Want your business to survive? Invest in capacity building

business meeting

One of the biggest challenges for small businesses in Kenya is survival through their fifth birthday,

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One of the biggest challenges for small businesses in Kenya is survival through their fifth birthday, with many closing shop whenever an economic tragedy strikes, however small.

This challenge has opened an opportunity for some organisations to offer training and capacity building to SMEs on strategies to apply to improve efficiencies in their operations, cash flow management and budgeting, which are key to the survival of a business.

The trainings offer business owners a bird’s-eye view of their enterprises at any given point, providing them with the advantage of acting accordingly when need arises.

Naomi Kirungu, Lead, Business Growth Programs at African Management Institute (AMI), says the organisation has been running training programmes for SMEs for several years now, offering business owners buffers to survive through hard times, access finances and achieve compliance.

“Disruptions to business will always be there, and the best thing is to learn and prepare how to ride through them. There will always be value for those who predict the future and plan for all possible scenarios,” Naomi says.

She adds that for SMEs to survive hard times, key is to create efficiencies in their operations and identify ways to manage cash, which can kill or build any business.

The organisation runs programmes to support SME entrepreneurs demystify different aspects of managing their businesses.

“Tracking cash is key to survival because an entrepreneur is able to look at what they have and how they can grow the cash. They are also able to predict what could disrupt the cash in the future and in what ways, preparing for such eventualities. It’s all about learning the making of, sustaining and protecting cash,” she adds.

Mercy Kithinji was on the verge of closing down her decade-long large format printing company a few years ago, as she could not make any sense of continuing with operations when she was not making any profits. She also had liabilities, licenses’ fees and taxes to settle. Today, Mercy, the director of Swift Ventures Limited, says since joining one of AMI SME training programmes, her company, which designs and prints banners, stickers and digital printing, was rescued from imminent closure.

The programme largely helped her to identify means to always stay current with the operations of her business, tracking expenditure, customer and income trends.

“I wouldn’t say it was anything new, it was more like a wake-up call on things that I already knew but wasn’t implementing. It was more on how to do my costing and largely how to tell where my business was at any point. It was an eye opener to have an overview of my business at every single step, to know what I was spending; the sales, salaries and overheads.”

Mercy Kithinji

Mercy Kithinji is the director of Swift Ventures.

Photo credit: Pool

She also acquired new knowledge on how to manage credit, how to calculate profit margins and engage customers. These are some of the key lessons that helped her make corrective decisions that rescued her business. These included stopping small quantity orders from shops that were costly and a switch to large orders from wholesalers on some products. The move helped her company manoeuvre through the Covid-19 pandemic and tough inflation.

Mercy’s move to seek business training to gain skills that would sail her business through difficult times is a reflection of the steps a growing number of SMEs are taking today.

The Central Bank of Kenya in 2021 reported that at least 35 per cent of Micro and Small Enterprises in the country shut down in the first 17 months of the Covid-19 pandemic with poor cash flows as the main reason, an indication of weaknesses existing within Kenya’s small economy, which constitutes over 90 per cent of businesses.

And now, more and more SMEs are taking up trainings to prepare for bad times, an inevitable occurrence for any business.

Justin Magiri, a rabbit farmer and rabbit meat products trader, the founder of Millimag Rabbits, says a business management training he went through helped him address his budgeting. It also helped him think and make more precise budget decisions.

“While initially I used to make short-term budgets for periods like six months, I currently make budgets running three to five years, which helps set a clear vision and plan while cutting on overheads and needless expenses that affected the business previously. Budgeting taught me key aspects of cost-cutting, managing stock and predicting customer behaviour to better prepare,” he says.

He adds that he has also learnt to utilise more rabbit products such as urine and poop for manure, skin for in-house slippers and several meat product lines to come up with pizza, smokies and burgers.

“I have learnt that it is important to know how to communicate to workers even during difficult times, to keep giving them hope and reminding them of the company’s vision,” Justin comments.

A Kenya National Bureau of Statistics, KNBS, report in 2016 identified that a large number of small enterprises in the country close down before their fifth birthday.

At least 18 per cent of them, KNBS data showed, closed down before the third year due to marketing constraints.

This would challenge Munene Githira to co-found Orac Branding, a start-up that runs a curriculum on integrated branding, training businesses on aspects of digital branding, brand development, promotion and customer promotion, to better compete and survive.

“Many SMEs struggle with branding issues. They lack information on ways to grow their businesses, and sufficient budgets to be consistent in the market,” Githira says.

He adds that while his organisation has trained at least 559 business owners on branding, with most of them reporting success within six months and hiring at least two extra workers as operations improve, he has also had to attend business trainings which he observes as being key for business thrive.

Githira observes that as markets open up and competition stiffens, it will be key for entrepreneurs to prepare by gaining skills and knowledge, or else they will be pushed out.