Writing a business plan can feel like a daunting process, and making mistakes is part of the package, even if you follow the online guides and templates. To make this process simpler, we have made a short list of common errors that somehow keep creeping into these vital documents.
Making it too long
As Amazon founder Jeff Bezos once said, “You know the business plan won’t survive its first encounters with reality. It will always be different. The reality will never be the plan.” He did, however then go on to stress that writing a business plan is essential to understanding what will make your business tick. It’s important to realise that your business plan will never be able to cover every contingency and every possible incident that can occur and should rather be focused on revealing the core business. Once you understand your core business implicitly, you will be able to write it down in a much more succinct fashion. A long business plan is therefore only evidence that you don’t yet understand what’s going on.
Understand your target market
No product is for everyone. Understanding who you are selling to and what will motivate them to buy is the first thing any investor will look for, and the most fundamental thing you will need to understand to be successful. It will shape who you hire, what your marketing looks like, and even what your startup’s logo will be. Simply believing you will market to everyone is putting your business on the path to failure.
Ignoring competitors
It is extremely common for companies to exclude business competitors from their business plan. Many believe that their new product is so superior, cheap or well-supported that competitors won’t stand a chance once it is marketed correctly, or simply don’t have as much understanding of the market they are entering as they think they do. Having a sound, realistic competitor analysis shows investors you understand the market and know where your unique differentiators lie.
Neglecting a financial forecast
Many business plans ignore financial forecasts as they either don’t have the experience necessary or don’t believe they are important – of what use is guessing things that don’t exist? The truth is that a good financial planner or accountant should be able to help with these forecasts which need to include profit and loss, but also, essentially, cash flow and balance sheet. This area of the business plan will reveal to potential investors whether your plan has been carefully thought out, and takes realistic rates of growth into account, or whether it’s simply pie in the sky. No investor is going to work with someone who believes they will sell a million items in the first three months.
Being too strict
The business plan should always be viewed as a guide and not as a set of hard and fast rules. Any business plan that locks a business into a specific course of action is a bad one. You should always have the ability to pivot and make changes as necessary based on the latest feedback. Your ability to research new information and change direction will make it much more likely that your business will meet its long-term goals and needs.
Since 1999, the Skills Development Levy (SDL) has served to fund skills development in the country. It encourages a planned and structured approach to skills development so employers, employees and the economy can benefit from a better skilled and more productive workforce.
All South African companies with a payroll exceeding R500,000 per year (that’s just under R42,000 per month) – including salaries, wages, overtime payments, leave pay, bonuses, fees, commissions and lump sum payments, and with certain specific exclusions – are required to pay SDL of 1% of the total amount paid in salaries to employees each month. It is declared and paid by employers to SARS with the other monthly employee taxes (PAYE and UIF) via the Monthly Employer Declaration (EMP201) and is then paid over to the relevant SETA by SARS.
Employers can claim back more than half of the levies paid each year, but most miss the opportunity by not meeting the stipulated requirements. Depending on the size of a company’s payroll, this could be a substantial amount. There are also other benefits that can be unlocked by meeting the requirements for claiming back the levies paid.
We briefly summarise below the benefits of claiming back the SDL paid, as well as how to do it in the most efficient way.
Benefits of claiming back levies paid
How to claim back levies paid
Ask your accountant for help if you are uncertain about anything.
The urban development zone (UDZ) tax incentive, provided for in section 13quat of the Income Tax Act (the Act), was introduced 20 years ago in 2003, as an accelerated depreciation allowance for property investments in certain central business districts. It aims to promote investment by the private sector in the construction or improvement of commercial and residential buildings, including low-cost housing units, situated within demarcated UDZs.
In the most recent 2023 Budget, this incentive was extended for another two years, to allow for the completion of a review of the incentive, which has yielded some successes, by motivating investment in South Africa’s cities. We briefly overview below what the tax incentive entails and the criteria that must be met, where it applies and other issues to take note of when deciding if it could benefit your business before it expires at the end of March 2025.
What the UDZ tax incentive entails
Individuals and companies investing in residential or commercial property in South Africa’s urban zones from which to carry on a trade, should carefully consider the UDZ tax incentive before deciding where to buy.
This tax allowance, when deducted, can substantially reduce the taxable income of a taxpayer, and – because the allowance is not limited to the taxpayer’s taxable income – can create an assessed loss.
However, five specific criteria must all be met before the allowance is granted. In addition, only certain costs can be considered for the purposes of the allowance. These are listed below, along with the UDZs listed by SARS, and some further issues to take note of.
Five criteria to be met
Costs that may be considered – and those that are not
Costs specifically excluded are the purchase price of the land, VAT and transfer duty, financing charges, agent’s commission and transfer and related legal costs.
Where does the UDZ tax incentive apply?
Source: SARS
Other issues to take note of
Taking advantage of this tax incentive, if it applies to you, could mean a difference of millions of rands to your future tax bill. However, this is a very complex tax incentive and there are many issues to be considered.
It is highly recommended that business owners consult with their accounting and tax practitioners to find out if they would qualify for the maximum allowance when investing in a UDZ, and to do so while still ticking all the compliance boxes.
The big Budget Speech 2023 tax news was the introduction of tax incentives for investing in rooftop solar and renewable energy. The Budget also detailed tax relief in the form of adjusted tables for tax and rebates for individual taxpayers, adjusted tables for retirement tax and transfer duty, and the expected increases in ‘sin’ taxes. How will these changes affect you directly?
To better understand the impact of the Budget on you and your business, here is a selection of official SARS Tax Tables, then follow the link to Fin 24’s Budget Calculator to do your own calculation.
