Enterprise Clinic enlists experts to help budding businesses get off the ground. In this issue we focus on a young woman who wants to move into the fashion industry.
Our entrepreneur: JoyCathy Wanyoike
Bio: Age: 25 Current employment: A leading international airline. Start-up dilemmas: JoyCathy is looking to start a boutique business in Nakuru. Her concerns are getting the right location for the business, management and growth strategy.
Our Expert Panel
Kamau Nyabwengi – Kamau is a young entrepreneur working with Ignite Consulting in Business Development. He is the founder of The Network Ignited – a young entrepreneurs’ club – and the coordinator of the inaugural Ignite Business & innovation Award for SMEs.
Robinson Ensiliamba – Robinson is the founder and CEO of AfroVumbua, a consulting firm that helps businesses develop innovative business models and then facilitates their connection to investors.
Wacera Kimani – Wacera started her first business when at university, providing housekeeping services to the richer students. While working for a family business she started VAZI, a new and pre-loved high-end clothing store in Kilimani (facebook.com/VaziKenya).
How do I know if I am capable of starting my own business?
Kamau Not everyone has the qualities to become a successful entrepreneur. It’s hard to determine the chances of success before jumping in. Starting a business can be as daunting as it is exciting, so it’s important to evaluate the risks. Passion, optimism and great leadership skills are some of the qualities successful entrepreneurs possess.
Robinson What matters is not your capacity to run a business but rather your capacity to run this business. And what determines that is passion. You need to have a passion, bordering on obsession, for doing what your business does. It is passion that will breed endurance, ensure quality delivery, and draw your customers. All other business minutiae can be learnt or people can be hired to perform them.
Wacera First and foremost, I think one has an inner gauge that lets you know that you are ready to get into the grind of entrepreneurship. If you are willing to put in the hours and sacrifice your finances, you are halfway there.
Do I need a team? If so, how large?
Kamau At the outset you should focus on building a low-burn outfit to conserve resources. It will be prudent in your case to have only one full-time assistant and outsource other services you might need.
Robinson In the early stages of growth, you need to keep your team lean and mean. Expand it as the customer base grows.
Wacera At any one time I would say that you need two people working: you and your assistant. As the business grows you will be able to tell when you need to add staff.
Do I have to start by writing a business plan? How important is it?
Kamau A business plan can be viewed as an entrepreneur’s road map: it outlines the dreams and hopes that motivated you to attempt to start the business venture. We often make the mistake of thinking of it as a single, static document that you put together when you’re first starting out and then set aside. In actuality, the business plan is a dynamic document that should offer guidance throughout the life of a business.
Robinson At the early stage of a business, what you need is NOT a Business Plan (BP) but a Business Model Canvas (BMC). A BP is a series of assumptions about your projected revenues, customers, distribution channels, marketing strategies and the like, but without factual basis for such assumptions.
A BMC is a framework that allows you to visualise all the building blocks of your business (usually about nine), create a series of hypotheses about them, go to market to test those hypotheses, and use the validated hypotheses to craft your business model. It is this series of validated hypotheses that will later form the basis of your BP (check out www.businessmodelgeneration.com).
Wacera The importance of a business plan is to help you map out how you will start your business, how it will run, grow and when you might need to exit. Typing out your business plan will help you think through strategies and put into place structures and policies that will help your business to grow. Of course, if you intend to seek investors you will certainly need a good business plan.
How do I determine my start-up costs and other expenses?
Kamau You should figure out the exact start-up costs you will incur before venturing into the business. This can be done by using tools available online or engaging an accountant. Taking calculated risks involves carrying out a thorough investigation to reveal whether the venture is viable, factoring in revenue projections and expenses.
Robinson Set the revenue and other growth targets you think are important. Then ask yourself what resources you must have and what activities you need to perform to reach these objectives. Finally, develop a costing for these resources and activities. Start modestly.
Wacera It’s all in the research. Where are you sourcing your clothes from and at what cost? How much rent do you expect to pay? Insurance? Employee/s? Once you have the numbers, it will be useful to have at least six months worth of rent and personal money to fall back on when the need does arise.
What proportion of profits should I retain in the business for growth?
Kamau A famous writer recommends that you pay yourself first. This can be appropriate if you deduct only enough for your needs until the business breaks even. The amount of net profit is an important determinant of internal savings. The higher the net profit earned by the business, the greater will be its capacity to plough back profits for faster growth.
Robinson Definitely 100%. It is very unlikely that you will make a profit in the early days, but if you do after paying yourself, your staff and all expenses, all profits should be ploughed back into the growth of the business. Also remember that profits are subject to taxation. So why subject your hard-earned cash to government tax when you can use it to expand your business?
Wacera The more you can the better, but I would say 25% minimum.
How important is the location to the success of my business? What should I consider when choosing an ideal location?
