Jacques Magliolo
`ALL I owed was R5 000 — that’s all! And now I’ve lost my business.”
Renowned South African couturier Hilton Weiner was placed in liquidation by holding company Bergers before it too was placed under final liquidation.Like so many professionals Weiner concentrated on his craft and neglected making it a priority to understand basic business terminology and practices.
To this end this column will, until the end of January, focus on personal finance issues. It will explain technical terms, set out tools of trade and outline general business practices.
Business issues seem unimportant and far away when you want to be a lawyer or doctor. They are — at least until you, like Weiner, are faced with a liquidation order and the courts wind up your business.
The first lesson is a simple one, but difficult to digest. Your practice is a business. You have to pay rent, staff, water and lights accounts and telephone bills. You have creditors and debtors. These are business issues and need to be understood even before a practice is set up.
* Aims: Determine short, medium and long-term objectives and decide where you want to be in the future. Then set out a plan on how to get there.
For instance, if you are an analyst at the Johannesburg Stock Exchange and want to become rated, then have a five- year plan. To achieve this target the analyst would need to become well known within institutional circles as someone who is reliable and has indepth knowledge of certain sectors.
For institutions to get to know you takes time-consuming marketing, contacting them daily and travelling to make report presentations.
Without an aim — either to become famous, rich, study further or help the poor — the outcome is predestined. South Africa is a tough environment and it is guaranteed that competition will take away your clients or patients if you don’t market yourself and your company.
* Product and target market: Three questions have to be asked. What do you intend selling, to whom will you sell and is there a need for the service or product?
Firstly, there are different products within particular spheres of a profession. An example would be a lawyer who got tired of practising corporate law and decided to lecture the subject instead. This lawyer has changed his aim and target market, but not his product.
Target market relates to one’s personal desire. For instance, it is unlikely that a doctor who wants wealth will achieve this by working as a resident doctor at a government hospital. However, if he became a plastic surgeon for the stars of Hollywood (his target market), there is a strong chance that he could become extremely wealthy.
Basic supply and demand economics comes into play to answer the third question. If you are a plumber and place your store in a shopping centre with a dozen other plumbers, supply of the service would exceed demand.
While there are exceptions to the second rule — doctors with private practices based at hospitals can be successful — they are limited.
* Location: Once aim, product and target market have been chosen, a place to set up the practice has to be selected. However, there are occasions when these are restricted by law.
For instance, stockbrokers may only be based within one block of the JSE. If the professional wishes to live in Cape Town he has to become a director linked to a stockbroker who does fulfil this law. Depending on your target market, your location could be a suburb, in the CBD or even a rural area.
* Equipment: Two considerations have to be made: what types of tools and machines are needed, and how to finance this equipment.
Practically all financial institutions will finance equipment needed by a professional, particularly doctors and lawyers. It is important to remember to obtain the best deal possible, including repayment terms (prime rate at most) and negotiate a price for the goods with the supplier.
While tools required by a doctor may be obvious, there are still choices to be made. What type of communication network do you require; is it upgradable and is it efficient and within cost constraints? For instance, cellular phones are expensive, but more efficient for doctors. For other self-employed businessmen, like electricians and plumbers, these may be too pricey or inconvenient.
Alternative technology is available in the form of answering and fax machines, which requires giving existing and prospective clients your home number.
Businessmen can also employ an answering service to relay such messages. The system enables professionals to get time-stamped client messages at their convenience. The local company is called VoiceBox.
* In the next issue this column will focus on factors which can make or break your firm, what keeps the business running and what economic factors, ratio analysis and factoring are.