Your business : Why others grow while you struggle

By Edwin Kimani 

An interesting phenomenon is currently shaping up to be an interesting story told in the Kenyan economy. Just recently, an article was written about former blue chip companies now trading as penny stock. To expound on this will require that I give proper illustrations on this phenomenon.

Previously, companies such as Kenya Airways, Mumias, National Housing Finance and National Bank of Kenya, among others, were considered as a reliable investment for those willing to invest in the stock market and the country. They enjoyed a great deal of adulation. However, the tide has changed. . As the writer notes, they trade at prices well below the price of a tomato and struggle to make a profit year in year out.

Currently, the Nairobi Securities Exchange is dominated by Safaricom which commands almost half of a day’s shares traded as well as banking stock.

You may be wondering what this has to do with your startup, family business or your small or medium sized enterprise. A lot. To be honest, times are hard in this Kenyan economy, but so are times hard everywhere and only good businesses, founded on good ideas, led by charismatic leaders and not mere managers that adapt to circumstances with vision shall emerge as true market leaders in their respective niches in the larger market. In a while, only the most resilient have and shall continue to grow.

If your business stagnates and you feel that the economy is to blame, then here is some advice for you.

So, what should I know when my business struggles?

Understand your idea

To monetize your idea, an understanding of that idea is key. To illustrate this, allow me to refer you to two movies that I highly recommend to each and every entrepreneur, The Social Network and The Founder. What is common about the movies is that those considered the founders of those businesses were not really the founders of the respective ideas that birthed the businesses. Those that grabbed the opportunities to develop the ideas are different from those that started the ideas because they understood the ideas and monetized them, thus forcing the owners of the ideas to submit and part with them.

Back home, I happened to advice a startup that focused on making condiments. The business had been struggling but the idea was marvelous. I made brief analysis of the ideas and the business. I realized that apart from condiments, they had the potential of doing festivals centered on their condiment. This would bring, not only public awareness to their business, but also strategic partnerships, revenue from sponsorships and sales as well insight of market trends.

To understand your idea, always look at the bigger picture, centered on your key product. The bigger picture is where the opportunities are.

Understanding of the market

Over the past week, I happen to have met a friend who is an executive in a leading insurance industry. I asked him a question that has been on the minds of many market observers. Why is the Kenya’s insurance industry in Kenya underperforming? Keep in mind, the pool of funds that they manage and the insurable risks currently observable in the market. He told me that times are hard. True, times in the economy have never been easy, but I noted that for one, the insurance companies haven’t always prioritized research and grassroots engagement. Dr. Bitange Ndemo once noted that we should re-think the rural and livestock industry. This, I think, the insurance industry could tap into through research, innovation and public engagement to create awareness on their products and grassroots dissemination. This is how you understand and show understanding of the market.

Warren Buffet once stated in an interview that he missed an opportunity to be part of Amazon. Amazon as a business shows a great understanding of its market. Today, it has pushed large retail stores such as Walmart almost to market obscurity. This is by understanding that buyers would much appreciate to buy from the comfort of their home without walking in market stores and queuing in lines to pay for their select products.

Back home, large retail stores have collapsed while budget supermarkets put up near crowded neighborhoods are doing well. An example would be Cleanshelf Supermarkets, among other budget supermarkets, has strategically implemented an expansion drive that focuses on the lower and middle income parts of the economy by putting up in their neighborhoods. The same can be said about Jumia Services which has tapped into ecommerce, allowing sellers to sell on their platform while strategically placing warehouses and drop off points around cities and neighborhoods thus fueling growth.

These are perfect examples of entities that have shown an understanding of their market. To grow, you as an entrepreneur should understand your market.

Understanding of your consumer

In your business, without clients, what you are engaged in is just but a mere hobby. This is just as relatable to throwing a party and nobody shows up. This is what is known as the iron law of the market. It is cold, hard and unforgiving. If you don’t have a large group of people to buy what you are offering, your chances of survival are next to slim. To get to the clients, you need to simplify your idea, make it relatable and make it reach to the preferred audience.

