Starting a business in Kenya ....Step 3!

Following on from step 2!

Value your business. In most cases if not all, no one but your parents would be willing to advance you any monies towards a business idea if you have not already started. For Equity bank and many other SMEs, they would want you to be operational for say 6 months. The financial institutions would like to be sure that you are in a position to repay any monies advanced. As such they would like to see the statements you would have drawn to determine if your business is profitable/viable or not. Whilst professionally drawn up accounts aren’t necessary, basic records clearly showing sales and expenses should be expected. Don’t be tempted to understate the costs, after all not many businesses are profitable in the first 2 years of operation. Understatement of costs may signal your naivety in business and could work to your detriment.

For the Cooperative bank of Kenya, the minimum period of account operation prior to advancement of loan is 6 months. They would also need to see that the account is active; as such you need to make daily drawings and deposits. It is advisable to start the business on a small scale until you are able to have some orders/customer to present to the bank. You don’t need to start the biggest spa treatment in town to make it. The trick here is to deposit all your daily takings even though it means you go to the ATM and withdraw the following morning. This way the business development manager in the bank can see that you have actually been making sales and that you are not just claiming to be in business.

For Co-op bank the relevant bank account is Haba na Haba to qualify for an SME loan. Even though you dont need a loan, you might want to take a small amount at the start, this will cost you interest rate but it will earn you credit worthiness with the bank for future loan reqirements.

Starting a business in Kenya ....Step 2!

Step 2

Planning stage; in this stage as the potential business owner you would need to translate the passions for the business and the outcome of the idea research in stage 1 into cash flows and projections. You might need to get someone not heavily invested in the idea emmotionally to look at the figures. Please note that you will need to seperate your passions and ambitions for the business with the actual reality as determined by the market research. Having conducted a thorough market research would make this stage more comprehensive. Don’t leave out any costs including paying your own wages. By including all costs you would ensure that you don’t under fund your business leading to cash flow problems. A common trap in this stage is not to set aside you passion for you business idea and the reality.

Start off with the fixed regular costs such as business licence, rent, wages and domain registration from online businesses. To work out the Wages, you would need to research how much a person in a similar job is paid, don’t underpay your employees just because the job market is flooded by unemployed youth. Be sure to get the best staff for the job and compensate them fairly to minimise the possibility of high labour turnover. Obviously the first employee of the business will be you. Whilst you might want to pay yourself, you need to do so more so for tax purposes. If the business cannot pay your efforts and time, you would need to reconsider the model.

You would also need to have defined a business model at this stage. In the recent years there is a move towards social enterprising where your products are bought at a premium if they are produced fairly. For social enterprising you might want to publicize your operations with a blog or some other online means. The customers tend to be westerners who would rather buy the products than give cash aid which might not be spent in their intended ways.

Lelgut farm.....new take on farming!

When and why did you decide to start the farm?
I started farming in 2009. My parents have been farming for as long as I can remember; I grew up in the farm. My university fees in Strathmore were paid by sales proceeds in the farm and that made me realize the true potential of farming.

What are the challenges you faced when starting the farm?

Oh, there are many challenges in farming even for the seasoned farmers. For a start the cost of feeds and medication is both unstable and very high. Secondly there is lack of good qualified professional vets and AI personnel. In animal farming you just cannot afford not to have access to these two, this could mean death of your animals or no breeding for an entire season both of which affect your bottom line significantly. Thirdly, we receive very poor prices for our milk from the processors. I mean we get paid 25 shillings a liter of milk, whilst in the supermarket ½ liter goes for 45 shillings. Fourthly, the poor infrastructure and farmer training is also a great challenge we face in general. And finally, there are the usual suspects, lack of credit facilities, seasonal food prices, lack of strong farmer’s cooperatives to voice the farmer’s opinions and lack of policies that are geared to making farming an easier trade.

Heifer, you can purchase or order from Lelgut farm!

How do you mitigate these problems?

Lelgut geese!

Well, we do offer training in our farm for those who may be interested in farming and don’t know how to start. The information can be found on our webpage http://lelgutdairyfarm.kbo.co.ke/ and on our Facebook page

Where do you see your farm in 5 years?

In 5 years we see ourselves to be a model farm, able to provide one stop shop to all farming. We want to be able to have all the fodder crops on our farm ready for our animals as well as seedlings for those who may be interested. We want to be in a position of mentoring young and upcoming farmers. But most important we want to be able to have solved most of the common farming problems such as dealing with draught, having better vets and AI access and dealing with animal diseases and productivity.

How do you deal with drought?

We preserve feeds from the rain season by silage making and preserving hay. We have also been experimenting with planting root vegetables such as lucienne, Beet roots. Fodder sorghum that is also a very drought resistant crop. The most important thing is planning, knowing you animals’ nutritional needs and forecasting how much you might need when the times aren’t so good.

Starting a business in Kenya ....Step 1!

I have been researching and documenting the steps of starting a business. In the next couple of weeks I will be blogging about all the 5 steps. These are my findings but then again there is no one agreed formular on how to start a business.

For most of us, the ideal dream is to be own boss if we aren’t already there. However, having the passion to start a business and actually getting the business going are two very differing aspects. Below I list the steps into starting a business. 

Step 1

Idea and product formulation phase; in this stage, you should come up with an Idea which you perceive as unique and one capable of making a business. Don’t fall into the trap of following the band wagon like most of us Kenyan do. Don’t buy a plot just because your friends have. Do substantial research around the idea, the proposed market and target customer to determine the viability of the idea. A good starting point is in a line of experience. For instance for someone who works for a bakery, knows of the business models and the costs and revenues involved could be better suited to start own bakery delivery bread or cakes at a cheaper price rather than investing in Jewel cutting for instant. Don’t hesitate to start a competing business as your employer; chances are they too started their business in the same way. Don’t be afraid to ask other traders, you might find a solution to their problems. Also remember, whilst we envision our business to be successful making a lot of money you must watch all your cost whilst not compromising on quality. Don’t invest in a saturated business area, for instance don’t open a mobile phone or clothing boutique in Moi Avenue not unless yours is very different. However, you could become a wholesale in the same area targeting small start-up or businesses which might not be able to raise enough cash to bring in a big load from the suppliers (for the case of imported supplies). Don’t be afraid to trail other blogs to see what other aspiring entrepreneurs are in search of.

Next week -----------------Step 2