Still, I have Faith in the Kenyan Enterprise Story

This week I have had mixed feelings about a subject I love most  entrepreneurship. And more so, about Kenyan startups and enterprises.

After a short period of mourning one of the major brands I have celebrated over and over because of their ingenuity, I got some really glad news about three of our brands, two of them home grown that won major awards at the World Tourism Awards. Kenya Airways, our national flag carrier, was voted as the top airline brand in Africa for the second straight year. It beat South Africa Airlines, Rwanda Air and the likes. Maasai Mara Game Reserve, the eighth wonder of the world, was voted the best in the national parks category beating Kruger National Park (South Africa) and the Namibian National Park. Sarova Hotels and Lodges, our premier tourist hotel chain, also won top awards in the hotels category in the continent.

But that is not news. Nakumatt was the biggest surprise of them all. After a prolonged period of negative publicity due to dwindling business fortunes, there was some good news  they have started restocking their stores again! To those who are not up to speed with the goings on in Nakumatt, the retail mart chain has been having it rough in the last 24 or so months. Faced with growing debt and a strain on their working capital reserves, the supermarket chose to start rolling out of the markets they had entered. They first closed the Ugandan store and later on, followed up with their Thika Road Mall (TRM), NextGen Mall and Westgate Mall stores. Last week, their landlords, the Junction Mall in Nairobi threatened to close their shop due to reduced traffic. One more in Nairobis Industrial Are and another in Mombasa too have gone down too. People have been avoiding going to their stores for lack of sufficient supplies despite their we need it, we’ve got it brand tagline.

 It was therefore a sad thing to see the mighty bronze elephant statues being dismounted from the entrances of their stores as the giant slowly fell. 

But the story of Nakumatt is reminiscent of the Kenyan entrepreneurship story. An entrepreneur comes up with a great concept, works his way to make it established like a colossus. But the problem starts to arise when the firm reaches its maturity stage and the growth either stagnates and declines or continues to rise and forms its Achilles heel. The latter is what happened to Nakumatt. Nakumatts rise has been anything but phenomenal. In a few years from being a small backstreet store, it established its footprint all across the region. As at the beginning of the year, it has slightly more than 60 stores across Kenya and Uganda. With increased stores and pressure to deliver to its clients, Nakumatt relied heavily on suppliers credit to meet the demand. With no cash to pay for its supplies, it resorted to extend its debtor days from the standard 60 days to more than twice that number 120. But what even made things worse was a strategic decision by the Nakumatt management to start producing their products under the famous Blue Label brand. In this case, it approached producers of various products and bought in bulk to resell to its customers, undercutting its suppliers. The Blue Label products were even more popular with consumers as they were cheaper than the conventional ones. 

However, we have to appreciate  that the Nakumatt enterprise is a wholly owned family outfit. Atul Shah, the current heir, is the son of its founder. Many suitors have approached the family to invest into the firm but they have continued to hold on. As such, the working capital has been provided through external borrowing and sources from within the family, which limited its operations. With a restricted cash inflow to finance operations, suppliers refused to provide more suppliers on credit since the delivered goods were not being paid for. And that is how the firm was pushed into a corner since human traffic was reduced significantly. Stories of stores with empty shelves were abound on social media and the print media, further eroding its brand position and equity. They remained with no option but roll out of the markets they had entered, further deteriorating the situation.

This therefore means the cookie started crumbling when the owners of the firm refused to adjust to the demands of the business in terms of capital. A business that grows demands a huge outlay of capital and when the owners are restricted, it ultimately collapses. Most startups are started with an all- mine mindset by the owners. They start businesses with an intention of being the sole beneficiaries of returns and hence choke it up in the fullness of time since growth is stifled for lack of capital. What we need to appreciate is the fact that a business is like an asset. No asset is held for good. There must be an exit strategy sooner or later in the course of time. The owners must be ready to cede part of the shareholding and ownership in exchange of additional resources (financial or knowledge) to help their vision advance to even bigger proportions. 

As the founder, you will still remain the originator of the business idea and the vision carrier. But moving the business from its nascent stages to maturity would demand that you leverage networks and resources. And this is where the call for additional shareholding is most welcome. It is time we learnt from firms founded in the West. Facebook, Google, Apple and the likes, were started off by one or two people who came together. With time, they needed additional resources to grow and as such, they had to cede control of their firms in exchange for additional resources that have made them the conglomerates we know them to be, today. It pays to know when the time is ripe for an exit in any undertaking.

