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Currently, I do not have any savings, but I have links with vehicle owners who are willing to give them to me for management in a lease arrangement.
Hello. My name is Onesmus. I am currently working with a car rental company. I earn around Sh35,880 a month net pay. I have two wives who do day-to-day retail businesses. Their earnings are for my two homes' upkeep. I would like to set up my own car rental business because I feel that I have enough experience, exposure and networks. However, I am afraid to leave my monthly earnings, which are currently guaranteed. Currently, I do not have any savings, but I have links with vehicle owners who are willing to give them to me for management in a lease arrangement. My target is to do car hire services. Not taxi. How do I get through this successfully?
Emmanuel Mbogholi is a Partner at SFAI Kenya; a strategy, accounting and tax practice helping entrepreneurs grow their businesses.
It appears you have no direct monthly expenditures since your two spouses take care of the upkeep of their homes. Your focus, therefore, seems to be on how you can prepare to transition into a full-time business. The first thing you ought to do is ensure you have sufficiently planned and prepared for the entrepreneurship journey ahead.
You have no savings, which implies that you may either have extra expenses or you may have unhealthy spending habits. You need to identify these to track where your salary is going. It can be easy to imbibe in impulsive spending. This will have to change if you're to realise your business start-up goal.
For a business venture to be successful you need structures and systems in place. Before you leave your job, validate your interest.
Remember statistically, it will take you three to five years for your business to be sustainable. In the beginning despite the assumptions you could easily find yourself with no income. That means you need a cash reserve to take you through this time and help you focus on growing your business. I propose you build a fund covering 12 to 24 months of your current income which is Sh430,000.
To achieve this, put aside between 20 to 30 percent of your current income in a mid-term savings vehicle, for example, a money market fund, which will give you a modest return while preserving your capital. Do this continually until the fund equals about 12 months of your current income. Allocate a further 10 percent or Sh3,500 into a separate fund to cater for non-medical emergencies. Apply the same strategy and build this fund for about six months to 1 year.
This will help you avert any need to provide for your homes that could arise. In addition, ensure you have adequate medical insurance for your family. Take out an annual cover for your family which will prevent you from going back into your pocket for medical costs. Save a further 30 percent of your income in a SACCO. This will help you with the option of taking out a loan for your business at any point should you require capital injection. Try and live on the remaining amount. One of the qualities of an entrepreneur is financial prudence. Practice this before leaving employment.
Try and start this business venture while you are still in employment as you build a financial reserve. This will also help you test the commercial viability and test any assumptions you could be having. Use the extra time you have off work such as evenings or weekends to work on your business. Ensure you also do not risk your job as most employers are against having a direct conflict of interest.
Don't for example directly approach your current clients and offer them your services outside of your employer's business. Try and market your company as a separate entity and see whether it will build traction and figure out all the roadblocks you will face.
The next thing you need to do is cultivate your skills to run a business. Figure out what gap you will fulfil in the market and your entry strategy. Get your pricing and test out different models to ensure people are willing to pay. A short course in entrepreneurship can help you have a deeper understanding. You can undertake this part-time. I can tell you are enthusiastic about the potential this new business venture offers but tread cautiously so as to increase your chances of succeeding.
Ensure you have a support structure to fall back on. It's best to get a mentor, preferably one who is currently doing the same business and honestly have them hold your hand as you begin so as to help you minimise the common pitfalls. Also, ensure your family knows your intention to go into a full-time business and get their support as well. Running a full-time business will need a lot of sacrifices at the beginning and so it's best that those around you know how best to support you. All the best.
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