True millionaires invest in patience and learning

Enterprise success stories omit the ‘pain’ side. Investors must learn to wait. PHOTO | FILE 

By PETER MUTUA

In Summary

• Leaders of Family Business must be willing to invest money, effort and time into their ventures in equal measure if they are to succeed.

In 2005 a company in Nakuru introduced a crop said to be the solution to local farmers’ woes.

It was suited for the local soils and climate, had a ready market through the company that was connected to an international pharmaceutical company and had a relatively short maturity cycle. Farmers were promised two crops every season.

The crop was artemesia, the source of the artemisinin extract that goes into malaria’s artemisinin-based therapy that was introduced to conquer malaria’s growing resistance to chloroquine.

Using data obtained from a patch of land leased from a local large scale wheat grower, farmers were presented with evidence that they would double or triple incomes compared to what they get from cereals.

What the farmers did not know was that the large scale grower had negotiated a contract in which he would get a handsome reward regardless of how the crop turned out; he would not agree to plant the crop under the conditions offered to the local farmers.

Leaders of Family Business swallowed the bait. The first year went moderately well. Those who requested seedlings got them albeit in smaller numbers than ordered. Payments were quick and efficient. The second year proved more challenging; the company struggled to cope with demand for seedlings, causing delays in planting which subsequently affected yields.

Disaster struck in year three; farmers, encouraged by the results they had seen on neighbours’ farms went into artemesia production in big numbers. They put other agricultural interests like dairy on the back burner in anticipation of a windfall.

Without notice, the company changed the payment system, reducing the amount due to the farmers based on artemisinin content which drastically affected their earnings. This move was followed by delays in payment that crippled many family owned businesses.

It would be sad if this were an anomaly; an unusual occurrence that happens to Leaders of Family Business once every generation. Unfortunately, this tragically happens every few years.

In 2007 it was the pyramid schemes, in 2009 it was multilevel marketing of herbal products, in 2011 quails and in 2013 it was the rearing of rabbits.

Each one of these ventures is lucrative to those who have taken time to understand the business intricacies, identify and mitigate against draw backs. They ordinarily have been in business long enough and continue to thrive long after interlopers have left. The smart ones even use clueless newcomers for their own benefit by egging them on and supplying them with materials at exorbitant prices.

‘Investors’ who, imagining these to be business opportunities in which they can make overnight fortunes, join the bandwagon midstream. They end up as helpless spectators to a disastrous crash scene in which they are the main victims.

In a world of instant fixes, fortunes made overnight and ever accelerating product cycles, one of the most often overlooked factor affecting the founding, establishment and eventual success of many family business ventures is time.

Unrealistic expectations

A few aspiring Leaders of Family Business understand how important it is to gain a reputation for expertise/performance in specific areas that can only be obtained by remaining in this space long enough.