Monday, September 25, 2006

So you’re a businessman, eh?

So you’re a businessman, eh? You have a registered business, a proven product, and a growing client list. You’re passionate about your business and spend every waking moment at it. You’re confident that you know best how to deal with the problems of the business and you’re there to save the day in case anything goes wrong. You’re a specialist at what to do. No! You’re the best at what you do. Hiring someone else to do a client’s job would be short-changing your client, as you care deeply about your clients.

So you’re a darn good businessman, right?

WRONG!

While consulting for one my clients today I realized that many of us businessmen (term includes both male and female gender) are still victims of what Michael Gerber in his E-Myth series describes as technicians seized with an entrepreneurial spirit.

Angela[1] my client is a dyed-in-the-wool believer in taking personal charge of one’s business. Back in 2000 she took a three-year IT course where she specialized in web development.

Two years into her course she was already bagging clients as the nascent web industry in Kenya took shape. A perfectionist, she gave great value for money, and a satisfied list of clients was testament of her great work. Her clients were always unsolicited and mainly sought her out after referrals from other clients or her web developer colleagues.

Her skills were soon noticed by the training institution she was studying in as they offered her a position as a web developer. Angela took on the job with her usual zeal but bureaucracy, low pay and the inflexibility of working hours soon got her entrepreneurial bug biting.

In 2004 Angela went solo; she whipped up a logo, drew up a portfolio and went into business as a free-lance web developer. Things started out well, referrals from her old clients got the ball rolling and she was making a decent living from her work.But as the clients streamed in and the money piled up things started going downhill. Angela found herself working 90-hour weeks. There seemed to be a new deadline to meet every day and she found herself carrying a blanket to work (for a few hours nap) on the nights before the deadlines. Feeling frustrated that she had become a slave to her work she started sub-contracting out work. This only made things worse. The subcontractors were not perfectionists like her and she found herself redoing almost 100% the work they submitted to her.

Have you ever been in this position? I know I was when I worked as a contractor.

[1] Name changed to protect identity

Thursday, September 21, 2006

Styling Up a Jua Kali Garage



Today fed up with my overpriced town mechanic and needing some specialized service on my car I decided to try out a “jua kali[1]” garage. My friend gave me the instructions to get to the place and after a few wrong turns I pulled into a muddy ‘mabati[2]’-fenced garage with a boldly drawn Mercedes-Benz three star on its gate. I was apprehensive but I had been assured the best mechanics this side of Kenya would be found within those tin walls. Four hours and perfectly working car later I found myself unsure whether to agree or disagree with my friend.

Great customer care, consistent service, and a professional set-up attract me most to my town mechanic. The jua kali mechanic lacks all the above but sufficiently compensates with sublime technical skill and competitive pricing. What put me off though most was that the jua kali mechanic takes on the role of administrator, sales man, customer care rep, and mechanic at the same time. He ends up giving your car staccato attention as he shifts from tightening a bolt, to buying spare parts, to appeasing a delayed client, to negotiating for a job.

Body repair work at the garage

As I waited, frustrated at how slowly the job was moving and consoling myself with the few thousands I had saved, the entrepreneurial spirit seized me. How many other similarly dissatisfied car owners like myself are out there: wary of the expensive town mechanic whose spare parts you can count on being genuine but whose skill in fixing them you can’t; or those willing to put up with technically superior jua kali technicians with great quotations for a job but who need to be baby sat and change prices on the fly?

The more I thought about it the more excited I became, I quickly got my laptop out of the backseat and started on a proposal for setting up a garage which would combine the best of both types of garages. There are hundreds of thousands of cars in Nairobi and every car owner I’ve spoken to has gripes with their mechanic. Its an entrepreneur’s dream: there’s an identifiable need, a large customer base, and an existing product that is a candidate for disruptive technology. I’ve posted the first half of the proposal below, and I’d like to invite you to give your comments and suggestions. Please note that your suggestions shall be publicly available to all.

THE GARAGE PROPOSAL

INTRODUCTION

The Garage (the “Garage”) is an automobile repair shop located in the outskirts of Nairobi city. The Garage currently occupies land that has been leased out. The presumed owner of the Garage is a senior mechanic plying his trade at the Garage. It is very likely however that the real owner is another individual is not involved in the day-to-day activities of the Garage. It has been witnessed by this author and confirmed by the aforementioned senior mechanic that the Garage faces severe management problems. It also appears on the face of it that the Garage is not being utilized to full capacity. This presents an opportunity for the investors to enter the automotive repair industry with: a functioning garage, a strategic location, large pool of human resources, and little capital investment.

