I got the privilege to give a talk to accounting graduates, mainly Certified Public Accountants, at Strathmore University. A whole world ahead of them and definitely, most of them at least, at crossroads. The choice of employment or entrepreneurship. An honour as this is the first time I was asked to share on my journey of entrepreneurship. Rather than doing that, I decided to draw some lessons from my experience of starting and running a branding agency. The journey is long and it could be a long story for another day, and no, it is not your usual exaggerated rags to riches stories. So, I start off with…
Ideas are the beginning point of all fortunes they say. They could also be the most dangerous misfortune if you are not careful. An idea cannot be successful if it exists only in your mind. An idea can only flourish if implemented (well). An idea must fulfil a purpose whether a monetary one or a passionate one. I have had countless ideas, most of which I have written down and further shared with my friends. Sharing is good as you get to contextualise your idea in a real environment. Some entrepreneurs are afraid to share their ideas, which is funny because otherwise how would you know it would work.
The most important thing for you to do as an entrepreneur is to get a mentor for your idea. I found myself wasting precious time learning things on my own. I could have accelerated growth of my business within a short time frame if I had someone by my side. Finding a mentor may be challenging as our business environment is still mostly composed of first generation entrepreneurs – and this entrepreneurs are yet to learn how to let go. If you get one, they can definitely help you in…
I have written before on the dangers of competing on price and compared business strategies from Telcos in Kenya. They are literally failing because they are competing on price. If you find yourself saying you’ll price lower than the other guy to make it, you are an endangered business species.
When starting off, we did offer printing services and branding of promotional material. However, this would take a back seat in later years amongst our product and services. The problem with an ageing industry such as printing is that the only key differentiator may be cost. Back then, the industry was not too proliferated but the barriers to entry were lowered with cheaper machines. The cost of running the machines however was and still is not cheap. Some businesses though count on volumes to break even. This led to serious commoditisation of printing and promotional materials. When you are in an industry where some players are banking on 5% margins, you better exit… FAST!
We still do provide printing services, but to those willing to pay. The only key difference being our reliability to deliver within short time frames… nothing special!
Another service I was keen on learning the ropes was design – back then a problem child for me (with reference to the BCG Matrix). How would I turn it in to a star! It was clear that the margins were very good and the costs involved in operations were also minimal. With design, the style you develop as a creative agency becomes a differentiator in itself, something no one else can copy! The pricing problem was still present here, how much would you charge for a logo design for instance? Why would you price it that way, and what value would you be offering to your customer?
All in all, pricing would take a year’s work of schooling and research to effectively address it here. It is both an art and a science at the same time.
The pursuit of focusing more on design work rather than production work led to massive time consumption and a problem all entrepreneur’s face, which is:
Are you Working in or on your Business?
It is an all too common trap you are bound to get into as an entrepreneur. When starting out, you do fill in a lot of roles in your business. You will be the manager, the owner, the accountant, the marketer, and the doer of all things in your business.
You MUST overcome the shopkeeper way of doing things, otherwise your business will remain just that – A Small Shop! To grow into a supermarket, you need to focus on growing your business and to do that, you need time, the scarcest resource available to you as an entrepreneur. This will involve you letting go of mundane tasks in your business that consume a lot of your time and contribute least to your business. This way you can spend more time on more important tasks.
Leverage technology to save on time e.g. you can now do all your banking from the comfort of your phone or computer. This could save you 30-45 minutes in your day. Do you really have to type up that report? Do you really need to learn that or is there someone that can do it for you at a fraction of the time it would take you? Only participate in value addition activities that take the least of your resources.
Cash Flow, The Real Boss
We all hear of how many businesses die within the first year and those that survive many would die within 5 years. They are very gloomy statistics that can deter you from ever starting a business. In fact, when starting out again with Pulsar, one of my friends threw this statistic at me! It gets scarier when you have zero sales in a month like January!
As I was addressing accountants, there’s no need to explain what cash flow is, but for the benefit of the readers let me summarise. You can be making profits but not have a single cent on you, and you can be making losses with lots of cash on you. It is the strange world of accounting. Cash is all that matters in your business, and at the end of the day, all you want is a positive cash flow: take all the money that has come in versus all the money that has gone out. Cash businesses tend to survive longer as they have what they require to survive, cash flow!
Ensure you get paid, and fast! Keep your expenses at the bare minimum i.e. bootstrap your business thoroughly. While it is extremely hard to do, you also need to build runway for your business i.e. the amount of cash you burn monthly should be available over a say six-month period. This way, you create a buffer for external shocks beyond your business control. I am trying to achieve this as we speak.
Plan for your finances in advance e.g. paying for your VAT. There is nothing as bad as bumping into money and not knowing what to do. You’ll find yourself not spending your hard-earned resources wisely. Have a budget that exceeds your current capacity. A budget that will also allow you to plan for…
Growing Your Business
Yes, there is such a thing as growing too fast. If you’ve ever seen broiler chicken at four weeks old, then you know what growing too fast is. The obese chicks are as heavy as adults and at this stage, I doubt there organic (kienyeji) counterpart have even shed off their yellow soft feathers (baby hair? Hehe).
Your operating capital determines how much you can absorb as a company without hurting your cash flow. In the service industry, it may be easier as you may be able to outsource the job and push for payment after you have been paid. In production, relationships are hard to cultivate and even then, you’ll still need to meet some suppliers halfway. With no true financial solutions for start-ups, you may find it difficult to finance your order – yeah, they all require security to finance you!
With that, you need to be careful on how much you need to take in as an entrepreneur. Do not be greedy to take it all up, in the end you may kill off your business and further create a host of disappointed stakeholders. Anyway…
Why Would You Start your own Business?
I have thought of my businesses down the line and the purpose they are here to serve. I see a second generation taking it up to the third and fourth. It is the same idea our parents have when buying shambas and building flats. They see a resource they will leave behind for their children. As a first-generation entrepreneur, you will toil the hardest. Do not let that (your hard labour) go to waste due to poor succession planning.
At the heart of every business is an entrepreneur who wants to leave a legacy. A business that will live among the greats that have traversed the decades and survived external shocks. A business that will impact the society… A business that will meet your daily bread. It is a journey you must prepare for, but I’m afraid there’s no proper prior planning that will be bulletproof. The ultimate first step is to start the business, and that you do by making your first sale!
I would thoroughly recommend the following books, though, that doesn’t mean you hold off on to your idea until after reading them. Do start and learn as you progress.
The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael E. Gerber.
The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries.