The post 4 Key Investment Secrets To Know Before Starting A Business appeared first on Career Point Kenya.Click on the TITLE link for the original.
By Mark Namaswa,
Kenyans work very hard. They will also not hesitate to try out their hands in any business that comes along. And following the crowd is one of the business lessons Kenyans are drawing their experience from when it comes to investment ideas. This is not wrong either.
However, as financial advisor Patrick Wameyo explains, there are a few fundamentals in business we cannot ignore. “Take for example the cooking oil business. How did Bidco Oil Refineries find a foothold while other similar businesses are struggling?” he poses. The difference, he explains, is neither in the oil nor the process of manufacture—everything is standard.
“It is usually a 16-page process that any manufacturer can choose to follow or stop at the point he wishes. Any manufacturer,” Mr. Wameyo says, “can also name his product in whatever name he chooses.” Where does the difference come in?
1. Strategize Keenly
And just like any product, business or investment, planning and packaging will count. “It takes strategy to know the kind of market share you want to target; how long you want to stay in the business and how to counter your market competitors. This is exactly what Bidco did,” Mr. Wameyo explains. “They realized how expensive the tin packaging of Unlilever’s Kimbo transferred the cost to the consumer and introduced plastic containers instead.
They made it possible for the woman in Kibera to purchase 200 grams of cooking oil contrary to Kimbo that had become inaccessible and technically increased the number of people who could afford their products.”
2. Master your target market
The next strategy Mr. Wameyo explores is looking at how the product interacts with the market to balance demand. “I would go back to the quail business; the whole process thrived on the usual demand and supply market forces but it had other additional elements attached to it like the supposed medicinal value,” he says “The good prices at the start was a factor of suppressed supply against demand. Unilever on the other hand had the monopoly of Kimbo, and there was only one supplier, they did not push out Kimbo; the market forces pushed it.
The resultant situation is that common people could not access the cooking oil and shifted to the more affordable brand. The rise in profitability then increased investors in Bidco and Unilever had to exit in the cooking oil business.”
“Investing in a business,” he insists, “requires one to understand thoroughly how the market operates. For example, we have learnt that risky ventures happen to be those whose entry is easily accessible to most people such as quail business.”
3. Heavy Capital businesses have less competition
“How long does it take to convert quail eggs to mature quails?” Mr. Wameyo poses. “A very short while. Does it cost a lot to set up the business? It is very easy. When the cost of entry is low, the lapse time is short plus the cost of running/ maintaining the business is not high, there are many entrants.”
The opposite, he expounds, works for businesses which require heavy capital to start. “By the time people have marshalled enough capital to enter the business, you would have gone miles ahead and now concentrating on cutting down on the competition. Look at how Safaricom have dominated the market and Yu has been forced to close shop. It works in the same way.”
4. Know that Entrepreneurs provide solutions not profits
According to Mr. Wameyo, true entrepreneurs don’t go to the market to make quick profits; their first priority is to identify a problem and come up with a solution. Profits rank at number three on their list. Mabati Rolling Mills is another example. They have been around for a long time and no one has managed to challenge their market dominance.
“Understanding business and investment is about participation, strategy and designing your processes to suit you on long-term or short-term basis. If you take time and consult with business players who have been in the industry for a long time, they may be able to give the sharpest analysis drawn from experience.”
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The post 4 Key Investment Secrets To Know Before Starting A Business appeared first on Career Point Kenya.Click on the TITLE link for the original.
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