Nakumatt was approached by investors interested in injecting additional cash but they chose to cling onto their baby. Now they are struggling. It is my hope that they would indeed heed to the needs of the business and give in, for the preservation of this important national success story. And I do believe that other startups would learn this lesson and follow suit. This is why I still have hope for the Kenyan Enterprise, that indeed we will thrive!This week I have had mixed feelings about a subject I love most  entrepreneurship. And more so, about Kenyan startups and enterprises.

After a short period of mourning one of the major brands I have celebrated over and over because of their ingenuity, I got some really glad news about three of our brands, two of them home grown that won major awards at the World Tourism Awards. Kenya Airways, our national flag carrier, was voted as the top airline brand in Africa for the second straight year. It beat South Africa Airlines, Rwanda Air and the likes. Maasai Mara Game Reserve, the eighth wonder of the world, was voted the best in the national parks category beating Kruger National Park (South Africa) and the Namibian National Park. Sarova Hotels and Lodges, our premier tourist hotel chain, also won top awards in the hotels category in the continent.

But that is not news. Nakumatt was the surprise of them all. After a prolonged period of negative publicity due to dwindling business fortunes, there was some good news  they have started restocking their stores again! To those who are not up to speed with the goings on in Nakumatt, the retail mart chain has been having it rough in the last 24 or so months. Faced with growing debt and a strain on their working capital reserves, the supermarket chose to start rolling out of the markets they had entered. They first closed the Ugandan store and later on, followed up with their Thika Road Mall (TRM), NextGen Mall and Westgate Mall stores. Last week, their landlords, the Junction Mall in Nairobi threatened to close their shop due to reduced traffic. One more in Nairobis Industrial Are and another in Mombasa too have gone down too. People have been avoiding going to their stores for lack of sufficient supplies despite their we need it, weve got it brand tagline. It was therefore a sad thing to see the mighty bronze elephant statues being dismounted from the entrances of their stores as the giant slowly fell. 

But the story of Nakumatt is reminiscent of the Kenyan entrepreneurship story. An entrepreneur comes up with a great concept, works his way to make it established like a colossus. But the problem starts to arise when the firm reaches its maturity stage and the growth either stagnates and declines or continues to rise and forms its Achilles heel. The latter is what happened to Nakumatt. Nakumatts rise has been anything but phenomenal. In a few years from being a small backstreet store, it established its footprint all across the region. As at the beginning of the year, it has slightly more than 60 stores across Kenya and Uganda. With increased stores and pressure to deliver to its clients, Nakumatt relied heavily on suppliers credit to meet the demand. With no cash to pay for its supplies, it resorted to extend its debtor days from the standard 60 days to more than twice that number 120. But what even made things worse was a strategic decision by the Nakumatt management to start producing their products under the famous Blue Label brand. In this case, it approached producers of various products and bought in bulk to resell to its customers, undercutting its suppliers. The Blue Label products were even more popular with consumers as they were cheaper than the conventional ones. 

However, cognizance has to be taken into consideration that the Nakumatt enterprise is a wholly owned family outfit. Atul Shah, the current heir, is the son of its founder. Many suitors have approached the family to invest into the firm but they have continued to hold on. As such, the working capital has been provided through external borrowing and sources from within the family, which limited its operations. With a restricted cash inflow to finance operations, suppliers refused to provide more suppliers on credit since the delivered goods were not being paid for. And that is how the firm was pushed into a corner since human traffic was reduced significantly. Stories of stores with empty shelves were abound on social media and the print media, further eroding its brand position and equity. They remained with no option but roll out of the markets they had entered, further deteriorating the situation.

This therefore means the cookie started crumbling when the owners of the firm refused to adjust to the demands of the business in terms of capital. A business that grows demands a huge outlay of capital and when the owners are restricted, it ultimately collapses. Most startups are started with an all- mine mindset by the owners. They start businesses with an intention of being the sole beneficiaries of returns and hence choke it up in the fullness of time since growth is stifled for lack of capital. What we need to appreciate is the fact that a business is like an asset. No asset is held for good. There must be an exit strategy sooner or later in the course of time. The owners must be ready to cede part of the shareholding and ownership in exchange of additional resources (financial or knowledge) to help their vision advance to even bigger proportions. 

As the founder, you will still remain the originator of the business idea and the vision carrier. But moving the business from its nascent stages to maturity would demand that you leverage networks and resources. And this is where the call for additional shareholding is most welcome. It is time we learnt from firms founded in the West. Facebook, Google, Apple and the likes, were started off by one or two people who came together. With time, they needed additional resources to grow and as such, they had to cede control of their firms in exchange for additional resources that have made them the conglomerates we know them to be, today. It pays to know when the time is ripe for an exit in any undertaking.

