Over time people have sent me a lot of question about starting a business. Here are the five most common ones.
How does one start a business?
By starting! A business is a transaction. A transaction where value is being exchanged for money. Customers should see value in your product or service. This value should translate your idea into something tangible that can be transacted upon. If you like cooking and sell a meal, you have started a business. If you offer somebody advice and they pay for it, you have also started a business. If you draw a painting or make a chair and sell it, that’s also a business. You start a business by transacting.
To support those transactions, you will require certain things like a separate bank account or a dedicated MPESA number. From the very beginning separate your personal funds from the business funds and keep records of all transactions (money coming in and money going out). You can also give your business a name and register it. You are giving your business an identity that is separate from you personally. You can go further than simple registration and choose to have a company that gives it legal and financial separation. Just remember you start by starting i.e. transacting and everything else is about giving the business its own identity and of course complying with various regulations like tax.
Which business should I start?
Nobody can actually tell you which business to venture into. The right question to be asking is what problem can I solve. If you decide to sell bananas, it should be because you have noted there is a shortage of bananas in a particular area or demand for a particular type of banana. The problem you may be solving here is convenience or availability. Too many people, start businesses simply because somebody else is doing it and that is not the right way to think about it. Match this problem to a skill you have and something you are passionate about or at least like doing. Many of us discover our true passions after we have started. So, it is okay if you don’t have the answer. My first business was helping people buy and sell shares on the stock market. People needed help with this (solving a problem) and I had the skills. Later it transitioned into something else but it provided the foundation for starting.
Where can I get capital to start my business?
First ask yourself what you need money for. To employ people, rent an office, buy computers. I have given some of the common answers people give. None of this has to do with the ability to get customers in. Many businesses do not need as much capital as we think they do to start. In our classes when we ask this question a lot of people cannot actually explain what they would do with the capital. You don’t need a fancy office to start. Use your house. You don’t need to employ people from the beginning. Go and get your first 10 customers then you can begin to think about capital. Once you have started your eyes will be opened up to other ways of getting resources like suppliers giving you credit terms. If you really need some capital it will most likely come from your savings, family and friends in the early stages of the business. Until you have what is called “proof of concept”. So instead of waiting for capital, go and test out your idea and improve on it.
How do I pay myself from the business?
I wished I asked myself this in the beginning. Most people have a mind block here because they are looking at large amounts. For many especially those transitioning out of employment, your business will not be able to pay you what you were earning so don’t look at it that way. This shouldn’t stop you from starting. Pay what you can as a salary. It will probably not meet all your expenses but pay anyway. It is the habit and discipline you want to introduce from the beginning. You can decide to start off with ten thousand shillings a month. As the business grows you can keep increasing the amount. It is very important to pay yourself. If you don’t do this, you will eventually become in disciplined with business funds and use them for personal expenses. This has gotten many businesses in trouble.
How do I know my business is the right one?
You don’t. When you start a business you are becoming a student. There are no guarantees. As you learn, the way you see things will change. For a lot of businesses, the products they started out offering is not the one they currently offer. The nature of the business may change as you get better at recognizing opportunities and understanding your customer. Businesses grow out of partnerships. People realise that they were not passionate enough to do what they originally started out with. Some don’t go through drastic change but all will change somehow. So you don’t have an answer in the beginning to this question. You just have to be committed enough to learn the lessons.
Waceke runs programs on Entrepreneurship and Personal Finance Management, registration is currently open and ongoing through our website centonomy.com For more information get in touch with her through waceken@centonomy.com /Facebook-Waceke Nduati /Tweet @cekenduati