If you read a lot or do a lot of research about business, finance or any other related topic, you must have come across a statistical piece of data that shows that less than 20% of all startups last more than 5 years. Most business startups don’t even succeed past two years and this is caused by several reasons I am to discuss in this post.
If you have never come across this piece of information before, you are welcome.
In Kenya, startups are just as hard to maintain as in any other place on the planet. Of course, obstacles and competition vary regionally, but the same fundamental principles of business apply worldwide.
In this post, I will take you through the lessons from a Kenyan startup business that is 14 Months old, and how to succeed in any venture you walk into. Stick to the end as I lay out my case and results.
Let’s dive in…
1. Why would you want to start a business?
Here’s the deal! There is no way you will start a coffee-selling business if you are not devoted to it. Successful businesses require the willingness of entrepreneurs to invest time and money into them. With that in mind, you should assess why you want to start a business in Kenya.
Below is a list of good and bad reasons to start any business, in question form. Each is marked respectively in green and red.
- Are you competing with a friend or family member? 🔴
- Are you bored and looking for something to make you less idle? 🔴
- Are you targeting a financial goal? 🟢
- Are you good at something and want to turn your skill or talent into a business? 🟢
Narrow down your reasons for starting a business and used them to motivate your startup.
2. Do you have enough capital?
All good business investments require good capital. Further, the bigger the capital investment, the larger your venture will be and possibly, the rate of returns. However, you should watch out for the law of diminishing returns, i.e., increasing capital for a startup will have a ceiling beyond which returns on investment (ROI)are inversely proportional.
Generally speaking, most businesses in Kenya will require a minimum capital investment of about Ksh.100,000 to an infinite maximum. Of course, different businesses will require different capital amounts. For instance, starting an electronics shop may cost you Ksh.300,000 whereas a poultry farming business may start with only one chick at Ksh.450 etc.
In a situation where you do not have enough capital to kickstart your business, getting a loan will help boost your venture and cushion against any business emergencies or miscellaneous expenses that may arise.
Capital is a crucial active ingredient to any business startup in Kenya.
3. Plan on your location – Physical or Virtual Space
Your clients will need to access your products or services in a physical location or a virtual space. For someone like me, my business entails e-commerce and therefore, my website is my location (virtual). I get clients by optimizing my site for SEO to ensure that I rank for all the necessary keywords.
For businesses such as hardware, liquor stores etc., a physical location must be set up in high-population areas, such as the Central Business District, towns, municipalities etc.
Furthermore, security should be paramount as you settle on a location. You don’t want to get robbed at night just because you chose to overlook security because of high customer traffic.
4. Satisfy any legal requirements to avoid unnecessary suits
All businesses in Kenya require legal registration, a service that can be accessed easily through online government portals i.e., e-citizen.
Depending on the kind of business you want to start in Kenya, registration and business permit prices vary. For instance, starting a retail shop may cost you only Ksh.950 whereas starting a limited liability company may cost you north of Ksh.20,000.
After successfully registering your business, you will need to be tax compliant. Failure to adhere to legal requirements will result in fines and even closure of your business.
For you to have a smooth entrepreneurial journey, make sure you adhere to all legal requirements.
5. Structure your business plan
As discussed, in a previous post, business plans offer a variety of advantages to entrepreneurs that may make them stand out against the competition.
Here is how a business plan will set you apart from other entrepreneurs;
- Setting Clear Objectives – A business plan helps you define your goals and objectives for the laundromat. It allows you to outline what you want to achieve, whether it’s financial targets, customer satisfaction goals, market share objectives, or expansion plans.
- Understanding the Market – A comprehensive business plan involves market research, enabling you to gain insights into the local demand for laundry services, identify your target customer base, and assess the competition.
- Financial Planning – A business plan requires you to estimate the costs involved. This includes expenses for equipment, lease or purchase of premises, utility bills, staff wages, maintenance, marketing, and more. By conducting financial projections and creating a budget, you can assess the financial feasibility of your business, plan for funding requirements, and set pricing structures that ensure profitability.
- Operations and Logistics: The business plan allows you to outline the day-to-day operations and logistics of your business.
- Marketing and Promotion Strategies – A business plan helps you define your target market segments, identify your unique selling proposition, and develop marketing strategies to reach and attract customers.
- Securing Funding or Partnerships – If you require external financing or seek potential partners or investors, a business plan becomes crucial.
6. Understand the risks associated with your business
After working on a business plan, you will have a list of all possible obstacles, risks and disadvantages. This list will help you anticipate any future problems thus keeping you prepared.
If you choose not to work on an entire business plan, make an effort or make notes on risk factors and possible challenges your business will face.
- Market Competition – Identify the key competitors in your industry and analyze their strengths and weaknesses. Consider how their presence may impact your business’s market share and customer acquisition.
