Toward the construction of a business bootstrapping model to equip emerging micro business in the first year of operation in South Africa.

Abstract

SMMEs industry in South Africa contributes approximately 52 to 57 percent of the GDP. SMMEs sector is envisaged to 90 percent in the next few years towards South African GDP and employment. More than 50 percent of businesses in South Africa do not survive in the first years of operation due to inhibitors that limit potential growth. The significance of the study is to develop a business model that eradicate major influential business challenges affecting the survival of businesses in the first year of operation, in South Africa due to the currently existing business model are not tailored towards infant business competitiveness. The study review businesses in the first year of operation, in South Africa contributory forces which were the inadequacy of accessibility of capital during start-up and deficiency of business skills. In addition, the study identified three business skills which are financial management, marketing, and business management as significance towards survival of business in the first year of operation, in South Africa. The study unwrapped existing models such as Financial bootstrapping and Balance Score Card which are both significant to businesses in the first year of operation, in South Africa; however business owners struggle to integrate both existing models. The proposed study pursues to explore the relationship between current challenges and competitiveness of businesses in the first year of operation, in South Africa. To address the research questions, a mixed research approach was selected for the study. The phenomenological (qualitative) and positivist (quantitative) philosophical paradigms were adopted with a determination of attaining an in-depth understanding of the strength and direction of the relationship between a business skills deficit and competitiveness of businesses in the first year in South Africa and moreover the development of Business Bootstrapping Model. Semi-structured interviews and questionnaires were used as data collection instruments for the study. In relation to collected data of the study, analytical techniques used to analyse qualitatively were content analysis and for a quantitative study, SPSS was used to analyse responses from questionnaires. Key findings outlined the accessibility of capital and inadequacies on financial resources to manage account receivables are impediments towards the survival of business in the first year of operation. Vicious competitive pressures interrelated with restrictive financial resources slowdowns sales growth and sub-par competitiveness of business in the first year of operation. Empirical studies and findings were consolidated into bridging identified research gap which was further used for the development of the Business Bootstrapping Model. The Business Bootstrapping Model comprised three components: financial, marketing and business governance in the first year of operation. Business owners on the financial component of the Business Bootstrapping Model are able to start generating capital which is a determinant towards the obliteration of financial and liquidity constraints. In addition business owners through Business Bootstrapping Model are equipped with skills towards planning and management of business activities such as drafting of business short-term financial policies and measurement capabilities on business current financial performance, business financial position, envisaged future business plan, providing a summary business revenues and expenses from both operating and non-operating activities over a period of time, summary of business assets, liability and equity on a given point in time. Business owners through marketing components of the Business Bootstrapping Model are equipped with marketing skills to brand positioning, counteract price discrimination and acquisition of useful, difficult-to-get customer information and insights on social media.