The Feasibility of a Freelancing Business in Uncertain Times

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Business start-up planning has been extensively covered over the past twenty years and longer, and without understating its importance or re-inventing the wheel, perhaps it has been overplayed. Much training is available on the Internet, including templates and guidelines provided by banks and the SA Department of Trade and Industry. To start a freelancing business can be a challenge – and then some. Thus, following a business plan infrastructure with the use of a project planning tool is the best route to follow.

Why perform a feasibility study? 

The feasibility study is a vitally important step in the well-known business planning process, not only pre start-up. In fact, it is the most important step because, if the business idea is not feasible, there is no point continuing with it. There are often more reasons for the business to fail than to succeed. Many renowned business analysts believe that only one in forty new businesses succeed and materialise in accordance with their original plan. Another good time for doing a feasibility study is when a business needs to be restructured to increase profitability, improve production, reduce production costs and overheads, increase sales/services income, expand the market reach, and many other valid reasons.

In the normal scheme of business planning, one deals with deciding on what type of business entity one wants to set up such as a Sole Trader, a Partnership, a Private Company, a Close Corporation, and then the drafting of various reports are needed in order to gauge the feasibility and to make the right decisions going forward.


What information do you need to prepare a feasibility study? 

The list of matters to be decided and the necessary analyses needed follows, such as are usually covered in the typical business plan.

  • The services or products to be offered.
  • Establish the professional standards and qualifications required to operate as a freelancer in your field of expertise.
  • The equipment and tools needed.
  • Start-up expenses, including legal and business analysis services.
  • Initial capital requirements.
  • The target market to be accessed and establish whether there is space for you in it.
  • The economy relating to that market, current demand, future growth opportunities.
  • Determine what barriers exist at present which may hinder your success.
  • How best to promote your products or services.
  • Distribution channels and agencies.
  • Operational plan.
  • Legal environment and statutory requirements
  • Establish a system of record keeping
  • Bank services needed – a separate bank account for the business is strongly advised.
  • If staff need to be employed, establish the Human Resource policies and SARS requirements.
  • Do the costing of each product and service very accurately.
  • Calculate selling prices based on all costs plus mark up.
  • Establish the total you personally need to earn per month. When an hourly rate will be charged for your work, you will need to calculate your hourly rate.
  • Compare your prices to those pertaining to the freelance industry of your services.
  • Draft the projected financial plan, a detailed budget for twelve months.
  • Draft the projected cash flow for twelve months.
  • Draft a Break-Even analysis.
  • Draft a starting balance sheet.
  • Draft a SWOT Analyses – Strengths, Weaknesses, and Opportunities.

Some business plans have the feasibility study way down in a list similar to the above list, but perhaps a better view is that most of these tasks need to be done in order for the feasibility or viability of a business plan to be ascertained.

Assistance and collaboration 

For an aspiring freelancer, these are all important steps to follow. It is also important to search for organisations and associations that provide vital services and advice for those in the various freelance fields. Let’s take as an example SAFREA (the Southern African Freelancer’s Association). They advocate for and support freelance workers in the communications fields. They also provide resources, tools, training, and networking to strengthen freelance careers. Their network includes hundreds of talented writers, editors, proof-readers, graphic designers, illustrators, researchers, translators, photographers, and other experts in media and communications. Another good example would be Project Management South Africa for freelance and professional project managers.

Membership associations like these are great for collaborating with fellow freelancers and professionals for professional advice, current industry standards relative to their professional fields, the current going rates for different work, up to date market research, training courses, and to finding available work.

As noted earlier in this article, the Internet is packed with valuable information such as from the DTI, SARS, the banks, and other websites through which one can glean the necessary information and assistance in one’s quest.

Freelancing is normally a challenging type of business to operate, but as business start-up and functionality are even more so during the pandemic and state of disaster, it is very important to ask your accountant for guidance and for help in drafting an accurate feasibility study and business plan. Wasting time and finances in going it alone would not be the preferred route to take.

Company Directors: Beware Of The Risks With Resolutions

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“The devil’s in the detail” (wise old idiom)

The “new” Companies Act (the Act) has some requirements which can easily be overlooked. They may seem to be minor and technical, but not complying with them could expose you to major risks.  In our increasingly litigious society, it is important to be thorough.