Nakumatt was approached by investors interested in injecting additional cash but they chose to cling onto their baby. Now they are struggling. It is my hope that they would indeed heed to the needs of the business and give in, for the preservation of this important national success story. And I do believe that other startups would learn this lesson and follow suit. This is why I still have hope for the Kenyan Enterprise, that indeed we will thrive!

             ***** Ends******

The writer is an acclaimed business author of Passionpreneurship Demystified and Business Networking: How to maximize on your contacts for Business and Professional Growth. Both books are available on Amazon. He is also a Personal Branding and Business Speaker with PBL Africa and a Cytonn eHub Mentor. In case you need assistance to give your business or profession a jump-start, he can be reached via the following contacts:

Email:                pblogix@gmail.com

LinkedIn:             https://www.linkedin.com/in/mike-okinda-9652b210a

Telegram:             @Mokinda

Telegram Community:      https://t.me/joinchat/EkprBT6zCKCRUmQUaDD9cQ

 

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Alibaba’s Founder Business Success Secrets


Arguably the richest man in mainland China and Asia, Ma Yun, famously known as Jack Ma is a man with a pack of lessons especially for startups struggling to make a mark in the world of business. The company he founded, Alibaba, conducted a record breaking IPO in the USA that raised USD 20 Billion a few years ago. His life, ever since he started cultivating interest in the English language at a tender age, presents many lessons that we who are rising up in entrepreneurship can adapt and have guaranteed success.
Lesson 1: Treasure your Passion 

It is said that when a young boy, Jack Ma used to cycle for over 45 minutes to a hotel which was frequented by western tourists so that he can practice speaking English. Through the interaction, a young female tourist could not pronounce his Chinese name properly and she christened him Jack Ma. It has stuck to date.

Through his love for language, he was employed as part of a governmental team that went to Seattle in the USA for a government exchange and that marked his initial interaction with a home PC in a friends home. And it fascinated him that through the desktop box, he could get a lot of information but not for his dear country China. When he returned, he purposed to develop Chinas first internet commerce platform for local businesses. And hence, his love for language birthed his ecommerce business.

What can you do best? What are your talents? Purpose to discover and develop these by developing a passion around them. Utilize these special gifts you have to help solve a society challenge and you will be in business! History has proven that no business anchored on passion has ever failed. I call these passionpreneurs.

Lesson 2: Be objective about providing solutions

Despite him being wealthy, Jack Ma confessed during his inaugural Africa Tour in Nairobi that he had no intention to be rich. He did business to provide solutions. Africa, he said and especially Kenya, presented a perfect environment to launch enterprises due to the various challenges facing the populace. 

Let your business be run based on values. When you have a value system, you enable your clients build trust and loyalty towards your brand. Ma questioned the current business school model with the following: The business schools teach a lot of skills about how to make money and how to run a business. But I want to tell people that if you want to run a business, you have to run the value first, to serve the others, to help the others  thats the key.

Vision never follows money. The converse is true  money always follows vision. Let your vision be anchored on a foundation of values that concur with societys needs. Dominant brands learnt this secret and they build their brands on this and that is why they withstand time.
Lesson 3: Anchor your business on your dream

From his own narration of his entrepreneurship story, his dream was to enable Chinese businesses reach out to the world He wanted to open up the space for local Chinese firms to sell to the world. And there was no better way to do this by employing the power of the international World Wide Web also known as the internet. And thus, by creating passion on his passion, which was to pursue English language and employ it, he built his dream of opening up his closed country to the world and thus Alibaba was launched. 

Do you have a vision of where your business would be in a few years time?  What is your dream? Build your business on that!

Lesson 4: Be optimistic

He is known to be a failure, going by world standards. Sample this: he failed twice in his primary school exams. In his middle school exams, he failed thrice once again. When he applied for his admission into University to pursue a degree in English, his desire, he failed again, thrice! He later graduated with a degree and he unsuccessfully looked for a job as a teacher. His search for a job was equally punctuated by failure. He reckons he did a record thirty job unsuccessful applications in total. When KFC opened its franchise in China for instance, he and twenty-three others applied for jobs. The rest were accepted except his which was declined. He also applied for a job as a police officer with three of his friends. They were all taken and he was left out. The reason for his rejection was given that he was no good.