Kamau Choosing a good location can make the difference between a profitable business and a bankrupt one. Among the issues in your checklist should be how secure the area is, nearby competition, future expansion opportunities, traffic flow of customers and the cost of operation. Ideally a retail business venue should be convenient, strategic and inexpensive for customers to access.
Robinson In the beginning, a location is useful but not absolutely necessary. You can do car boot sales or door-to-door delivery. However, in choosing a permanent location, think about your target customer segments and ask: how easily can they get here? How comfortable would they feel around here? Can my projected revenues support this?
Wacera I cannot emphasise enough how important location is to a new boutique. You need to be accessible to clients. The cost of the space and overheads has to be right. The space has also to fit the needs of your target market: if you sell a scarf for Ksh8,000, you had best make sure that you are in a high-end neighbourhood with a high-end space.
What type of customer relationships do I need to create for my boutique?
Kamau Your business will require dedicated customer service. Keeping an open line of communication by using social media is an easy-to-use, appropriate way to stay connected with your customers for repeat purchases and referrals. The continued success of a business can be guaranteed by the quality of its relationships with such customers. Through positive word of mouth, those customers may become the champions needed to provide the boost and leverage for the success of the business.
Robinson Customer experience is all important. Do not limit yourself to selling to them, but get their contacts (email, phone), ask them how they liked the last outfit they got from you, inform them of your upcoming collection, offer them tips. Engage, engage, engage, and treat the sale as the start of a long-term relationship.
Wacera Professional, yet up-close and personal (but only positive vibes, not your dirty laundry). Your customers need to view you as friend they trust not only to dress them but also to confide in. Something about clothes shopping gets women to open up about their body image anxieties, family issues and even work concerns.
How can I market my business in an already crowded industry?
Kamau You need to give your customers a reason why they should choose to do business with you rather than anybody else. Having a unique value proposition either in the price or presentation of your goods can put you ahead of the pack. If you cannot compete on price, compete with excellent presentation of the products.
Robinson Positioning and differentiation. You can craft a ‘Blue Oceans Strategy’ by seeking out niche markets or even creating markets. Are you able to identify a particular fashion style or need that is not adequately served? Can you fill this gap? See how companies such as Bonobos, Gilt, BeachMint or Indochino create memorable customer experiences.
Wacera Facebook, Twitter and your customers are invaluable marketing platforms. Make use of them and let your personality be your boutique brand.
What are the biggest mistakes made by start-ups in this industry?
Kamau When it comes to starting and running a successful business, there’s no surefire playbook that contains the winning game plan. In my experience common mistakes that should be avoided are: making a half-hearted effort, not starting out with a suitably detailed business plan, an insufficient feasibility study, high start-up costs and giving your all financially. Have a mega-plan, start small and grow.
Robinson These apply to all start-ups: 1) Premature scaling – spending too much on overheads, marketing and the like before understanding the market; 2) Overestimating how popular their products are, or underestimating how long it will take to build a customer base; 3) Failure to keep proper accounts – it is essential to record and document all your expenses and revenues.
Wacera There are many, but starting a business without researching the industry well enough can put you out of business in no time. Not having sufficient funds to back you up before the business breaks even is also critical. Your bookkeeping has to be done well, and to grow you must give the taxman what belongs to him.
Which has the highest turnover and profits – men’s or ladies’ wear?
Robinson Women tend to buy in larger volume and more frequently than men, but the profit margin on women’s wear is generally lower because women traditionally have lower purchasing power. This is changing, and with the correct positioning, you could see yourself double-closing in both high volumes and margins.
Wacera In my experience, it is women’s wear. Women shop frequently and will buy accessories to match the outfit. Often they bring along a friend who then becomes a potential customer. If they like what they buy, they share with friends and family.
How do I best cope with the speed of change in the fashion industry?
Robinson First, keep abreast of changing trends by networking with peers and reading industry-related literature. Second, consult your customers and hear what trends they are following and adopt from them what fits in with your boutique’s style.
Wacera Watch a lot of fashion television, buy fashion magazines and browse online for fashion blogs.
What financial reports do I need?
Robinson As a business grows, so do the variety and complexity of financial reports you need to maintain. However, for a young business, the most important one is the cashflow. At any given time, you should be able to tell how much money you have in the bank and how long it will last you. Negative cashflow is the mother of all start-up killers.
Wacera You need an income statement and keep track of your deductable expenses.
How long should it take to reach break-even?
Robinson There can be no specific predetermined timeframe for this. Some businesses record profits from day one. Others take 20 years. You do however need to do a ‘break-even analysis’ to tell you how long it will take to break even based on your projected revenues versus expenses.
Wacera Some say about six months (or as long as you have enough money to fall back on), but it is possible for your business to be an instant cash machine if you are in the right location, with the right product and at the right price point.
Got a business idea of your own? Then get in touch! We can put your plans to a panel of experts, to give you the best possible start: email email@example.com or Tweet us at @kenyayetumag