For example – resolutions must be sequentially numbered

In addition to being dated, resolutions are required to be sequentially numbered. Remember the law now (subject to the Memorandum of Incorporation) allows resolutions to be passed by electronic media which can make it more difficult to keep track of resolutions.

Ensure that your company has put in place such a numbering system. If you outsource your company secretarial function, check that your outsource partner has implemented this requirement.

The danger for directors

The Companies Act includes a general provision that: “Any person who contravenes any provision of this Act is liable to any other person for any loss or damage suffered by that person as a result of that contravention”.  You are accordingly exposed to substantial liability and should take cognisance of these and similar provisions, no matter how technical they may seem.

Record how directors vote at meetings or when passing resolutions

Another ancillary point is that it makes sense to record how each director voted on any matter, since directors risk liability for losses to the company arising from any breach of their fiduciary duties or required standards of conduct.

One of the defences available to directors when certain unlawful decisions are taken by the board of directors is to be able to show you voted against the matter. Thus, tabulating how each director voted can quickly establish who was against the decision made. Also remember, some years can pass before directors are sued.

Directors are tasked with overseeing and controlling of companies, so don’t overlook what seem to be small matters – they can come back to haunt you.

Cloud Based Accounting: Ideal For Your Small Business?

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One of the advantages of the technological revolution is that advances move swiftly down the cost curve. Accounting software for small and medium-sized enterprises (SMEs) has now become much faster, more secure and cheaper. It gives businesses real time information and thus makes SMEs more competitive against big business.

Cloud-based accounting software is stored in remote servers in “the cloud”. Processing also takes place in the cloud and the information is accessible anywhere in the world.  Effectively, it makes the days of loading software onto your accountant’s desktop and passing information via memory sticks obsolete.

The benefits of cloud accounting

It improves cash flow not only because it is less costly with no upfront costs (most people rent cloud-based solutions from as little as R200 per month) but also it allows you to virtually integrate with your customers. This reduces bottlenecks, improves communication and speeds up processes which take cost out of your system. For example, if your customer can see your planned offtake of their product for the next several months, they can reduce their inventory holdings and pass on some of these cost savings to your business.

It helps make your business more integrated as cloud accounting packages can “talk” to your other business software such as Customer Relationship Management (CRM). Thus the CRM system is automatically updated when accounting transactions which affect customers are processed.

The system is visible to multiple users who can interrogate the general ledger from anywhere in the world. This does not compromise internal controls as different users have varying degrees of access to the information. It is also secure as cloud-based software can be stored in different cloud locations.

It enhances management control as not only is the accounting information accessible but it is easy to run your own reports from it. Cloud-based software also leaves easy-to-follow audit trails of data. Management have much better information and they can quickly check how all aspects of the business are performing.

Whilst it involves a (possibly considerable) investment in time and effort to design and set up cloud accounting, once it has been installed the benefits can be substantial.

Ask your accountant for advice on whether it is right for your business.

Startups And Small Businesses: Consider Crowdfunding

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A novel and effective way of raising finance 
It is well known that finance is extremely hard to raise for small and medium sizes entities (SMEs). Banks are very conservative and prefer to deal with the larger, more established businesses. The venture capital market is small in South Africa and many SMEs fail due to a lack of finance.
Globally, crowdfunding has taken off and has also been successful locally in the past few years.
What is crowdfunding?
It consists of an online platform that puts investors in touch with any kind of organisation that requires funding – it can for example be a startup business, a one-off project or perhaps an N.G.O. looking for funding.
The online platform tracks how the required funding is being met.
It is best illustrated by looking at a crowd funding portal or two – see examples like Startme and Jumpstarter  – Google for more.
How do I make use of it?
Many of the funding requests fail and one of the most successful United States platforms has some excellent advice for using a crowdfunding platform:
  • You need to have expertise on the web and social media.
  • Plan and prepare. This is crucial. You need to have a great strategy for reaching investors. A video is a good tool for this. The video should come from you or a member of the team to communicate your passion and commitment.
  • Be transparent, honest and specific. The funding required should be detailed and not general. Thus, if you need R100,000 break this down into discrete amounts e.g. R20,000 for advertising, R20,000 for selling expenses etc.
  • Get your friends or colleagues to contribute – launching on a crowdfunding site with some funding already secured is a key success factor. US platforms advise that having 30% secured funding makes a considerable difference to the campaign.
  • Use influential people – well known bloggers, for example, can spread the message which can get momentum going
  • Always be proactive as being in frequent contact with potential investors will enhance your credibility. Make widespread use of social media platforms – they can be powerful e.g. the recent strike in Zimbabwe was inspired by a social media video.
  • Have set time limits for raising the funds. This creates a sense of urgency plus people have limited attention spans. Most sites recommend a one to two month fundraising cycle
  • Reward your investors. It doesn’t have to be large sums but if you are, say, making a documentary, give investors free copies. If it is for an N.G.O. send funders letters of thanks from the beneficiaries.
  • Have a good team in place as planning and executing the campaign are very time intensive
  • Always remember that some fund raising simply does not work. However many of the failed efforts have brought benefits as it has taught valuable lessons. In one instance, a business relaunched its campaign with fewer, more simple concepts and was then able to raise  their required funding.
Tax issues
There are many tax issues here – for example prepayments can fall into taxable income for the recipient. Speak to your accountant. This has the potential to derail a campaign.