After getting frustrated in his quest for a job, he chose to entirely rely on his English skills to earn a living. And that is how he ended up in being an English translator and being absorbed by the government in its foreign missions. And that opened up doors for what we know him for today  Ecommerce.


They say tough times do not last but tough people do. Being pessimistic about a business situation does not help matters. Maintaining a positive attitude does. Successful entrepreneurs do not let setbacks get them down and they see both what’s impossible and possible, but the difference is that they focus only on the possible.

Lesson 5: Be crazy!

 He was christened Crazy Jack Ma by his fellow Chinese for his outlandish internet commerce idea when most could not believe in him. In contrast to his fellow Chinese corporates who are conservative in nature, Jack Ma loves to make fun of himself.

In the early 200s, Time magazine called him crazy for his out of the world ideas in a world that was conservative. He responded by saying the he may be crazy but not stupid. His ambitions would be seen to be too lofty but he was wise to always aim at achieving his life dream. 


His management style has been termed as unorthodox since he blends western and Chinese management philosophies to come up with a winning formula for entrepreneurship where he puts his customers first, followed by his employees and lastly, the shareholders interests last. To him, hiring a more talented employee than him is a bonus.

You need not get the approval of the world to make it in business. So long as you have a belief in an idea, and it can solve a world challenge or problem, go for it. Just be crazy about it and pursue it! 
The writer is an acclaimed business author of Passionpreneurship Demystified and Business Networking: How to maximize on your contacts for Business and Professional Growth. Both books are available on Amazon. He is also a Personal Branding and Business Coach with PBL Africa. In case you need assistance to give your business or profession a jump-start, he can be reached via the following contacts:

Email:                              pblogix@gmail.com

LinkedIn:                         https://www.linkedin.com/in/mike-okinda-9652b210a

Telegram:                       @Mokinda

Telegram Community: https://t.me/joinchat/EkprBT6zCKCRUmQUaDD9cQ

SECRETS OF DOMINANT ENTERPRISES

This week, Facebook announced that they had hit 2 billion subscribers. Facebook is urguably the world’s biggest media content provider inasmuch as it does not create any content of its own! 

Uber, the world’s largest taxi hailing company, also does not own a single cab of its own. Neither is Alibaba, the biggest online retailer as far as business inventory is concerned. Airbnb follows the same fashion, with no real estate of its own, despite being the world’s largest accommodation provider. 

Coming closer home, Safaricom Kenya Limited is the biggest telco in East and Central Africa. With its profitability hitting Kes. 45 Billion ($ 442 Million) this year, the amount alone is enough to finance Kenya’s Health Ministry for an entire year, going by the country’s 2016/2017 budget. 

However, Safaricom is not known for being a communication company alone. Its flagship product is MPesa, a mobile wallet value addition which enables subscribers to undertake financial transactions. Banks have in effect, rode on the platform to offer lending products. So far, it is estimated that over 27 million Kenyans are subscribers of this mobile money service making Safaricom to be Kenya’s and East Africa’s biggest bank, quite literally! Mark you it does not own a single brick and mortar vault! 

Peter Drucker, the infamous management guru, said that the main function of business is marketing and innovation. This therefore implies that the main purpose of enterprise is to create customers. And hence, it follows that a successful business is only one if it creates and builds its customer base. It is therefore be logical to conclude that a business’ growth is only measured by the number of its clientele. 
This is the secret that has alluded many  businesses that exist in this day and age. Most startups are established to churn out revenues and monetary payouts to their owners. But then, it also explains why a huge percentage of startups fail – due to lack of focus on growing customers. Jim Collins, another guru in management, postulated the Hedgehog concept in which passion, ability to perform and cash cows are factored to create dominance by a firm in a sector. A firm can never generate sustainable cash flows unless it has the numbers in terms of customer numbers. If you study all dominating firms, they have invested heavily on acquiring and maintaining their customers to realise the returns they have.

It therefore calls for the entrepreneur to study his intended clientele well enough to keep up with their tastes and preferences and in addition, changes if any. Firms that withstand the test of time are those that are able to mutate in tandem with the changes in their market niches. This is exactly what cost Kodak and Nokia brands  – rigidity in their product innovation in conformity to customer tastes. New entities came, adopted to the client preferences and took over their markets. 

It again demands that the core corporate values of a business entity have to be in tandem with values of the populations they target. Safaricom Kenya Limited, as mentioned, was not the pioneer telco in Kenya. Kencell was. It later changed ownership and became Zain and currently is branded Airtel. However, despite being the pioneer mobile telecommunications company in the country, it is still struggling to capture the majority share of the available market. Safaricom commands slightly more than 70% market share thanks to its Mpesa value addition on its service. Mark you it is not the cheapest hence the price factor is out of question!