BACKGROUND

The area where the Garage is located is home to several different automobile-based businesses including: petrol stations, used car dealerships, garages, and auto spares shops. There are at least four other garages in the immediate vicinity with an estimated combined workforce of fifty mechanics.

The Garage has the following organizational structure: a senior mechanic at the top, other mechanics who are employed on a permanent basis and semi-skilled handy-men who are recruited for one-off jobs as the need arises. The senior mechanic is also responsible for management of the garage which involves: sales and marketing, administrative issues e.g. receiving money, purchases, and customer care. As he is also the foremost mechanic this has led to a situation where he unproductively splits his time between his managerial and technical portfolios. From observation it appears that his managerial skills are also worse for the wear.

The Garage does not issue receipts for payments made to them and will ask the customer to meet any expenses incurred as the work is being done. This includes the likely suspects: petroleum, spares, oil; but also includes things such as: torch cells (to power a torch as work is done at night), paying a petrol station attendant for use of his pressurized air nozzle, sandpaper. It is not clear what the mechanics do when a customer is not available to pay for these impromptu costs. The end result is a feeling by the customer that he is being cheated, as he ends up paying more than he was initially quoted for.

During the author’s observations of the workings of the Garage it was noticed that the progress of work was very slow on the author’s and others’ jobs. The initial view was that the Garage was stretched thin and understaffed. However this view was hard to reconcile with the fact that on numerous occasions the mechanics were absent from the Garage. The more likely reason for the slow work and “overworked” nature of the mechanics may be hypothesized as thus:

  1. the mechanics are not punctual in reporting to work, and have a large number of AWOLs;
  2. where the mechanics meet an obstacle they will abandon the job and possibly transfer it to another mechanic;
  3. the mechanics will not work on a job unless there is pressure from the customer and possibly his presence;
  4. the mechanics in many instances do not know how to perform the job given, and spend more time diagnosing other problems than fixing the identified problem

The Garage was observed to have five to ten mechanics, who were working on two to three cars at any given time. The nature of the work being carried out included: gearbox repair, body work and spray painting, and engine repair. The Garage however had in its compound approximately 15-20 cars, some of which appeared to have been in the Garage for a very long time evidenced by their peeling paintwork and layers of dust. Most of these cars were not worked on by the mechanics during the author’s period of observation.

The owner of the Garage intimated that at its peak the Garage earned KShs. 300,000 per month. It is not known whether this figure was of sales, gross profits, or net profits. As the garage operates only on weekdays and Saturday this would translate to roughly K.Shs. 11,500 a day. I came to know of the Garage after a friend referred me to a mechanic there when I complained to him about a car problem that my town mechanic had been unable to fix. The Garage in the senior mechanic was touted as having the foremost specialist in the repair of the specific problems of the my automobile. It is not clear though whether the Garage has an established system of referrals. It is not known at this time whether the Garage has any sales and marketing strategy.

The Garage was observed to have the following assets:[3]

  1. a quarter-acre property off a main road.
  2. an approximately 1000 sq. ft building complete with roof, walls, and windows and partitioned into approximately three rooms;
  3. a three-walled building with a two-story high roof with approximately 1000 sq. ft. of floor space;
  4. office furniture (heavily worn);
  5. spray paint machine;
  6. car batteries;
  7. hand-held tools including: spanners and pliers;

The question I pose to you is: From these observations, what strategy can be employed to convert the Garage into a leading automotive repair shop?



[1] Literally hot sun. Used to refer to entrepreneurs in the informal sector

[2] Tin sheets commonly used for roofing but can also be used for fencing

[3] It was not possible to verify that all these assets actually belonged to the Garage

Wednesday, September 20, 2006

Genius Executive Centre – Incubating Kenyan Startups

Andrew Mongy’s first business involved developing complex information systems for large organizations. To woo over his potential clients he invested heavily in expensive furniture in his uptown office where he met the clients. Unfortunately his business suffered from poor management, weak marketing and insufficient capital and had folded within a year. Down but not out he vowed he would not make the same mistakes on any future business. It was therefore with great pleasure when in early 2006 as he prepared to launch his second business, he heard of Genius Executive Centre located on the 15th floor of View Park Towers, a business incubator that would keep his start-up costs low, assist him in his marketing and possibly even finance his business.