Crowdfunding is up and running – it definitely works. Think about using it.

You Will Retire, So Get Ready Now!

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Benjamin Franklin once said the only certainties in life are death and taxes. To that you can add retirement (assuming the Grim Reaper doesn’t interfere earlier). Yet research shows that no more than 10% of us can retire comfortably.

What to do in 7 steps
  1. Get rid of your debt. Remember interest on your debt compounds and you don’t want to divert your retirement income to paying off debt. Also if you are married in community of property or your heirs have signed as surety or guarantor, they will be responsible for your debt after your death.

    The only exception to getting rid of your debt would be if the income and dividends you receive exceed the cost of your debt. Whilst this may hold now, you should ascertain that this will continue into the future.

  2. Save! As with the cost of debt compounding, so amounts put into retirement funding will also compound and realise more income on your retirement. Don’t forget there are generous tax incentives to help grow your retirement funding – you are allowed to deduct 27.5% of your retirement funding from your taxable income.  Ask your accountant to help you find the most tax-efficient method.

    Saving is a mentality. Once you get the habit it can be amazing how much you can save. So save now.

  3. Limit withdrawals.  Be extremely prudent when you have to withdraw any savings – weigh up the cost to your retirement and only take out the minimum you require.

  4. Rainy days.  No one goes through life without some form of crisis. We live in an age of uncertainty. Put aside funds for this as you don’t want to eat into your retirement funding to cover a crisis.

    In the unlikely event, you don’t ever need to use this rainy day money, it will add to your retirement savings and improve the quality of your retirement. For example, you could even retire earlier.

  5. Keep retirement top of mind.  It pays to constantly review your retirement funding, particularly when important events happen such as a decision to take on a new job or make a major investment.

  6. Plan and remain flexible.  Be prepared to react if obstacles to your retirement arise. If, for example, the value of your investment portfolio declines and you discover you won’t have enough to retire comfortably, find out if you can work say one or two days a week on contract at your firm. Otherwise, see if you can land a part-time contract at another business.

  7. When is enough actually enough?  Many people have doubts as to whether they have enough to retire and delay their retirement. You need to be disciplined about this – if you and your retirement adviser have set targets for retirement, stick to them unless unplanned events make it impossible to achieve your target.
This is a dynamic process and things can change quickly, so always keep this high on your agenda.
Don’t be one of the 90% – take steps to be part of the 10% who save enough to enjoy a stress-free retirement.

Staff Dismissals: Beware, There’s No Honour Amongst Thieves and No Short Cuts

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“A plague upon it when thieves cannot be true one to another!” (Falstaff, in Henry IV Part I)

We know how time consuming dismissing staff can be. It leads to loss of productivity and extra legal costs can be incurred. But be careful if you are considering taking short cuts to get the matter out of the way. A recent case illustrates this.
The employer’s quandary
An employee’s position was terminated after the employee resigned (that, at least, was the employer’s version – the employee characterised it as an unfair dismissal/retrenchment in the CCMA). Soon afterwards, said the employer, the employee’s union asked the employer to change the reason for leaving employment to “retrenchment”. The employer was placed in a quandary – to refuse the request meant the employee would almost certainly approach the labour courts for wrongful dismissal. To agree to the union’s request would ‘make’ the problem go away as the employee would then be able to apply for and receive UIF benefits.