Now for one to understand Mpesa, one has to appreciate the culture of the Kenyan people. Kenyans are a closely knit society which values sharing and blood relationships. As such, more able members of the family travel out in search of job opportunities and whenever they land a job, they would remit some of their earnings to their homes as a way to assist others. This sharing philosophy is what Mpesa was built on – to remit funds, albeit in small quantities. At the time of its launch, most banks had locked out most of the population by their stringent account opening conditions. For one to subscribe to Mpesa, one just needed an ID and a Safaricom line. And that is how the revolution started in 2007 with the launch of the service. Through MPesa, Kenyans could send cash, buy airtime, pay for goods, even borrow on short term basis through the click of their button. And that is how Safaricom wormed its way into the hearts of Kenyans, and assured its place into the Kenyan culture. Its value tag was “Get connected”, in consonance with the social connectedness of the Kenyan people.

Well, do you desire your business to live beyond you and post better returns? Then you have to think about your value system and match it to your clients’. That way, like Safaricom, Facebook and all the others mentioned, you will be assured of longevity of business. 

Customers feel their needs are met by firms whose values fulfil their needs. It is upon the business to craft its strategies around values that will give the potential clients assurance that their needs and preferences would be fully met. That way, one is guaranteed long term loyalty and growth. 
The writer is an acclaimed business author of Passionpreneurship Demystified and Business Networking: How To maximize on your contacts for Business and Professional Growth. He is also a Personal Branding and Business Coach with PBL Africa. In case you need assistance to give your business or profession a jump-start, he can be reached via the following contacts:

Email:                             pblogix@gmail.com

LinkedIn:                        https://www.linkedin.com/in/mike-okinda-9652b210a

Telegram Community: https://t.me/joinchat/EkprBT6zCKCRUmQUaDD9cQ

Facebook:                       https://www.facebook.com/maikol.okinda

Why That Business Plan May Prove Useless for Your Startup.

It is the norm for any business advisor speaking to newbies starting on the journey of entrepreneurship, to suggest that they start their business by doing a business plan. In fact, for many financial institutions, this is a core requirement for financing. But then, do business plans really work?
We have to accept that natural law of success: failing to plan is automatically the recipe to fail. Hence, failing to plan is planning to fail, so goes the adage. It therefore goes that planning in itself is a critical component in starting out as a business. It just cannot be wished away. Studies done to evaluate the relationship of business planning and success rate of the same give a direct correlation between the success of business and planning. This has been the theory that has been peddled all along by conservative business trainers, coaches and tutors.

But doing a business plan in itself is tedious. It requires input of many hours and abstract thinking, of where the entrepreneur needs to see his business in the foreseeable future. in actual sense, for one to do a practically applicable business plan, it would require technical expertise and this is not only discouraging, but expensive in the course of time. Its implementation too is another issue altogether. Business plans are rigid and structured that are almost always not flexible to the constantly changing conditions on the ground. This in effect implies that the conditions at the time of formulation of the entire plan are not guaranteed to be similar at the time of implementation. 

Business markets change almost on an hourly basis and hence, relying on a plan drawn up in the past for the present situation would almost always result into failure. Hence a fluid, more adaptable system of business planning especially for startups is needed. Its implementation is even hampered by its cumbersomeness. No plan is less than a page and hence it requires that one has to ruffle through the numerous sheets of paper to get a point. 

Faced with these challenges, Alexander Oxerwalder developed a simpler, fluid and highly adaptable business planning tool, which he aptly named the business model canvas. The model was planar and hence visualization of the business was simpler and less tasking as opposed to the conventional business plan. 

The model has nine critical components: value proposition, key activities, channels, customer segments, customer relationships, revenue streams, key resources, key partnerships and cost structures. It defines clearly and in a diagrammatic, planar form, how a business is going to create value for its target clients, what activities it will involve itself in in achieving this, how it will deliver this value and through which means, what strategic partners it would create linkages with, cost factors associated with its activities for maximum revenues, in a simple structure. 

It is aptly called a model because it is fashioned to adapt to the conditions on the ground. Hence, if the cost factors change, or the taste and preferences of the target market niche change, the model is adjusted to ensure that the maximum returns are obtained at the tail end. It therefore ensures the concerns of the business stakeholders are taken care of at all times.

