I always knew I wanted to be an entrepreneur. University education was going to be a necessary step towards that goal. And not just any entrepreneur- I was going to change the world. My lofty dreams were valid.
After graduating, I went into employment, and for a few years worked for a number of different companies in the finance sector.
My main foray into entrepreneurship begun when a close friend of mine invited me to his farm where he was growing cash crops for export, and there began a journey into the most expensive phase of entrepreneurship education where, once again, basic errors were made which proved very costly.
We leased a farm, build infrastructure for post-harvest handling and entered into a contract with an exporter and planted about 10 acres of beans for export. Nothing could have prepared us for the unknown variables that lay ahead. Being new farmers, we had no experience in optimal resource allocation and our wage costs were astronomical due to the scale at which we were farming. The usual challenges of farming then kept cropping up; water pump issues, pests, diseases, theft, but thankfully we made it to the first harvest with a really good crop.
At this point, our lessons began piling up. The reality of price changes due to demand and supply hit us hard. We had done really good financial projections based on the best case scenario and nothing prepared us for the actual reality of over-supply.
Like sharks in a bloody ocean, middle men descended on the farm and offered us prices well below our production cost, at which point we had no choice but to offload the harvested crop. Undeterred, we decided to plant other crops to sell to the local market, because people eat 3 meals a day, don’t they?
What followed was early mornings in Marikiti (the main vegetable market in Nairobi) dealing with another layer of middlemen and ‘security’ people, walking around Ngara market with export grade vegetables and dealing with shrewd sellers who would offer the lowest possible prices for our produce and then sell them at 3 times to the retail shoppers while we were still standing there.
After 18 months of constant battle, we wound up the farm, bruised and battered, but not defeated.
Why is it important to highlight these experiences? At each stage of my entrepreneurial journey, I learned and tried not to repeat the mistakes that I had made previously. A decade ago, we didn’t have the resources that are available now. There were no innovations to make the journey of the solo entrepreneur any easier. You had to learn on your own or work very closely with someone who was making a success out of business.
In the years since I left employment, I decided to apply the lessons I had learnt and in addition to teach some of the principles, which I will break down below:
Identify the need: What is this unmet need in the market? Is it something that you understand? Perhaps you have worked in the industry and have interacted with the customers, which explains why many people leave employment to become competitors or auxiliary businesses within the same industry because they have seen a gap which needs to be filled.
What are you going to offer to the customers that will fulfil this need? Is it lower prices? Better customer service? Smaller units? You need to clearly understand what sets you apart from the competition that will motivate your customers to give you their money.
Who is your customer? Are you a niche product, mass product? Who exactly is your target audience? Where can your customer be found? This will determine how you will plan to reach them and how you will communicate effectively to them.
What things need to be completed to get your product to your customer? Many people start a business not knowing what needs to be done because their experience with the product has been within an established business with processes and supply chains that bring forth a finished product.
What does it cost to get your product to the customer? In hindsight, farming on 15 acres was not the right thing to do. We should have started on one acre to fully understand our processes, costs, production cycles and market before scaling up or shutting down.
The steps I have outlined above are by no means exhaustive and do not only apply to startups. Every single business needs to have an understanding of their customer, the value they offer them, their resources and key partners, their costs, their competition and finally what their revenues are.
In 2018 I started a credit and debt management company, Collect Pro Limited and joined SNDBX, the first collective of SME business advisory experts under one roof. As part of the SNDBX, I now spend my time working with companies to help them deal with their cash-flows by optimizing the relationships between their credit sales and the debts their take on.
My advice to new businesses, existing businesses that want to grow and scale and optimize their operations, maximize their profits, grow their revenues and expand their footprint; talk to experts. And even better, talk to experts who have walked or are walking the entrepreneurship journey. Simply put, they have a deeper and better understanding of what you are going through.
This article was written by our Credit Management Expert Timothy who leads Collect Pro a consulting company offering Debt Management, Credit planning & Business Debt advisory services to clients’ day to day business.
If you have any feedback or inquiries write to him via this link >> Email Timothy