The employer agreed to the union’s request. The bad news was only just beginning as the employee promptly went to the CCMA claiming, amongst other things, that she had not been paid her retrenchment package. The CCMA arbitrated the case as a retrenchment dispute – the employer having agreed to present the “resignation” of the employee as a retrenchment during the arbitration – and found in favour of the employee.
Naturally the employer was furious – not only had it ended up in a labour forum but it had also been required to pay a retrenchment package. In essence, to appeal meant exposing the employer to the risk that that the case would be seen as fraudulent all along.

It just gets worse

However, the employer did appeal the case to the Labour Court. In the appeal the employer had to argue that the employee was never retrenched. The Court was understandably angry that a fraudulent claim had been entered and the employer had never raised this in the original hearing.

The appeal was dismissed with some strong wording: “The court turns its face against any fraud, particularly fraud perpetrated in respect of the processes that bear on the administration of justice……It is remarkable that the [employer] has the temerity to seek recourse from a court of law in the light of its admitted fraud. The conduct of the applicant is a perversion of the administration of justice.”

Don’t take the easy way out – there is no honour among thieves. The employer’s business not only spent far more time and money on two cases but also suffered reputational damage as well.

Vet Your Suppliers! Good Stakeholder Relationships Will Boost Your Profits

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Suppliers play a strategic role in your business because if they fail to deliver on time or with the required quality, they can cause delays in your organisation. These delays will inevitably have a knock-on effect to your customers.

How to ensure you get high quality suppliers

Best practice dictates that vetting procedures are in place that cover, at least:

  • A review of the supplier’s financials to establish that the business has the financial means to remain sustainable and to deliver to its customers.
  • The supplier has sound processes in place and the organisation is well managed.
  • How long has the entity been in business? The longer the better.
  • Get testimonials from the supplier’s current customers.
  • Check for fraud and/or conflicts of interest. This involves establishing that none of your staff have undisclosed relationships with the supplier, that the supplier has no criminal record or any suspicious activities.
  • See how the supplier responds to queries. You could call as “customer” of the supplier and see how they react to a problem.
  • Check their social media platforms to ensure they are consistent with their marketplace persona.
  • Culturally are they a good fit for your business? Do they have the same values as your organisation?
  • Have in place ongoing processes to detect if there are any changes in the supplier’s organisation which could trigger further investigation.

Getting the most out of suppliers

In the new King IV Report there is a section on optimising stakeholder relationships by an “inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organisation over time”.

This involves understanding what they want and ensuring there is a mutual relationship of trust which will last a long time and from which both parties will get the outcomes they want.

An honest, transparent relationship with your suppliers will bring good long term profit to your business.

Lean Times Ahead: 6 Steps to Help You through Them

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“We have seen better days” (Shakespeare)

When you read that nearly 75% of the middle class experience financial difficulty and a similar percentage are in debt, it is time to worry.

Add to this the economic difficulties the country is going to experience flowing from the ratings downgrades and it will not be just the poor who will suffer but many middle class South Africans will also find themselves in a crisis.

The “phony war”

In the Second World War, the winter of 1939-1940 saw no activity but in the spring Nazi Germany blitzkrieged Europe and all hell broke loose – the “phony war” was over. It seems inevitable that our own “junk status phony war” will soon be over.

Don’t be fooled by the fact that the country has successfully weathered the first month or two of the downgrades. Remember that only our US Dollar denominated debt has been downgraded and this amounts to ten percent of South African bonds. The rating agency, Moody’s, has yet to decide whether or not it will also downgrade us to junk status.  Even if we don’t get a downgrade from Moody’s now, it will probably come in the latter part of the year.

There are several rungs in the ladder below junk status. When this happens to a country its economic growth, currency, unemployment and investment show further declines. If South Africa takes no action to improve State Owned Enterprises and corruption, we will face such further downgrades.

