Understanding your ecosystem as an entrepreneur.

John Muchiri
mwasj.jm@gmail.com entrepreneurbridge@gmail.com
B.com(finance)
Kenyatta University

"If you know the enemy and know yourself. You need not to fear the result if a hundered battles. If you know yourself but not your enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle" Sun Tzu, the art of war.
Subscribing to the words of Sun Tzu, in a bussiness scenario just like in a war scenario, what separates those who succeed from those who don't is simply an understanding of the environment and the ability to adapt to its changes.
Entrepreneurship does not happen in a vacuum and there are many role players who impact on a startup in its life- cycle. Understanding the business environment is directly proportional to an entrepreneur's ability to solve problems.
In business understanding your business environment is everything: business environment entails both internal and external environment. The internal business environment is also refered to as micro environment and involves factors suchs as suppliers, investors, employees, e.t.c ; these factors can be influenced by the entrepreneur for the success of a business. The macro/external environment includes such factors as legal, political, social, and cultural  environment. Macro environment affects a business ;a business has no control over them but can mitigate their impact by adapting to changes.

PROFIT AS A MEASURE OF BUSINESS SUCCESS.

By John Muchiri

The success of a business is measured by looking at various aspects of a business, analyzing the firm's profitability can give clues on the performance level of a business.
It is the goal of every business  and by extension every entrepreneur to make profit. The question that entrepreneurs ask themselves is: what can i do to improve profits in my firm? For a business to increase profitability it requires leadership, deep analysis, tough decisions and good communication skills on the part of the owners.
Increased profits can be a great stimulator to an entrepreneur to work harder. To the business owners it means more cash is available for either ploughing back or as personal wealth.
Sustaining growth in profitability is not an easy task, as it entails making key decisions that influence all aspects of a business.

FOCUS ON QUALITY TO INCREASE PROFITABILITY.

By John Muchiri
mwasj.jm@gmail.com entrepreneurbridge@gmail.com
B.Com (Finance)
Kenyatta University

Faced with fierce competition and the need to increase profitability, an entepreneur may be tempted to cut on production costs. Reducing production costs is a delicate hassle as he must balance between desire to boost revenue and protecting the value customers get from his products/ services.
The predominant view among most entrepreneurs is that high quality is associated with high production costs. There is a link between increase in quality and decrease in costs of production. In fact, it reduced total costs by driving down the costs for repairs and control.
The term quality in a business sense means 'fitness for purpose'. The product/ service the business is offering should be able to  meet the expectations of a customer. It is important to note that quality is based on perception when it comes to services.
Focusing on improving the level of quality(value) offered by a business is an important strategy of increasing profitability. The aim here is to improve customer satisfaction by reducing wastes.

Considerations while joining a Sacco.

By John Muchiri
mwasj.jm@gmail.com entrepreneurbridge@gmail.com
B.Com(Finance option)
Kenyatta University

SACCO is an acronym for Savings And Credit Co-operative. SACCOs are deposit taking institutions that pool together money inform of savings from members and lends out or invests in authorised financial instruments such as shares, treasury bills and bonds,  e.t.c
In SACCOs just like banks, you have to open an account. An individual first buys shares in a SACCO to become a member: The shares can be bought in lump sum or can be paid in instalments.
After the purchase of required shares, a member starts to contribute monthly towards his/her saving scheme(which is not optional).
Default in remitting monthly contributions can lead to termination of membership. It is advisable for a member to state the amount he will be able to contribute without straining  himself as it reduces chance of default.
Unlike in banks; deposits made on SACCOs are not accessible to the member unless he chooses to take out a loan or withdraw from the SACCO.  This should be a key consideration while determining whether to join a SACCO or not.
In case of an individual with inconsistent income or a business with constrainted working capital apportioning a great percentage of your income towards SACCO contribution can be a bad idea. Why? This will mean reduced liquidity when cash is needed most.

Benefits of SACCOs.
1#. SACCOs have lower interest rates than banks. In Kenya the average interest charged by SACCOs is around 12% as compared to banks' 18-24%.

2#. Members earn interest on there savings.

3#. In most SACCOs in Kenya, the practice is that members can borrow upto 3 times their savings; provided they have guarantos.

4#. SACCOs pay dividends on share capital to their members.

5#. They offer a wide range  of loan facilities such as development loans, education loan, instant loans which are processed within a day.

You can kindly email us your comments or questions. Thank you

CASH MANAGEMENT: KEY TO BUSINESS SUCCESS.

John Muchiri
mwasj.jm@gmail.com
entrepreneurbridge@gmail.com
B.com (finance option)
Kenyatta University

You must be wondering why many business start-ups fail to materialize and eventually die in their early stages. Poor cash management is the key stumbling block for entrepreneurs. The lag between the time you have to pay your employees and suppliers and the time you collect cash from customers is the problem, and the solution is cash flow management.
When it comes to the success of any business cash is vital. Entrepreneurs need to understand that cash either at hand or in the bank is what the business need in order to be in operation.
Cash flow refers to the movement of cash into and out of a business. Cash movements into a business are the cash inflows while cash outflows are cash movements out of the business.