The Business Model Canvas (Picture: Courtesy)

On the contrary, a business plan cannot adapt to conditions on the ground. Therefore, any shift destabilizes the entire plan and hence, it is considered rigid. The business model canvas is based on experiential operationalization and hence, concepts and theories are tested before full implementation. Ideas are tested using the model. For the plan, this is not possible. The input to output process flow is fixated on the process major, with the theorized output quality and quantity realized at the terminal end of the entire process chain. The thought process is also exclusively applied on paper rather than testing on the ground.

The business model canvas also is more result oriented with a special emphasis on the how to component of achieving results and returns to the shareholder. The business plan is deficient on this. It only dwells on the final result or outcomes rather on the techniques and strategies to attain that. On another front, the business model canvas is more visual. As said before, it is planar as opposed to the business plan which is voluminous and made of several pages.  It is more of hypothesis and theory than being practical. Hence, it is nearly impossible to visualize the business from the initial stage of idea conceptualization, through to implementation and finally, delivery of the final product to the desired market. The business plan therefore falls short in representing the business as a vision which the business model perfectly does.

Startups in their humble beginnings require fluid and agile tools that would perfectly fit into the business system and enable the outfit adopt to the ever changing business external environment. A business plan would not be able. It is a known fact  most who draw up business plans eventually discard them since their implementation is near improbable. If you are currently operating a young enterprise, or in the threshold of starting one, it is time you change with the times and draw up a business model canvas. That is assured to work out fine!
The writer is an acclaimed business author of Passionpreneurship Demystified and Business Networking: How To maximize on your contacts for Business and Professional Growth. He is also a Personal Branding and Business Coach with PBL Africa. In case you need assistance to give your business or professional a jump-start, he can be reached via the following contacts:

Email:                             pblogix@gmail.com

LinkedIn:                        https://www.linkedin.com/in/mike-okinda-9652b210a

Telegram Community: https://t.me/joinchat/EkprBT6zCKCRUmQUaDD9cQ

Facebook:                       https://www.facebook.com/maikol.okinda

To Save Or To Invest: Which Way To Go?

There is a lot of talk of late about reviewing the year that was 2016 but then again, as most of us are, we have nothing to report about on the resolutions we made at the beginning. I know we will repeat the same ritual all over again: Get down with a pen and paper and pretend to be serious and note down “resolutions” for 2017.
One such resolution is creating a financial bubble for future contingencies. I have been involved in a lot of online banter about money and it’s good to note most are warming up to the idea of creating a hedge fund.
But then again, we have to get back to the drawing board and ask ourselves: why do we save? Literally speaking, why do we deny ourselves the pleasure of enjoying our earnings?  To spend or to increase its value?
And this is where we all go wrong. A pal of mine recently boasted to me that he had joined a chama that was involved in savings and lending. He contributed religiously every month and at the end of the financial year, he received his dividend of Kes. 30,000. Quite a tidy sum if you asked me. But he went ahead and used all of it in the Christmas festivities, flying to the coast for holidays. And I asked myself: what if he took 50% of the dividends and re invested back into the chama or better still, invested in some other portfolio like the money markets that are risk free and flexible? Another case I encountered online was a fellow who was wondering why anyone would save for an entire year and go chasing plots of land to buy. He opined that chasing the plots has become the norm nowadays. But then again, doesn’t land appreciate in value as opposed to the luxuries we go spend our cash on that bring in nil financial returns? Which still brings us back to the original issue: to save or to invest, which is the best way to go?
Saving involves putting cash away for a period of time completely safe and can be accessed after some time together with accrued interest. It is risk free. Investments are risk prone. The cash is put into some asset with the hope that you will get it back with some interest. However, the returns or compensation are higher than just saving. For instance, you can choose to put money under the mattress for some time, periodically topping up and get it back as it is in total. Or you can choose to buy into an investment vehicle and let professional managers manage it for you and earn interest and dividends.
Apparently, and sad to be true, there is no right way to manage your money: it all depends on your circumstances and your needs. If you want to keep money over the long term, investing would be appropriate. But note that there is a risk to it. Hence this should be the most critical factor to consider when choosing an investment option. Whether it is starting a business, buying stock, buying property, it is all about putting money away in the hope that the price of the asset will appreciate and you can get back your cash including accrued compensation. If you cannot afford that risk, then outright saving would be appropriate –either in a simple home bank or a savings account, whichever will deem fit.
Personally I recommend both savings and investments. Savings cater for short term needs and for collection of earnings and later, once the target is reached, invested to grow your net worth. At the end of the day, ensure your money is growing.
The biggest problem with holding cash is inflation. Money value deteriorates with time. Putting cash for mid to long term periods degrades its value and hence the importance of ensuring your money grows. It also would be beneficial in a way because the sum total value of your assets versus your debts (net worth) should always be increasing on the positive side. Financial freedom only comes when your sum assets can service your debts comfortably. Hence, to ring fence yourself, you have to ensure you are always growing your asset base as a safe landing in case any future eventuality.
Some people opine that it is necessary to save and spend after denying yourself the entire year. Well, why would you go the length of denying yourself in the moment anyway? Just earn and spend. But remember, no one knows what the future holds. The wise plan for generations to come. The unwise look forward to Saturday nights (and end year) to spend!
Life is short and you only live once (as generation Z say). YOLO is ensuring you make the right decisions now to live well even in your old age. It will start now by the choices you make. After you break that piggy bank or literally bust your savings account at the end of your saving period, apply wisdom. It will be worthwhile.