- Economic Factors – Evaluate the potential effects of economic fluctuations, such as recessions, inflation, or currency exchange rates, on your business. Plan for scenarios where consumer spending decreases or purchasing power declines.
- Technological Advancements – Stay updated on technological trends and advancements relevant to your industry. Determine how emerging technologies could disrupt your business model or create new opportunities, and be prepared to adapt accordingly.
- Regulatory and Legal Compliance – Research the regulatory requirements and legal frameworks that apply to your business. Understand the licenses, permits, and certifications necessary to operate legally, and consider any potential legal risks or challenges.
- Financial Constraints – Assess the financial resources required to start and sustain your business. Identify potential funding sources and consider alternative financing options if traditional methods are limited or unavailable.
Remember, it’s important to regularly review and update your risk analysis as your business evolves. Adaptability and preparedness will help you navigate challenges and increase your chances of success.
7. Keep a record of your progress
Efficient recordkeeping is vital for small business owners as it ensures the smooth operation of their businesses. By maintaining accurate records of income, expenses, employees, tax documents, and accounts, you not only establish good business practices but also gain several valuable benefits. Here are some key reasons why prioritizing recordkeeping is essential for your business:
- Compliance with Legal Requirements: By maintaining organized and up-to-date records, you can ensure compliance with various legal and regulatory obligations.
- Financial Transparency and Analysis: You can track income and expenses, identify areas of unnecessary spending, and make informed decisions based on financial data. Add
- Efficient Tax Preparation: Maintaining organized records simplifies the process of preparing and filing tax returns.
- Improved Cash Flow Management: By tracking your income and expenses diligently, you can gain better control over your cash flow. This allows you to identify trends, predict seasonal fluctuations, and make informed decisions regarding budgeting, inventory management, and pricing strategies.
- Effective Goal Monitoring: Clear records provide you with a benchmark to measure your progress towards achieving business goals. Regularly reviewing your financial records helps you assess performance, identify areas for improvement, and adjust strategies accordingly.
- Risk Management: Detailed records enable you to mitigate risks by identifying potential issues early on. For instance, monitoring expense records can help you identify excessive costs, allowing you to take proactive steps to reduce them.
8. Employ and improve on a working strategy
Once you find a proven strategy that consistently delivers the desired results, it is essential to implement a rinse-and-repeat approach. By refining and optimizing successful strategies, you can maximize profits, conversions, and overall business performance.
Renowned experts and business leaders have emphasized the significance of this iterative process. One such expert is Peter Drucker, a renowned management consultant, who emphasized the importance of continuous improvement.
9. Reinvest and work on your cash-flow records
Any time your money is deposited in your bank account or M-Pesa, avoid overspending on unnecessary pleasures. As hard as this can be, choosing to reinvest and expand your business is always the best way for your business.
Robert Kiyosaki, a renowned author and financial expert, has emphasized the importance of disciplined financial management and making strategic investment decisions. By resisting the temptation to indulge in unnecessary expenditures when you receive funds in your bank account or mobile wallet, you can redirect those resources towards the growth and development of your business.
10. Know when to walk away from a venture
According to Forbes [18 Jan 2019], it’s time to walk away when you objectively determine there is no sustainable market for your product or service and you are not willing to invest to educate a market. At that point, there is no upside to continuing to invest time and money.
Knowing when to walk away from a business investment is a crucial skill that requires careful evaluation and consideration of various factors. While each situation may be unique, here are some signs and indicators that suggest it may be time to consider exiting an investment:
- Poor Financial Performance
- Changing Market Conditions – If market conditions are unfavourable and show little prospect of improvement, it may be wise to consider an exit strategy to mitigate further losses.
- Lack of Competitive Advantage – If the market is saturated, and the business lacks a compelling differentiator, it may become increasingly challenging to maintain or grow market share, exiting a sensible option.
- Changing Personal Goals or Priorities – If the investment no longer aligns with your personal goals, lifestyle choices, or risk tolerance, it may be time to reassess your commitment and consider an exit strategy.
- Legal or Ethical Concerns – Discovering legal or ethical issues within the business, such as fraud, non-compliance with regulations, or unethical practices, can be a strong indication to exit. Involvement in such activities can lead to reputational damage, legal repercussions, and personal liability.
Ultimately, the decision to walk away from a business investment should be based on a comprehensive analysis of both financial and non-financial factors. It can be helpful to consult with financial advisors, industry experts, or mentors who can provide objective insights and guidance.
All in all, when you run a business, you should be prepared for more than what I have mentioned in this post. However, by simply following the guidelines from the lessons I have learnt from a Kenyan startup business, you are more likely to succeed in your business venture.
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