Lately, Ugandans have caught the business bug and are unceasingly in the habit of starting enterprises from scratch. It is an exciting experience of putting fresh ideas together; hiring workers, investing capital and seeing the company grow. For some, the thrill of starting a business never goes away until they start hitting a dead end.
Mr Mark Ochieng, an auditor turned businessman had his “wow moment” when he opened his first business until he came to appreciate what it took to make it through.
During his 10 year formal employment, he put up a bar in Bukoto, later set up a spare parts shop in Wandegeya and somewhere along the years, started importing rice from Tanzania.
“For the bar, it was just the enthusiasm with what I thought would work, there was no research to it,” he says.
Mr Ochieng refers opening a bar and later importing rice as some of the bad investments he made, hence businesses that warranted termination.
“The bar was absolutely a terrible investment. It did not work as it was not informed by any financial analysis, it was an excited decision,” he says.
In hindsight, the import business was a bad investment because he relied on too many assumptions.
“It failed and it was because of things you never know before you get into the business. You do your research downtown but they never tell you everything so you put money.”
Mr Ochieng says when he brought in the rice, he realised his volumes were not enough to sustain supply on credit. He needed 20 tonnes yet he could only supply five tonnes with his capital.
He encountered another problem when he found more money to match up the necessary volume.
Also, the taxes were high.
“There is a lot more money you pay than what is in the books. You either smuggle or pay unnecessary fees so importation business was hard,” he says.
Mr Ochieng has since ventured into agribusiness because he realised he needed to inject money in an enterprise where he could control production, from primary to value addition.
Reasons for failure
Three failed businesses and a budding one that is yet to make two years. Why do businesses fail in such a short span?
For Mr Ochieng, the amount of patience required to make it through in business is what kills businesses.
“The truth is you can draw all those nice business plans, you can put in the contingencies in case something goes wrong but the reality of running a business is so different from any plans you come up with, it is just unimaginable the unforeseen things that come up,” he says.
According to Mr Ronald Kirunda, an internal auditor, the reasons for this are beyond the average business person.
“The general economic environment is at the moment slow, we have limited production. We are an agriculture dependent economy and there is little output from the sector that employs about 70 per cent. If 70 per cent of Ugandans are not actively involved in production, there is limited capital inflow,” he says.
Consequently, the purchasing power of many Ugandans has dwindled, affecting businesses in various sectors.
Poor internal controls
On the other hand, some businesses lack proper internal controls and have no budgets or appropriate structures.
Business Development Centre Uganda executive director Moses Engwau says Ugandans increasingly lack a re-inventing culture and are doing business similarly year in year out, yet customer tastes keep changing.
For Ms Rosemary Mutyabule, director business advisory and consultancy services at Enterprise Uganda, business, like any other engagement, is never easy. For those who have failed to withstand the stress on their enterprises and closed them, there is an issue of lack of vision, passion and resilience.
Businessmen need vision to project where they are going and this must be clear from the start. With knowledge that business is hard, together with their vision, businessmen need passion because that is what will drive them when hard times come.
Business also has its stages that come along with unique challenges and that every enterprising person must understand. Birthing and nurturing to its growth takes about three years. This is where businesses are made and broken.
Businesspeople who quit are those who failed to combine vision and passion. Usually, those who hang in there because of resilience are able to make it to the growth stage, Ms Mutyabule says.
Businesspeople also need to understand that at this level, a business is basically growing, customers are still few, retailers are not willing to sell products and capital is limited. More so, at this point, businessmen are learning and so must allow themselves to gain experience.
“Death of businesses happens here. There are many challenges that businessmen did not anticipate so the reality is different from the initial picture,” Ms Mutyabule notes.
At this stage, she says it is fine for businessmen to change their business because market needs change at times. The better choice however is to alter if you have a clear vision.
No need to change business
You do not have to change business.
The dilemma of a failing business can be frustrating, but Ms Mutyabule says one can get back on track without closing. Consider looking at why the business is not working, quit feeding into the business and let it feed itself first and seek professional advice, she notes.
Mr Engwau says such businesspeople should find areas where they can reduce the cost of operating business and a possible way is to exploit technology to deliver the same products and services cost effectively. Rather than spending more, businesspeople need to consider allocation that cuts rent costs, build strong customer relations or release a few staff and merge roles to operate at a lesser cost.
Mr Kirunda says businesspeople need to postpone capital investment that, for instance, involves expansion or bringing in expensive machinery.
For those with debts, they have to negotiate for debt restructuring. “If you took a loan to pay in five years, ask so that you reduce the amount of interest you have to pay. In worst case scenario, ask for a bail out,” he advises.