Starting a new business is exciting but comes with challenges, the biggest of which is funding. The good news is that there are ways to avoid spending too much money on your start-up, with technology and the internet being by far the most efficient route in helping to do so.
Online start-ups also have their fair share of challenges. Still, they are viewed by many young people as a bridge to entrepreneurship, especially during these turbulent times of high youth unemployment.
There is no silver bullet to addressing the unemployment crisis in SA; however, entrepreneurship is the biggest hope to combat it. According to Njabulo Thulani Mthunzi, CEO of Johannesburg-based crypto start-up Mansa Musa, digital tools are essential to a successful online business. There are many that you can use to run your business.
“Digital tools can assist with managing customers, marketing, and automating sales processes. This will eliminate the need for large staffing requirements, thereby significantly reducing large seed capital requirements,” he says.
Benefits of online start-ups
There are numerous advantages to running an online business. A few years ago, e-commerce companies like Amazon, Alibaba, and Takealot didn’t exist. Still, they are conquering retail markets, thanks to the convenience of the internet and home shopping.
However, success in online business doesn’t necessarily mean you must be as big as Amazon. Projections show that e-commerce growth will primarily come from small to medium-sized companies in the next few years.
“Launching an online business is one of the easiest ways to start a company. COVID-19 has accelerated online commerce worldwide, so now is a good time to consider going online,” says Mthunzi.
Some benefits of running an online business include:
- Cheaper start-up costs,
- Low marketing costs
- International market reach, and
- Easier, faster financial transactions.
Mthunzi believes planning, learning how to advertise your products online, and understanding the nuts and bolts of running your online business are crucial for success.
“The main benefit is that you can get started quickly and access a much larger market at a cheaper cost than you would if you were running a physical store. The costs become significantly lower if you are selling digital goods. The logistics cost in South Africa is usually high and can hurt your business if you sell physical goods.”
He adds, “I suggest taking advantage of social media platforms to advertise your services or products. An analytics tool to help generate data for your marketing efforts and a good CRM to manage customers and help automate sales processes are great tools that can be procured at little to no cost.”
“Running online has saved costs and allowed us to have a more agile approach to cost optimisation and working patterns; hence, the COVID-19 period did not affect our business.”
Maqondo says the reason they also have a physical presence is related to business legitimacy, where some people may not fully understand the online business concept.
“One of the major drawbacks of running an online business is related to the state of digital adoption, where some potential clients may not trust the business’s legitimacy if It’s fully online. From our approach, we are trying to decouple from a fixed location that we reference as our physical address.”
Challenges facing online start-ups
Before venturing into any business, it’s crucial to understand the challenges you might face and how to overcome them. Like any start-up, online start-ups have their fair share of challenges, including cyber and data security. When it comes to e-commerce, one of the biggest challenges faced is security breaches, so it’s essential to prioritise this.
Other challenges include online identity verification, attracting and retaining the right customer, converting shoppers into paying customers, competition and competitor analysis, pricing and shipping, and product returns and refund policies.
Mthunzi says the main challenges he’s faced include attracting visitors to his website and converting those visitors into loyal paying customers. He says this is especially difficult to do in South Africa, where most people access the internet via their mobile phones, and consumers are more likely to visit physical stores than to shop online.
Maqondo says the biggest challenge he has faced in building a technology start-up is raising capital.
“South Africa is a tricky country to be in. The economic landscape is good enough for most people to spot opportunities and run after them, but hard to raise capital and sustain the humble beginnings in pre-revenue start-ups.”
“This is a process so hard that most tech start-ups will fail due to the harsh commitment your business will demand. The balance between the rate at which capital raised gets used up is one hard challenge, and you will need to commit more to offset the lean expenditure you’re trying to keep.”
According to him, the best way to overcome this challenge is to position yourself from the standpoint of creating value and providing that value primarily to people around you to grab your market and gain trust as a service provider.
Digital transformation starts here
There is no better time to start an online business. If there’s one thing we can thank COVID-19 for, it’s accelerating the adoption of digital technologies. Not only are we witnessing the rise of a new breed of entrepreneurs that value the role of technology in business, but we are also seeing a spike in the county’s digital transformation journey. According to Sage research, COVID-19 businesses are, on average, more confident than pre-pandemic SMEs.
What’s more, the pandemic has accelerated digital transformation in 59% of organisations, notes a survey by IBM.
“Adopting the right digital solutions will help SMEs become more agile and resilient, enabling them to adapt to customers’ evolving needs quickly,” explains Vodacom Business Executive Head for SME and SOHO, Nastassha Dooks.
Earlier this year, the company launched. This online platform aims to provide digital advisory services for SMEs who typically aren’t big enough to hire an in-house CIO.
The potential of young people looking to start an online business but lacking sufficient funding is seemingly immense because they are already well versed in most digital technologies, primarily social media. The most important thing is to be creative and able to collaborate, using whatever resources are at your disposal.