In the tough world of entrepreneurship, taking risks is often unavoidable. Many people embark on the entrepreneurial adventure out of necessity, in an uncertain economic environment and a competitive job market. In South Africa, more than 70% of small businesses fail within the first two years, highlighting how risky starting a business can be. Risk tolerance is often cited as one of the key qualities of a successful entrepreneur.
A 2017 study conducted by Harvard Business School found that individuals with a greater tolerance for risk are more likely to pursue entrepreneurship. However, in a country like South Africa, where economic growth is low and unemployment is high, many people enter entrepreneurship out of necessity rather than choice. This economic pressure and lack of adequate support makes risk management difficult for local entrepreneurs.
Tshego Bokaba, Director of Socially Responsible Investments at Momentum Metropolitan Holdings, works with many entrepreneurs through programs supported by the Momentum Metropolitan Foundation. She highlights the importance of tailored financial advice for entrepreneurs. Making solid financial plans, saving when possible, and looking for ways to improve yourself are essential steps to ensuring a prosperous future.
Even for those juggling a salaried job and a side project, the transition to entrepreneurship involves risks and an ever-present fear of failure. Side hustles, which have become a necessity rather than a choice, can have an impact on the mental and physical health of individuals. Momentum’s SME and gig work report for 2023 reveals that many South African households are now engaged in side projects to supplement their income.
Monique Schehle, Head of Strategy and Planning at Momentum Metropolitan Holdings, notes that the transition to entrepreneurship can be difficult for those who are not naturally inclined toward running a business. Financial advisors can play a crucial role in helping entrepreneurs manage financial risks and ensure their business thrives.
The path to entrepreneurial success is full of challenges, but with the right guidance, it is possible to reduce risks and accomplish your goals. Accepting risk is an integral part of entrepreneurship, and being well advised can help navigate this complex and changing landscape with confidence. In these economically uncertain times, it is essential for entrepreneurs to prepare, surround themselves with the right people and make informed decisions to ensure the sustainability of their businesses.