East Africa is alive with opportunities for entrepreneurs. A boom in high-speed internet connectivity, the high penetration rate of mobile phones, and a dynamic, youthful population have created fertile ground for new businesses. In the process, entrepreneurs are creating new jobs, boosting prosperity, and delivering more choice to consumers.
According to the 2016 Micro, Small and Medium Establishment (MSME) Survey from the Kenya National Bureau Of Statistics, Kenya has around 7.5 million small businesses creating employment for 15 million people.
However, becoming an entrepreneur can be a challenging journey. Here are a few tips for would-be entrepreneurs, based on what small business owners in East Africa and other parts of the continent have told us they wish they knew before starting their business.
Plans are nothing; planning is everything
Many entrepreneurs follow their instincts. They also often feel the world is moving so quickly that it is hard to plan years in advance. Yet the process of planning is valuable because it forces you to focus on what your business is about, where it’s going, and how you can adjust it to adapt to changing conditions.
Yes, you will probably need to adjust your cash flow forecasts, your cost projections, your target market and other elements of your annual or five-year plan. Drawing up a plan helps you set realistic goals and metrics, and then you can work consciously towards them.
Expect ups and downs
Success in life is seldom a straight and smooth line from the bottom to the top. This is especially true of entrepreneurship. One day you’ll be worried about whether you can pay wages and suppliers; the next, you could be celebrating a massive deal. Successful entrepreneurs need to look past the small setbacks and defeats, celebrate the little victories and keep their eye on the long-term prize.
The boring stuff is sometimes the most important stuff
Not many people start a small business because they love doing accounts, payroll and tax returns. However, a lot of a small business owners’ time is absorbed by admin and paperwork. If you don’t have a background in accounting and compliance, think about how you will develop these skills and who you can ask for help with the red tape. Also, use software to automate your basic accounting payroll processes, such as Sage Business Cloud, so you can focus on what really matters to you.
Managing people is more difficult than you can imagine
Even if you have managed people in a government or corporate role, managing people in your own business can be challenging. There is a steep learning curve to managing staff and motivating them – but take heart. It is a skill you can learn on the job and develop through training courses.
Meet the new boss… as tough as the old boss
Many people fantasise about escaping a demanding corporate boss who doesn’t appreciate them and then find the new bosses they encounter as a small business owner are even tougher to deal with. They include creditors, customers, tax authorities, regulators in licensed industries and more. The lesson here is that having your own business can be a gateway to independence and self-reliance, but it is not a complete escape from accountability and authority.
Cashflow is king
According to the MSME Survey, a total of 2.2 million Kenyan MSMEs closed in the five years up to 2016. Nearly a third (29.6%) of survey respondents said this was because they ran short of operating funds. This is perhaps the most important fact to know as you set up your own business.
Wise entrepreneurs need to start with realistic budgets and a plan about how they will become cash flow positive (more money coming into the business than going out) before their start-up capital begins to run dry. This is all about mastering basic financial disciplines, such as credit control, budgeting, and financial management.