The prestigious View Park Towers

“Genius Executive Centre although begun as a subsidized business centre, now operates with the social responsibility of a business incubator” according to Ms. Christine Matogo, acting centre manager. Begun in mid 2005 by SoftLaw, the Centre initially provided fully furnished office workstations with shared lounge, reception and meeting rooms facilities for an affordable monthly fee.

An incubatee at work at her workstation

“Over time we realized that the average start-up business requires more than a furnished office at a fancy location,” continues Ms. Matogo. “We turned round the Centre on its heels and began emphasizing on giving our members solid business advice, consultancy services, access to knowledge repositories like LawsofKenya.com, access to investors, and collateral-free loan financing. Our sister business division, Genius Capital & Consulting was initially set up to serve the Centre incubatees with these services at no additional cost. Capital & Consulting now also provides these same services to non-incubatees who have shown great enthusiasm in the products.” Ms. Matogo explains that the Centre acts mostly as a showcase of the services provided by Capital & Consulting which she calls the real cash cow.

The shared reception area

The business model for the Centre is a unique one. Although a for-profit organization, the heavily subsidized monthly fee and the free business support services would make one think it is an NGO. Ms. Matogo explains how the Centre achieves this. “When we begun the Centre, we could have chosen to go the way of the existing alternatives at the time and charge exorbitant fees in order to make high margins. Instead we chose to keep the costs low and work on volumes. This ensured the Centre was able to serve its intended clientele. Our targeted clients are business start-ups whose main asset is the skills and knowledge of their owners or staff. Such businesses are service-oriented and use the Centre as a communication and marketing point for their business. Collectively they can be grouped as consultants who specialize in one area or another. To become an incubatee one simply needs to attend an interview and if their business is assessed to have growth potential they are offered a space. The incubatee thereafter needs to pay only K.Shs. 10,000 every 30 days to enjoy the Centre services”

Genius seems to have struck a resonant cord with its targeted clientele, with 75% occupancy in its first month. The Centre is now fully occupied and new members are added to a waiting list. How the Centre ensures that all deserving start-ups get a chance at incubation is by encouraging the growth of its existing incubatees businesses. “Part of being an incubator involves nurturing the growth of the incubatee’s business. We call this graduation and we work with our incubatees to have them graduate within three to six months of joining the Centre. When an incubatee graduates, it means her business has: a strong business and marketing plan, a growing client list, sustainable revenues, a good understanding of cash flow and tight control of its finances as well as a marketable product. Since the Centre begun participating directly in the growth of its incubatees businesses we have had over thirty graduates.”


One of the boardrooms at Genius

The concept of business incubators is not new, but unlike most incubators that rely on donor support or government backed funding, Genius is a self-sustaining business albeit with low margins. Ms. Matogo explains that the Centre is more of corporate social responsibility effort than a money making venture. “The founders of the Centre decided to set up an incubator based on their own hardships and frustrations when starting their business. It was an effort at giving back to the community, but the Centre has been stringently managed to ensure that it can sustain itself financially. The Centre serves a social function as well as to advertise Capital & Consulting’s products to non-incubatees. When non-incubatees see the success of our incubatees they seek out Capital & Consulting to benefit from the same services.”


The members' lounge area

The future of Genius is bright. With a strong understanding of nurturing and developing small businesses SoftLaw’s plan for the future is to concentrate fully on the financing and consulting arm, Genius Capital & Consulting. “A plan is already in motion to remove the monthly fee for incubatees altogether, explains Ms. Matogo . We intend to provide offices at no cost to deserving start-ups who will undergo an interview to determine the viability of their business. We will also share in their risk by becoming equity partners through buying of shares in their companies. Our belief is that simply providing offices is not a sustainable business. The motto at Genius is ‘our business is your business’. We intend to put all our resources, skills, human capital and finances in facilitating the establishment and growth of innovative Kenyan companies.”

Hello all Startups

Hi, finally I've posted my first blog! Been wanting to do this for a long time but lazily never got around to it. I'm an entrepreneur of sorts and my blog will concentrate on entrepreneurship in Kenya. You're all welcome to post comments.