Businesses – corporate tax rates unchanged*
Source: SARS’ Budget Tax Guide 2023
Individual taxpayers – tax tables adjusted
Source: SARS
Source: SARS
Source: SARS
Transfer duty table – adjusted
Source: Budget 2023 People’s Guide
Sin taxes raised
Source: Budget 2023 People’s Guide
How much will you be paying in income, petrol and sin taxes?
Use Fin 24’s four-step Budget Calculator here to find out the monthly and annual impact on your income tax, as well as what you will pay in future in terms of fuel and sin taxes, bearing in mind that the best way to fully understand the impact of the announcements in Budget 2023 on your own and your business affairs is to reach out for professional advice from your accountant.
“This is not an austerity budget. It is a budget that makes tough trade-offs in the interests of the country’s short and long term prosperity.” (Finance Minister Enoch Godongwana – Budget 2023
Finance Minister Enoch Godongwana’s second Budget contained no major tax proposals, thanks to an improvement in revenue from higher collection in corporate and personal income taxes, and in customs duties.
Instead, the focus of Budget 2023 was firmly on the current energy crisis, which has resulted in a State of Disaster being declared. It announced that government will take over R254 billion of Eskom’s debt over the next two years, subject to stringent conditions.
Of the tax relief amounting to R13 billion to be provided to taxpayers in 2023/24 announced in the Budget, R9 billion is earmarked to encourage households and businesses to invest in renewable energy. More specifically, R4 billion in relief is provided for households that install solar panels and R5 billion to companies through the expansion of the existing renewable energy incentive.
These incentives are briefly detailed below, along with some of the other announcements that will impact individuals and businesses.
Budget announcements that will impact you personally
Budget announcements that will impact your business
Budget announcements that will impact all
How best to manage these changes and their impact?
In addition to the announcements detailed above, there were other technical amendments proposed in the Budget review that will require professional advice.
As tax collection remains government’s main source of income, you and your business would do well to rely on the expertise and advice of tax professionals as you determine the impact of the Budget 2023 announcements on your tax affairs.
Employers and employees need to keep an eye on the annual increases in both the National Minimum Wage and the Earnings Threshold, summarised below for your convenience. Both are effective from 1 March 2023.
The National Minimum Wage increase
The National Minimum Wage (NMW) for each “ordinary hour worked” has been increased by 9.6% from R23-19 to R25-42. Workers who have concluded learnership agreements in terms of the Skills Development Act are entitled to a sliding scale of allowances.
Domestic workers
Domestic workers were brought into line with the NMW in 2022, and assuming a work month of 21 days x 8 hours per day, R25-42 per hour equates to R4,270-56 per month. The Living Wage calculator will help you check whether or not you are actually paying your domestic worker enough to cover a household’s “minimal need” (adjust the “Assumptions” in the calculator to ensure that the figures used are up to date).
The Earnings Threshold Increase
The annual earnings threshold above which employees lose some of the protections of the Basic Conditions of Employment Act has been increased by 7.6% from R224,080-48 p.a. (R18,673-87 p.m.) to R241,110-59 p.a. (R20,092-55 p.m.).
“Earnings” (for this purpose only) means “the regular annual remuneration before deductions, i.e. income tax, pension, medical and similar payments but excluding similar payments (contributions) made by the employer in respect of the employee: Provided that subsistence and transport allowances received, achievement awards and payments for overtime worked shall not be regarded as remuneration”.
Some employees enjoy only limited BCEA protection even if they earn below the threshold – notably any “senior managerial employee” (“an employee who has the authority to hire, discipline and dismiss employees and to represent the employer internally and externally”), any “sales staff who travel to the premises of customers and who regulate their own hours of work” and any “employees who work less than 24 hours a month for an employer”. Take specific advice for details.
The threshold also impacts on some of the protections provided in the Labour Relations Act –
Turning to the Employment Equity Act, employees earning over the threshold can only refer unfair discrimination disputes (other than disputes based on sexual harassment) to the Commission for Conciliation, Mediation and Arbitration (CCMA) with the consent of all parties. Otherwise, they must go to the Labour Court for arbitration.
“Making good judgements when one has complete data, facts, and knowledge is not leadership – it’s bookkeeping” (Dee Hock, Founder and CEO of VISA)
When running a small business, it often feels like you are doing everything yourself, and some important tasks can slip under the radar. One aspect that should never be forgotten though is bookkeeping. While intimidating, keeping your finances in order need not be as hard as it sounds. Here are our tips for ensuring your accounts remain ordered and your peace of mind intact.
“The time to prepare for disasters is before they happen” (Stephen Matheson, Vice President of Product at BridgeHead)
Given how reliant we all are on our IT infrastructure, it will come as no surprise to learn that one of the worst things that can happen to a business is for a failure to occur in that department. Whether it’s fire, floods, or hacking, being taken offline can spell a serious period of trouble for most organisations. In the time it takes to get back up and operational projects can be delayed, the quality of work can suffer, or worst of all, everything is put on hold for months while data is recreated. All of this can lead to strained relationships with both customers and suppliers and potentially the end of the business.
A Disaster Recovery Plan is the pre-planned process a company will turn to when disaster strikes to ensure that a short-term problem does not become a permanent one.
Here are five simple tips for what you need to consider when drawing one up.
On top of all of this, your Disaster Recovery Plan should also detail where copies of all the most vital information will be stored and how they can be retrieved. This should be a safe and secure offsite location. Keys and access codes need to be kept in a third location as well.
