Thatís because government ñ leaders and employees ñ does not understand the risks we run. Maybe if they stopped posturing and we starting gathering ñ we could arrive at an understanding of each others challenges.
A simple example: There doesnít seem to be a single government initiative to help start up and operate small service businesses. Every government program is focused on manufacturing. Yet setting up and operating a service business is simple, inexpensive and risk-free ñ and can be started tomorrow. And it is much
more scaleable than manufacturing ñ without much investment. Every small business owner knows that it is much more difficult to start manufacturing. Who wins in this debacle? Certainly the government wins directly ñ because their taxes are guaranteed by everything our hero owns. Politically they look hot, because they are seen to be helping the indigent by reducing the prices of drugs.
But if we look at the longer term, a different picture emerges. In this single case, 8 folk are out of jobs [including our hero], and they each support another 4 ñ and over a 6 month period that means 32 people without income and support. Seven immediately try to claim UIF and start to drain the system. The pharmacist and a few staff remove their kids from private schools and place them into government schools. All of them stop paying their medical aid and start to use government hospitals. All of them stop distributing money into their local economies. All of them stop paying taxes. Indirectly, the cost to government is much, much greater. It simply does not make sense, does it?
1,250 pharmacies @
32 people each = 40,000 people without income or support, relying on government handouts.
Is this truly what government wanted?
What will happen to the income generators ñ those folk with qualifications that they cannot use in SA any longer? These are the folk with the judgments. Will they stay to endure at least 5 years of financial hell, or will they move elsewhere
to follow their vocation where the judgments will not follow them? Ooh, difficult decisionÖ
This is not about the retail pharmacist, it is about small business in this country. If we do not make a stand now and get some balance back, then we may as well all give up and go home. Oops, canít do that, because this is home! After I went down this path 12 years ago, I devoted my life to trying to stop this pain. I cannot stop the government doing stupid things ñ yet. But I can show you how to prevent this in your own life using a Trust and a few simple changes to the way you structure your business and its finances.
Thatís what the Business Warriors web site does ñ encapsulates everything I know about removing the risks from your business because none of us can guarantee what is going to happen in the future. And the more Warriors there are, the more weight we have as a single voice.
September 29th, 2004
- Umhlanga Rocks
Continuous Education?
We’ve all heard about the pace of change, and how it’s increasing, but what does that mean to you and me - on the wrong side of the Gen-X, but not yet quite old enough to be needing adult diapers? (Although, I bet you too are feeling aches and pains in places you didn’t know you had.)
A few weeks ago, I sat in on a weekend conference on Internet marketing in Vancouver. You’d imagine that these folk would be blase’ about technology - but the room was full - about 600 folk (including quite a few old enough to be dusty)! And they were learning how to add more value, more quickly, and less expensively, to the folk that are currently your and my clients!
It’s very sobering (that’s a gentle way of describing the uncertainty I felt) to see a group of people of all ages learning skills that are going to render the world - as we currently know it - obsolete. Which brings me to the point of this much delayed Petes Weekly: continuous education.
Until pretty recently we could survive on the skills we learnt at school or university for the whole of our lives. No more. If your income is currently under threat - chances are that you’re in a skills deficit situation. (Tempting as it might be to blame it on BBBEE, AA, or any other acronym that springs to mind.)
So here are a few suggestions:
Consider formalising your business skills by investing in a postgraduate diploma or MBA. Not only will the knowledge you gain add immense value to your financial future, but that august piece of paper carries immense weight if you ever choose to take your business international and feel the need to move your head office to Australia or Canada. (I am doing a MBA - via correspondence and the Internet - through University of Southern Queensland for both these reasons, and having a bunch of ‘fun’ en route.) You will find them here, and their SA representative office is here.
Consider putting a rocket under your sales and marketing skills by investing in some of the superb material from the Internet Marketing Centre. The reason I have an income, and Petes Weekly, the Business Warrior community, and the CrashProof book exist, is because of the skills I gained from these guys. And they’re continuously updating their material as the Internet shrieks along at an unrelenting pace.
Their best products right now:
Insider Secrets to Marketing your Business on the Internet (my marketing bible)
Blogging for Dollars (taking internet marketing to a new level)
and their Accelerated Wealth DVD series
It’s extremely tempting to ‘blame’ whatever pain we may each be experiencing on the current SA political, economic, or infrastructural situation - but that should inspire us to work smarter, not to throw more and more effort down a rapidly narrowing tunnel.
It’s not easy for anybody, anywhere, right now so lets get on with the job.
April 25th, 2006
Peter Carruthers
Under a local baobab tree while after donating my ADSL line to support Telkom strikers in their bid to get more money for less service.
PS If you’re planning to travel internationally - at any point in your lifetime - you might want to start arranging your SA passport this week. The delays in that division are unpredictable and creating all sorts of challenges - so solve them by applying now, long before you need it.