6 steps to take and avoid    

Lock down for the lean times with these –

  1. Don’t take on more debt to supplement monthly living. This amounts to postponing a day of reckoning which more debt will only worsen.
  2. Budget carefully and understand your spending patterns. For example, analyse the times when you spend unnecessary money and consciously avoid these occasions. Make a plan to cut spend and be disciplined about it.
  3. Plan to live below your current means. This may sound daunting but will enable you to become frugal. Some simple planning around your habits and strengths (if, for example, you are good with your hands, maintain your own car and home) will help you achieve this.
  4. If you succeed in either breaking even or saving money, think how it will improve your morale – just think of not waking up at 3 a.m. with a knot in your stomach as you worry about money.
  5. Learn to distinguish between a want and a need. Once you have done this, reduce or cut out things you want.
  6. The most important thing is realising your situation will get worse unless you cut costs. Then you must have the willpower to implement living frugally.

Employers:  Help your staff through this

Why not share these ideas with your staff – not only can it help them navigate these choppy waters, but it will improve morale and productivity in your workforce.

You Need Independent Directors, not Herd Mentality

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“Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently.” (Steve Jobs when he was reinstated as CEO of Apple)

The Companies Act tasks directors to apprise themselves of company activities and make up their own minds as to how decisions should be taken. Strong governance structures should also exist in companies. This spirit of independence and good governance should infuse leadership so that the best interests of the company are safeguarded.

Yet when we look around today, we see State Owned Companies floundering and some multinational heavyweights like KPMG, SAP, McKinsey and Bell Pottinger in serious trouble.

“Surely” you ask “why didn’t some of their directors stop these disasters?”


The herd mentality trap

It is human nature to adopt a herd mentality particularly when there is a forceful and strong CEO. That is precisely why the framers of the Companies Act required independent leadership and good governance.

Good governance and leadership consists of demonstrating accountability, honesty, transparency and respect for all staff and stakeholders. You don’t need committees and red tape if your business is a small one – your leadership should demonstrate these characteristics.

It also pays to be a good listener as this trait curtails “leadership cults”. Encourage your managers and staff to challenge you.

Short term thinking often gets a business into trouble. Listen carefully to your independent thinkers.

Directors and Shareholders: There’s Hope If You Forget Companies Act Compliance Requirements

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The “new” Companies Act is pitted with clauses requiring that special resolutions be passed. There are also instances where as directors you are required to take certain actions such as recusing yourself if there is a conflict of interest.

It is important to note that transactions can be set aside if the necessary steps are not taken. Should this happen, a costly and time-consuming exercise would follow.

Can “unanimous consent” rectify non-compliance?

Both our “old” Companies Act and English company law allowed the concept of “unanimous consent” to override statutory non-compliance with certain requirements, such as the requirement for a special resolution to be passed authorising the sale of all (or the greater part) of a company’s assets. Simply put, if all of the shareholders were aware of the implications of a transaction and consented to the transaction, then the “unanimous consent” principle may be available to hold up the transaction despite the required statutory steps not having been taken.

In South Africa following the introduction of the “new” Companies Act in 2011, there was uncertainty whether “unanimous consent” would be accepted here until the Supreme Court of Appeal (SCA) recently pronounced on the subject.

What the SCA said

A company sold the major part of its assets and the directors had a conflict of interest in the sale. Part of the case revolved around setting aside the transaction as no special resolution was passed for the sale of the assets and the directors had not disclosed their interests. The company was owned by a single shareholder – a trust effectively controlled by one person.

The SCA said that the reason for requiring that a special resolution be passed was to “ensure that the interests and views of all shareholders are taken into account”. When reviewing the circumstances of this case the SCA found that the person who controlled the sole shareholder was party to the transaction and thus no special resolution was needed as the shareholder was clearly aware of and had effectively approved the transaction.

It used a similar line of reasoning in resolving the conflict of interest question.

The court specifically accepted the principle of unanimous consent, stating “that principle, long recognised in English company law, from which our courts have received much guidance, was accepted as part of our law relating to companies, under both the 1926 and the 1973 Companies Acts. I can see nothing in the current Act to suggest that the principle no longer finds application”.

The implications are that if a business is owner-managed or the board of directors are a tightly knit group then – even if in error you don’t tie up all the Company law requirements – the “unanimous consent” principle might be available to you.

Be sure however to seek professional advice – every situation will be different.