Six things to know before you start a business

21 February 2019

By Nikki Summers, Regional Director for Sage in East Africa

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.

Sage Impact of Data Effectiveness - IDG-Research

The Impact of Data Effectiveness on Business Outcomes – Full Report

Do companies with more user-friendly and accessible enterprise resource planning (ERP) systems enjoy more positive business outcomes? Are they more profitable? Do highly effective ERP systems help create a sharper upswing of revenue growth? How much difference does effective data really make to business success?

To answer these questions, Sage commissioned IDG Research Services to conduct a study of medium-sized businesses in North America and Europe to explore the business implications (in US dollars) of improving data access and usability, and better understand the associations between the overall effectiveness of the ERP infrastructure and business profitability, revenue, projected growth, and so on. In other words, how do key business outcomes change as accessibility, usability, and insight into business information improves—even by small increments?

The research aimed to explore how investments in ERP solutions that address four data attributes—accessibility, usability, quality, and intelligence—can impact key business outcomes, such as revenue growth, profitability, sales (including sales to new customers and of new products/services), operational efficiency, and market penetration.

Supply Chain Management

The Changing Face of Supply Chain Management

As production, processing, distribution, retail and online technologies continue to advance aggressively and redefine the very meaning of operational efficiency, we are constantly seeing the very nature and structure of Supply Chain Management (SCM) as an operational function also having to change in order to place enterprises in a good stead competitively. Looking around, one can see that SCM actually seems to be gaining increasing interest as a competitive tool to gain market share, as indicated by spending and activity in the area.

Supply chain excellence is becoming more widely accepted as an element of overall business strategy.

In actual fact, the technology and process upgrades that can be seen taking place at forward-thinking companies shows that supply chain excellence is becoming more widely accepted as an element of overall business strategy and that increasing value to customers is not just management’s, but everyone’s business.
The nature of the present day business environment and the changing expectations of clients have forced many CIOs to take a deeper look at how they view and manage their supply chains, with an emphasis being placed on specific areas and drivers of change.

Six Key Trends Driving Change

According to research done in food and beverage, consumer products, high tech and industrial manufacturing companies, there are six key trends causing significant impact and change to supply chain design and performance:
1.    Demand planning
2.    Globalisation
3.    Increased competition and price pressures
4.    Outsourcing
5.    Shortened and more complex product life cycles
6.    Closer integration and collaboration with suppliers

2 Questions You Should Ask Yourself:

  • Does leadership at your organisation view your supply chain as a strategic competitive advantage?                                                                If not, are you considering outsourcing your supply chain management?
  • Are the capacity strengths of your supply chain commonly known and understood by leadership of the company?                                     If so, how do they impact growth, profitability and customer service?

For more information on how Mucheki Consulting can help make your Supply Chain Management more efficient and competitive, contact us.

Mayfox Mining CEO

Sage ERP breaks into East African mining sector

Kenyan mineral exploration company Mayfox Mining recently announced its adoption of Sage ERP X3 to become the first East African mining company to adopt Sage’s dedicated resource planning solution. The timing of the move to implement the software couldn’t have been better timed as the company prepares to list on the Nairobi Stock Exchange’s ‘Growth Enterprise Market Segment’ (GEMS) by the end of the year.

“We are excited to have clinched this important deal with our first mining customer in East Africa,” said Keith Fenner, senior vice president sales for Sage ERP X3 AAMEA (Africa, Australia, the Middle East and Asia).

In a statement, Sage said: “The solution demonstrates Mayfox’s commitment to accountability and tight cost control to future shareholders and investors. It will also provide management with critical real-time information for fast and responsive decision-making,” says the Sage statement.