#WealthMindset

To Start A Business, You Need Not Capital!

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What does one need to start a business? Many would say capital and financial resources. It is true that any business operation demands a lot of financial resources to finance operations. Startups are no exception. However, past studies of cases of several startups have established that little or no capital is required for actualizing a passion into an enterprise.

It is no secret that most startups face the challenge of funds availability for operationalization. Banks and other financial institutions depend on revenue flows as a basis of advancing financing. For a startup, this is not possible since no business has been transacted before. Borrowing from other sources may prove expensive and unsustainable.

It therefore leaves the entrepreneur with no option to raise funds from other sources apart from borrowing. It therefore requires the business owner to raise capital from own sources other than external sources. This can be from personal savings or at times, funds raised from selling or owned assets.  This exercise where money for starting a business with no or little money is employed establish or run a business is called ‘bootstrapping’. Also, bootstrapping occurs when the new venture uses capital from operating revenues of its own.  This is called ‘ploughing back’ money earned from business operations. Bootstrapped firms therefore focus more on profits since the profits made is what keeps the business concern going over time.

Apart from personal savings, the business owner may raise capital in the following ways:

  1. Being economical in operations and eliminating any excesses especially on operating costs.
  2. Running a business from quick turnovers or even taking preorders from suppliers and paying later after sales, sell off of owned assets, among others (trade credit). However, most of the suppliers would be unwilling to extend trade credit until they have established a firm relationship with your firm for some time. It will help if one would approach his suppliers to extend this form of credit. In as much as it’s workable, the mode is not sustainable in the long term.
  3. Selling receivables to a buy in exchange for cash to for instance a financial institution. This is usually common in sectors where receivables are characterized by a long repayment period. The factor (buyer) therefore assumes the risk of collecting the payment. Caution should be taken to take into consideration the factoring cost and hence the price setting must be set with this in mind.
  4. A letter of credit can also be employed in securing finances to undertake production and delivery of products. This is usually a popular mode in businesses dealing with export and import of goods.
  5. Credit contracts to finance acquisition of business equipment. In case of a business that is engaged in production of products, one may approach the supplier for a credit facility in which the equipment is supplied and the payments paid over a term in installments. This is convenient to startups since committing a huge amount of cash to the equipment may constraint cash available for working capital.
  6. Leasing of equipment from suppliers. In this case, the business owner only pays for the part of the equipment he puts in use rather than the whole buying price.

The major advantage of using bootstrapping to finance capital requirements of the business is it removes the burden of having to deal with expensive loan facilities in the nascent stages of the business. It therefore is more convenient and gives the entrepreneur total control over the business decision-making processes.  Nevertheless, it should be noted that this form of financing may limit the pace of the firm becoming stable over time. It may therefore be restrictive to expansion of operations and investments in other areas, for example.

However, for startups, this provides the most convenient way to raise capital especially for firms that are just starting up and do not have a firm foothold in the target market. It should also be noted that bootstrapping is not limited to start ups alone. It is a cost effective and inexpensive way to treat existing resources at any stage of the business’ life. It is a sustainable business practice.

Bootstrapping is all about how one manages his financial factors. Its aim is to keep the overheads low while maximizing returns via revenues. Operating expenses too need very close monitoring and control, with keenness to choose what is cheaper in the short run for the benefit of the business. Any investments should be discouraged in the business unless absolutely necessary and work within the business’ means without stretching other critical business sectors.

