Effective Working Capital Management for SMEs -1

Corporate Finance_rszcpdFrom my interaction with many entrepreneurs from across Sub Saharan Africa, cash flow management is one of the leading causes of stunted growth for most SMEs. Most founders assume that they know everything about their businesses; hence they do not see the need of having advanced working capital management tools within their businesses. The results are tragic!

Some of these SMEs have found themselves cash trapped and unable to deliver on their client orders. Failure to deliver on client orders have led to lost goodwill and customers shifting to competitors; and the ultimate staggering of the business as it heads to its downfall.

Continue reading “Effective Working Capital Management for SMEs -1”

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The Future of Political Elections — Software Elections???

KEIf we can trust a robot with our lives to conduct a surgery on a patient; then maybe we can trust the same technology to conduct an accurate, FREE, FAIR & CREDIBLE election?

Look, a surgery is a matter of life and death; while an election is not. So if the human race can opt to trust technology with their own lives; why not trust the same technology with systems and processes that are repetitive without any direct attachment to human life?

I am thinking of a situation where an advanced elections software is able to use big data analytics by aggregating various data points from all citizens eligible to vote and making a decision as to who is best suited to be the country’s next president. The process takes the whole electoral cycle (5 years in Kenya), with data being being collected over the whole period. The software then uses advanced algorithms to automatically generate the next holders of political offices at the end of each term.  Continue reading “The Future of Political Elections — Software Elections???”

Growth Entrepreneurship & Structural Transformation in Africa

AfricaEntrepreneurship and economic growth are intertwined as we saw in my article last week on Understanding the Nexus around Entrepreneurship & Economic Growth in Africa. What we did not explore is how entrepreneurship leads to structural transformation in an economy when it is catalyzed over time. In order to achieve structural transformation within an economy, the kind of entrepreneurship needed is what scholars refer to as “growth entrepreneurship“.

Definition of terms

Growth entrepreneurship is entrepreneurship founded on innovation and transformational fundamentals. Growth entrepreneurship is based on identification of profit opportunities within the market; and innovating to either improve on the current solutions, or create new solutions all together. This can be contrasted with subsistence entrepreneurship which is founded on a necessity to fulfil immediate financial needs; and hence lacks a sustainability plan and a scalable business model around it.

Having understood what growth entrepreneurship is; we can now look at what structural transformation means. In the broader context of the economy, structural transformation refers to the reallocation of the three main factors of production to different sectors; in order to ensure that the deserving sectors get their fair share of the scarce factors of production including land, capital & labor. Continue reading “Growth Entrepreneurship & Structural Transformation in Africa”

Understanding the Nexus around Entrepreneurship & Economic Growth in Africa

joao-silas-72562Coming from a premise of factor-driven economies, Africa has not in the past explored extensively the relationship that exists around entrepreneurship, economic growth & structural transformation. However, as I highlighted in my article last week on Fusing Innovation & Entrepreneurship for Economic Growth in Africa; the tide is quickly changing, and now it’s the right time for scholars of entrepreneurship to take a deep dive on this subject matter.

Two schools of thought

Economic growth is interpreted differently by scholars subscribing to different schools of economic thought. Two distinguished economic scholars stand out of the crowd in their different propositions as to what leads to economic growth. They both however agree on the very fundamental measure of economic growth which is an increase in productivity within a given economy. Continue reading “Understanding the Nexus around Entrepreneurship & Economic Growth in Africa”

Fusing innovation & entrepreneurship for economic growth in Africa

woodrow-walden-smallThat Africa is shifting its economic growth model from being commodity based to entrepreneurship driven is a no brainer to policy makers across the continent. Following the fall in commodity prices in 2015 that led to many oil dependent countries slowing down in terms of economic growth; policy makers in most African countries are now looking at alternative models to sustain economic growth within their countries.

