If you are a reader of my blog, chances are that you are interested in one goal: to build a successful African business.
Everyone can open a business, but driving that towards success is what most people fail at. In fact, all over the world, the majority of start-up closes within the first five years.
In Africa, the highest rate of start-ups that discontinue on the continent are found in Malawi, Angola, Uganda, Zambia, and Botswana.
Unfortunately, the figure of the Global Entrepreneurship Monitor 2013 Global Report, which was featured in a CNN article did not mention the year of discontinuation. I assume the figures in the chart are for the first year of operation, because frankly, they are somewhat low. Looking at figures in the West for example, start-up failure within year 1 lies at around 25%, for the first 5 years they are as high as 50-70%, and the renowned Forbes Magazine even claimed in a 2015 article that 9 out of 10 business start-up were failing. That’s 90% !
So start-up failure is a global phenomenon, and in Africa the lack of education, market research, and access to funding were cited among the main reasons.
How to increase your African business success potential – Know this ingredient!
One thing is for sure, you need to provide something the market wants. That’s key. But even then starting a business is not easy and there is ONE ingredient that is so crucial to overcome the initial start-up hurdles in the first 1-5 years, but not many are consciously aware of that element. It is called:
Scalability.
You may think. That’s obvious, I want to scale so I can grow. But here is the point, not every actually business has high scalability.
So what do I mean by that?
Let me give you an example.
Let’s say you want to tap into the market that is aimed at children – there is a huge gap out there across the continent.
So you decide to open an in-door play or recreation center where people pay entrance, and can have some snacks, too. Sounds great.
After a long search you get the perfect place – it was not easy to convince the owner to turn it into a play center. Then you wait for the playground interior to be shipped in from abroad, you employ a company to get it all set up, and you may need a licence from the authorities that your kids center complies with safety standards. After a lot of input until the place is open for business and a lot of money flowing in you are finally in business and your place is popular. You need to pay rent, and staff, cleaners, and pay back a loan, but it is keeping you afloat financially.
You are ready to expand. But how? You are only allowed a maximum of 20 kids at a time in this space. You have fast hit a ceiling and ‘expanding’ for you will mean to find a new place and open a new play center. Cost? Another year to get this done and a lot of capital. Your start-up expansion plans get vulnerable.
Scalability is low and costive.
You will find the same situation with plans to….
open a shop, a boutique, or a restaurant
Sell something that is so unique that you will depend on a hand full of buyers – Xrays for hospitals for example or similar specific equipment.
Services that depend on your skills where you cannot quickly find skilled staff to expand your business – opening a piano school for example – where you can simply only teach one or two children at a time. Having said that, at least this option does not require high capital input, or does not generate major expenses. Although scalability is low, so is risk in this example.
Low scalability is also present when you need to significantly increase staff cost for every growth aspect. Because in a business with high scalability growth is somewhat exponential, it is not linear.
Can these businesses still become successful? Sure, but they will cost significant time and capital input each step of the way and that can be your downfall during start-up phase.
How does a scalable model look like?
Let me give you a couple of examples:
You produce a new African beauty care brand. The machinery is doing most of the job you just need to source the ingredients. You sell your products online, in supermarkets….you can simply scale up. Reach a greater audience online, reach more supermarkets, sell to beauty salons, expand your outreach across borders into neighbouring countries and export. This is a business model with very high scalability without much need for a major capital injection, because your sales go up exponentially and you can simply re-invest that gradually.
What else has high scalability? An online software solution or product, is usually highly scalable, too.
Even an agricultural product if the growth cycle of the plant is short and you can get access to land or partner with existing farmers. There are of course many more examples.
Bottom line
Let me tell you why scalability is so powerful in Africa. Because you have such a huge ‘space’ in form of a fast growing consumer class with increasing spending power, or growing businesses that need services – but overall demand is so much larger than supply. It is THIS factor that makes Africa so attractive, so choosing a business model with a ‘low ceiling’ may not be your smartest choice. If you however consciously apply high scalability in your approach to business, you have a much bigger chance to survive the enemy number one of start-ups: cash flow problems. You have a greater chance to overcome it, because you can simply grow faster.
Businesses with high scalability grow with lower capital requirements, but there is another great benefit: it makes them more efficient and hence more attractive to initial investors.
And still. Let’s be defined what dosage in this case approaches most of all. There can be it cialis 20mg or something another. To me I think it isn’t necessary to choose for you necessary. Think. Perhaps suits you cialis 20 mg It is much better.
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Businesses such as personal training (fitness). are they considered as a high scalability low capital market? Thank you.