Be it raising funds from own sources or elsewhere, bootstrapping remains the most convenient mode of capital facilitation in startups. But caution must be put into consideration when considering cost implications. It is therefore a challenge that would need strict business wisdom to tackle. Another point to note is the bootstrapped business has to develop a pipeline of paying customers and maintain them. This is because it’s only by revenues generated by the business that the firm is sustained over time.

With the limited financial resources available, effective marketing has always been a challenge. However, bootstrapping on marketing especially for startups can be achieved in the following ways:

  • Increase sales via cross sales, where a client is allocated a minimum of several products.
  • The use of social media for marketing – YouTube, Facebook and Instagram provide free platforms for doing advertising. With the power of connections, one can reach millions using a product page. And it is absolutely free!
  • The use of customer referrals for new sales. Keep a database of all clients that you have sold products to. Engage them and if they are happy with the product, they do referrals to those connected to them. This is called networking.

It is therefore possible to start an enterprise without money. It has been seen even in West Africa where entrepreneurs landed big deals with big corporations without capital. As long as you get the product right, capitalization should never be a challenge! It therefore means what one needs to start a business is not capital per se, but a passion and the need the passion would fulfill.

Objective Networking in Business

When we speak of networking, many take it as the usual meet-the-people activities we engage in during our free times. Like going to pubs and having some weekend snack with pals. Of course most are characterised by football or political banter that does not add any real value to life.

But let us think over this in a few: how many meals do we take in a day? I guess on the higher side three  breakfast, lunch and supper, if at all there are no snacks in between. Of these, how many do we employ for use for the benefit of our professions or businesses? I know most have none as the answer!

If we are to compute the total number of meals using the three meals a day average, it comes to about 1095 meals in a year. If we imagine only ten percent of these dedicated to utilising them to grow our business and professional relationships, this translates to around a hundred opportunities availed! Man is a social being and as such, networking events are relationship connections.

Networking has the potential of facilitating growth of business and professions through cultivating mutually beneficial relationships with other parties. They operate on the givers gain policy where, those who are willing and are committed to offer the other party something, benefit in return. 

An objective driven networking event or social gathering ensures that each member of the network comes with something to offer the other member and in return, they get to receive something. As such, whenever the members of the network congregate, each comes with a referral or a business fulfilment for the other party.

Everyone would want to work with someone they know and as such, a relationship or acquaintance has to be cultivated. You can only work with someone you know, trust, like and invest time in building that social bond for mutual benefit.

Professionally run and objective driven networking gatherings work in a structured manner, with laid down ground rules that dictate the mannerisms of its members. What they aim at is to build a structured supportive system of doing referrals to its members. As such, each member would emanate from the meeting with substantial business and hence gain value from the relationship. They therefore need to have a common bond and objective  to network and grow mutually.

Objective networking also would require that the members have an unbowed and unwavering commitment towards the social organisation. They should be able to afford to sacrifice their time resources or otherwise towards the networking forums. Most usually hold their meetings over a meal, either the breakfast or lunch period. As such, there should be strict observance of time and frequency of meetings. Some clubs have established ground rules that dictate penalties for deviance from established norms as a deterrence measure.

As mentioned, the mind-set of the network members should be sole  to give. As such, all should work as a team with their sole purpose to market the other persons business. And hence each member markets the other members profession and business and in a way, advertises their commodities business via word of mouth. There is therefore need for sincerity on each members part to help the other as he or she receives help in turn. At the end of the day, through word of mouth, each business entity represented there is advertised for free and business leads generated!

The most important bit is availing tools of networking by the members. The most basic of them are business cards. These hold vital information and as such, they should be articulately designed and laid out with attractive features. A blog would also come in handy as it would be a platform for articulating issues of concern or interest and as such, attract followers and build a fan base. It helps one create an influence cheaply and conveniently.

As mentioned, one obvious benefit of networking is free and cheap advertising through word of mouth and referrals. Indeed, comparing the heavy costs of doing media ads versus the free word of mouth referrals, the later wins the day! In actual fact, it is said that over 98% of business leads generated today are through networks. If your business is currently not leveraging on this, then you are not in business!

It would also be an enriching experience socially and professionally to interact with people from diverse backgrounds. It is said, that we are defined by the books we read and the PEOPLE we associate with. It would also be a platform to learn new skills and get to learn from people who possess better experiences.

In a nut shell, next time you meet a person, get to task to see what you can learn from him or her. Let that interaction leave a lasting impression and in return, influence their life in one way or another. For indeed, clever people look for business or work. The smart build networks!