‘You don’t need money to succeed’

1.How does a startup or SME business attract equity partners because people have the ideas and not the money?
I get asked that a lot. So, let us start off with the fact that maybe you don’t need money. Whenever I travel around the world, entrepreneurs have the same song, “I need money; I need finance.” You don’t need money and you don’t need finance. You need a compelling economic right to exist.

2.What does that mean?
You have a product that you sell and it has a basic unique proposition. You have to have a market that will buy it. You have to have the will and ability to sell it and if you sell it, that you will make a profit. With that in place, money will flow.
When entrepreneurs say they want finance, they are going to ask, “How does this thing make money?” Whether it is an equity partner or a bank manager or whoever is going to lend you money is going to try answering that question.

3.Does it mean Small and Medium Enterprises write down the basics first?
You can’t start a business without getting it right. I do not believe in business plans. 96 per cent of businesses will fail within a 10-year period, most of them within the first two years.
The ones that succeed have spent the last 20 years trying to understand, “What is the difference between the 4 per cent and 96 per cent?”
Some focus on giving and creating value while others are focused on trying to find the value.

4.When you say “Creating the value,” what does that mean?
There are two concepts around value - commonly associated value and perceived value. If you go to your grandfather and tell him that you’re going pay $1 (Shs3,700) for your bottle of water, he’s going to say, “Are you crazy? You can get it for free.” But many years later, everyone is using bottled water and it then becomes a common place. So how much does a bottle cost?
What happens if you’re in a desert and there is no water? How much could I charge you? I could charge you $10 (Shs37,000).
There is no real value, it’s only perceived value. You should understand how people perceive value and how to create perceived value. It is about understanding what is important to a client and how to deliver that in a profit.

5.Many youth don’t have jobs. But can everybody be an entrepreneur?
No. Not everyone is entrepreneurial. Entrepreneurs are not borne and they are not made. They precipitate.
There are five conditions that need to be in place for this to happen.
One, every entrepreneur out there saw an opportunity or a crisis in their life.
Two, there is a tolerance for pain or risk. A 22-year old person has a risk profile that is far higher than someone who is 50 with other responsibilities like sending children to school.
A piece of research from the US said the most successful entrepreneurs were 60 years and older. They’d never been entrepreneurs before. With the 60-year old, the children have probably moved out of home, they have paid off their home, so their risk profile is closer to the 20-year old and to me who is somewhere in the middle.
The fourth thing is the belief in their ability to master resources. It’s not the ability to put resources together, it’s the belief that they can. You ask any entrepreneur they’d say, “If I knew then what I know now, I would not have done it.”
Finally, any entrepreneur knows that the day they started their products or services they had and what they have now are completely different. So, it is the ability to learn and apply that learning.
But not everyone can precipitate at the same time.

6.Why do some enterprises survive with limited finance?
Let’s look at the success rate of all entrepreneurs; 96 per cent of businesses fail. When you look at the statistics further, 90 per cent out of the 96 per cent just wake up one morning and say ‘I’m done. I can’t do it anymore.’ So they go and find a job. So they just give up.
When you look at the research further, 87 per cent of the 90 per cent don’t have the business skills in place to carry on and they just can’t handle the pain of no cash flow.
So, who is an entrepreneur and who is not? There are three types of an entrepreneur –a survivalist, a life stylist and growth entrepreneur.
A survivalist has income on the x-axis and the desire to grow on the y-axis. They’ll make just enough money to survive.
The life stylist will make money but they don’t want to grow. An extremist or growth entrepreneur will start below the income line, they’ll keep growing and they want to see how big this thing gets before they die.
If you are an entrepreneur, you need to discern which type you are. But the ones with the highest survival rate are the survivalists. The ones with the lowest survival rates are the growth entrepreneurs.
If you are lifestyle entrepreneur, your focus should be on specialisation.
If you’re a growth entrepreneur, your focus should be on creating systems and processes so that the business delivers the value.

7.How can business incubations make businesses survive because some who have been incubated die after leaving the incubator?
When they are in the incubations, they are accorded with a false economy. They can get everything for free and when they go into the real world, they can not survive.
Last year, The Economist said we were ‘the only genuine incubator in Africa’ because entrepreneurs who leave us thrive. We are a prosperator, not an incubator. 86 per cent of our businesses grow at 48 per cent per annum. When you look at that our alumni of people who are five years out, 93 per cent are still in business, five per cent add additional business and 3 per cent have shut down.
When you create this process, don’t make your entrepreneurs dependent on the system. Ensure their business model is right.