This is quite relatable in many business ventures in Kenya. You could ask many what they sell, and chances are that you will be left bamboozled by the mouthful of paragraphs describing their business and products. I imagine this being sold to a layman during a business expo, they will most definitely stare at you, ask for a brochure and walk away never to contact you or your business ever. That is cold, hard, unforgiving and a reality.

Partnership strategies

No business or idea thrives in isolation. In our symbiosis as human being, one thing helps us grow, and that is partnerships which bear creativity. The history of the digital age has reinforced this idea. A look at many great ideas tells you that they were a partnership. Steve Jobs needed a team including Gary Wozniak to create Apple, Bill Gates needed Paul Allen and much later Steve Ballmer among others. To date, this large corporations are partnering to develop ideas and to establish market presence. Berkshire Hathaway, controlled by warren buffet, has partnered with amazon and JP Morgan case to develop an affordable healthcare venture called Haven. The idea is to pull ideas and resources to make healthcare simpler, better and low cost.

Back home Equity Bank and Safaricom signed a partnership that could see the two companies broaden their fintech offering across the local and regional markets. This collaboration leverages on the two companies competitive advantages with Safaricom enjoying telecommunications infrastructure while Equity Bank enjoys a large banking infrastructure. This will see both institutions dominate the field for such a long time.

Your venture, no matter how small should be ready and willing to partner in order to grow, prosper and establish a firm and proper foothold in the market. This will ensure longevity, sustainability and grow streams of income for your business.

Understanding of your funding needs and sources of funding

Assistance from a local loan shark, an unregistered lending organization and lending contracts that you hardly read or with clauses that you don’t understand could be the end of your business. A lending partner that does not tailor their lending facilities to suit your needs could also be the end of your business. Poor understanding of your funding sources, needs and options could bury your business and push you to liquidate assets for the sake of servicing your loans.

To illustrate this, I wish to briefly retell the story of one Thompson Aderinkomi, the cofounder at Nice Healthcare and Relate. In 2011, he started a tech enabled primary care practice that would cut the cost of healthcare. He, and a few colleagues built the backbone of the company. Revenue was weak as very few companies signed up to his idea. He sank into debt and needed cash. He raised finance from raising $ 1 million in seed funding. After a slow but almost anemic growth, growth started to accelerate. However, it seems that the Venture Capital firms that funded his idea, were already impatient and fired him from his own startup. This clearly shows that the funding entity did not understand the entrepreneurs business properly and thus got impatient and fired him.

Back home, I have engaged startups and some businesses seeking funding. Their options have not always been the best due to their lack of conducting due diligence and proper needs assessments. They have brought contracts with loan shark kind of clauses especially on interest rates and their adjustment.

My advice has always been to seek professional help, conduct a needs assessment to see what part of your business need funding and how much funding. You probably would need to restructure the business in order to spin off some of the ventures that need funding and ring fence them. This would protect the rest of the business from risk. You’d then consider what kind of funding works for your venture, is it equity funding, debt funding or a hybrid of both. Due diligence on the best funding partner follows and with that, you are well placed to grow your business, protect its ideas and various ventures.

Conclusion

Businesses operate in different economies with varying challenges. What separates those that thrive from the struggling ones is strategy. Many have been established, had their run and now struggle to survive. Others, despite the economic vagaries, grow exponentially and impact societies in many positive ways. Identifying growth opportunities is important, but so is understanding how a business actually works, starting the business, improving the business and employing growth strategies that see the company last during difficult and great times.

The writer is a Lawyer and the managing partner at Avikele Services, a professional services firm offering legal, tax, accounting, business development and consulting services to enterprises of all sizes and industries. The firm offers growth strategies and funding advisories to startups and enterprises.

Email: avikeleservices@gmail.com