The Sustainable Development Goals are also bringing in a new perspective on how Africa can solve its core social-economic challenges. From being factor-driven economies, African countries are now transitioning into being efficiency-driven economies; before we can ultimately get into the ideal and most preferred innovation-driven economies status. Continue reading “Fusing innovation & entrepreneurship for economic growth in Africa”

The Art of Business Story Telling for Small Businesses

Jay 2In a world where the consumer is spoilt of choice from increasing number of substitutes; businesses are spending a huge percentage of their budgets in marketing and public relations, in order to remain relevant in a progressively competitive and dynamic global market. Globally, the advertising market is estimated to be worth about USD 500 billion annually; and the figure keeps growing each year as more businesses and products get created. The growing spend in marketing is driven by the need for businesses to tell their stories in a clear, attractive and convincing manner to their potential customers, strategic partners and investors. And this is not an option; rather t is a necessity if you are to survive amidst the thickening competition in the market.

What makes the fairy tales interesting and memorable is the same thing that makes business stories exciting and worth listening to. In business storytelling, you will need to master five key principles that will help you to communicate about your brand, products or services better. Continue reading “The Art of Business Story Telling for Small Businesses”

August 8th Elections – Risks & Mitigation Measures for your Small Business

ElectionsUncertainty increases business risk, and general elections are engulfed with a high degree of uncertainty with regard to security issues and possible change in trade and economic policies. Large corporations and small businesses alike therefore have to plan in advance and brace themselves for the unknown outcomes during any electioneering period. Prudent risk management requires that any business should be able to assess its risk exposure and take appropriate risk mitigation measures to prevent, avoid or transfer the risks they are exposed to.

Security

General elections, and especially in Kenya pose a unique challenge to small business owners. Unlike in the developed economies where there is a higher probability of peaceful elections and transition of power, in our developing economies, elections tend to be marred with pre or post-election violence of varying magnitudes. In 2008 post-election violence, most small businesses were badly affected since they had to close down their operations for a long period of time when the violence persisted; hence resulting to huge business losses. Other small businesses were vandalized, and that too was an added loss for the small business owners; who had to incur huge capital expenditure to restart their ventures when peace was restored.

Going by the political climate across the country, having learnt from the bad experiences in 2008 and borrowing from the calmness after 2013 general elections; we are unlikely to experience the kind of post-election violence we had in 2008. However, that does not fully eliminate the risk of isolated cases of violence that might erupt spontaneously and lead to stock-outs and closure of small businesses, reduced customer numbers due to security issues or vandalizing of your business assets. It is therefore advisable to be prepared for such eventualities by way of business insurance; and proper management of your cash flows so as to have enough working capital throughout the electioneering period.

Change in trade & economic policies

Another major business risk during the electioneering period that is often overlooked by small business owners is the possible change in trade and economic policies when a government changes. In the Kenyan context, the change could be dual; at the county level and at the national level. Both the national and county governments set policies that govern business operations at the national and county levels respectively.

Kenya has a presidential system of government whereby when a new president or county governor gets into the office, they bring with them a whole new administrative team starting with an overhaul of the cabinet secretaries. The new administration will also bring with them new policies that they would like to implement in order to either boost economic growth at the national or county level; or to just prove that they are different from their predecessors.

Small businesses are more sensitive to some of these policy changes which may touch on taxes, borrowing interest rates, investment in business infrastructure, minimum wages, mandatory contributions such as NHIF, NSSF and county government levies on businesses among other regulatory issues that are likely to increase your cost of doing business. Although we do not get to hear Kenyan politicians talking much about these issues in their campaign trails, the fact of the matter is that when they get into office they will in one way or the other change them.

With every change in trade or economic policy, there will be a direct effect on your business profitability; depending on whether the policy change is increasing or lowering your business costs. It is therefore very important to be keen on these issues, and get to know what politicians on either side of the divide stand for with regard to policies affecting small businesses. In addition, depending on the expected policy changes you need to put in place risk mitigation measures in advance; in order to prevent your business from shocks when either side of the political divide gets into power.

Lobby group for small businesses in Kenya?

Except for the large corporations who lobby the government on trade and economic policies through their lobby groups such as Kenya Manufacturers Association (KMA), Kenya Private Sector Alliance (KEPSA) and the Kenya National Chamber of Commerce and Industry (KNCCI); the voice of the small businesses within the policy making circles is still very weak and they are mostly left out in the cold.  As a result, policies that are particularly focused on their unique needs at their respective business growth stages are left unaddressed at the national and county levels.

Maybe it is time we had national and county level lobby groups for the small businesses in Kenya. If anything, more than 80% of employment in Kenya is in the SME & informal sector.

Originally published at Fie-Consult Perspectives