Steps to attaining financial health in your business.
1#. Prepare cash flow projections.
With reference to previous payments and receipts, an entrepreneur can make future projections on how he intends cash to flow into and out of his business..
This can help to point out 'danger zone' earlier before the actual action occurs.
Also cash flow projections allows the business owner to control his business financial future.

2#. Match cash inflows and cash outflows.
A business can be within its budget but still experience cash flow problems. This can be due to mis- match between cash inflows and outflows.
An entrepreneur can review his credit policy and try to maximize on the creditors terms as a way of reducing this mis-match.
Ways of reviewing credit policy.
-Offer discounts to customers who pay their bills rapidly.
- Review customers records, this will help to rate your customers credit worthiness.
- Don't give credit to first time customers.
- Ask customers to make deposit payments while placing an order.
- Reduce credit period to improve cash liquidity.

Meeting your debt obligations
- Pay prompty to take advantage of suppliers credit policy.
- Build relationships with your suppliers/ creditors.
- Keep proper inventory records. This is imprtant as it reduces chances of buying in bulk items that take longer before they clear.
- Match your borrowings with your needs. If your are undertaking long term investments consider long term loans.

3#. Avoid drawings.
Most entrepreneurs keep one bank account for their personal life and business.
This can be disastrous especially when no records are kept.
To avoid this trap, entrepreneurs should consider themselves as employees of the business and pay themselves salary.
This increases accountability and unnecessary cash outflows are greatly minimised.

INVESTING IN UNIT TRUST FUNDS

By: John Muchiri

A unit trust fund is a collective investment scheme in which investors contributions are pooled together to purchase a portfilio of financial securities such as shares, bonds, and other money market instruments.
In  unit trust fund you have the option of investing in a money market fund or an equity fund.
Money market fund invests interest bearing assets such as treasury bills and bonds, corporate bonds, commercial paper e.t.c
Equity funds invest principally in shares but may also invest in interest bearing instruments. Equity funds are considered high risk venture and therefore are long term with higher returns.
Unit trust are professionally managed, thus giving an investor peace of mind especially when the investor is constrainted in term of time.

Benefits of investing in unit trust funds.
#1. Risk diversification
This refers to spreading of risks over a wide variety of securities in different sectors. Unit trust facilitate this by pooling funds from small investors and investing the funds in portfolio of assets. Through diversification investors' exposures to risk are minimised.

2#. Liquidity.
An investor can sell all or part of his investment at any time.

3#. No tax charges.
A unit trust fund does not pay tax on its income, either from dividends or interest.

4#. Portfolio portability.
Investors can easily switch from one portfolio to another when their needs or risk profile changes.

5#. Professionally managed.
Unlike other investments, unit trust funds are managed by professionals who understand investing in unit funds.

Entrepreneurship: Unlocking job oppotunities in Kenya.

By: John Muchiri

In the African culture a youth is a blessing to both his community and the world. In this context, then kenya by all measure is a rich country. Going by the 2009 census results 65% of kenyans are aged between 18 -35 years, translating to 26million people, with 65%-80% of this age bracket been either unemployed or under employed.
They work in low paid, insecure jobs and are the representation of the face of poverty that rocks our nation's fabrics.
Unemployment is pushing youths to social vices like crime and prostitution. The recent negative waves of crime in kenya are the spiral effects of unemployment.
This statistics should be an eye opener to us as a nation; we need to reconsider our priorities and direct resources where it is crucial.
The focus should shift from economic growth figures to impact of economic growth on the welfare of kenyan citizens.
Economic growth should translate to socio-economic empowerment of citizens of Kenya. I commend the initiative been undertaken by the government to encourage youth owned businesses.
I strongly believe that entrepreneurship in Kenya has never been more important than it is today; when we are faced with high unemployment rate among the youths. Entrepreneurship provides a way forward for solving the unemployment challenge, building sustainable development, creating jobs, and generating renewed motivation needed to achieve vision 2030.
Why do entrepreneurship matter? Lets go back to the 2007-2009 global financial crisis. It is evident that developed nations have identified SMEs as the engine room for economic development for the next decade.
I was reading the July 11, 2013 Daily nation 'money' pull-out and the interventions set out by the government to promote youth and women- owned businesses caught my attention.
The steps that the government is taking are in the right direction but more need to be done. Financing remains the greatest challenge facing entrepreneurs. The government need to increase the youth fund by fourfolds and educate the youths of the need to embrace entrepreneural culture.
Through entrepreneurship youths will be turned from job seekers to job creators. With proper incubation these youth owned businesses will be sources of employment.
Proper legislations will see the government revenue streams expanded. In Kenya informal sector employs 80% of the workforce. If the government implements a framework within which these SMEs operate, it can earn more revenue from taxes and registration and licensing.