Wednesday, July 31, 2013

Some tips on building a business

Businesses are registered by the hundreds at the Registrar of Companies every week and even more business are being run on the side without any formal registration. But does registering a business name or limited company make you a business owner? Here are some tips to transform your registered company into a business.

Tip 1: Have a plan

A lot of us Kenyans register businesses without a plan. I have in the recent past asked at least 5 small business owners if they had a plan before beginning to carry out their activities and it seems that many businesses operate without a plan. Why do you need a plan in first place?

A plan enables a business to map out revenue streams (in short, how the business will make money), where the business will play in terms of locale, target customers e.t.c. (you can't be everything to everyone!), how the business will  market its services and how much money is required to start?

As a business owner, If you approach the bank or Micro finance institutions or in the worst case scenario the venture capitalists, they will need to evaluate the business plan. That is to tell them, "how will you make money and how will you pay us" and if there are any chances of survival in the business field chosen within the prevailing socio-economic and political environment. After all, statistics show that new businesses do not survive the first six months. What I have just stated above is very simplistic, in the real world, a business plan requires a lot of research and most of the times companies hire an expert in this area.

Also market research is vital in that it provides a business with knowledge about its competitors and if there is viability in starting a certain company. When choosing a location or type of business, it is important to ask yourself if there are similar businesses in that area and even if there are, how your business will differentiate your products or service. I have seen butcheries located within a few steps of each other and in low populated areas and that just shows that the owner did not think about the location of the business.

A business that is not well thought out i.e. having considered the opportunities as well as threats prevailing might be one of the reasons a business may not survive. An example could be the recent demolition of a well-known garage on Westlands Road. The land on which the garage was built belonged to a private developer who as things may seem had not given consent for use of the land. I do not have a lot of details on this one but it makes little sense to build a huge customer base, brand equity and a business on a location that you are not sure of its ownership. I remember Barclays Bank refused to open a branch in Kasarani for the mere reason that the owner of the plot did not have a title deed. The thing is big businesses do not just do things for the sake.

To put up your business anywhere, have a lease, a business permit and any other thing that is required to operate your business or one day you might wake up to either government or city council demolition.


Tip no. 2 Register a Limited Liability Company

Registering a sole proprietorship is fine when you are starting and the finances are still tight but it is extremely crucial to register a Limited Liability Company. There is no difference between a sole proprietorship and the person.  The main advantage of a limited liability company is that it confers; Corporate personality – a limited company is a legal person and hence can own assets and liabilities protecting you as a person from taking liability for debts owned by a company. Resources


Learn to protect your company and your assets

There are many ways of protecting your company;

1.      Copyrights

2.      Trademarks

3.      Patents

The Kenya Intellectual Property Institute (KIPI) is charged with registering trademarks and patents while the copyright board is charged with registering copyrights.

Registering intellectual property does not require a lawyer to do! There is a misconception that it is a very complicated process involving a lot of money.  All you require is go to KIPI and ask for advice on how to progress with the registration.


Tip no. 3 Separate ownership and management

Richard Branson says that he is only involved in a company while setting it up and then leaves the Chief Executive to run the company, recruit staff and develop the company. Eventually, larger companies choose to list on the stock exchange.

Management is involved in the day to day running of the company.

In fact, in Robert Kiyosaki's Cashflow Quadrant, the greatest assets to an entrepreneur are OPM (other People's Money) and Other People's Skills. This is because the company can recruit persons with different competencies that will help you run the company and grow it to the next level.

Business development

Having a technical skill does not an entrepreneur make! There is a different set of skills that are required to let say run a company like Microsoft. Yes, the company may be known for software development but its main strength comes from shipping and selling products in most of the continent in different languages. I read an article from I suppose a frustrated technical guy at Microsoft showing how shipping a product is important for Microsoft. The techies might complain of a product having bugs and all but for most of consumers, if Ms. Word works, nothing else matters.

I have witnessed technical people trying to present to the Tender Committee and while they may know their product, let just say it's important to hire someone who can sell the product successfully.  


This article is not exhaustive on how you can develop and grow your businesses but there are a lot of resources online that you can read (and implement) as listed below;

1.      Maple Resource Centre


2.      Personal MBA

3.      Small business administrations (US based)

4.      Coursera runs courses throughout the year


 "The most you can do for a friend, is be his friend."