The tough business of advising entrepreneurs

Many entrepreneurs will be informal or in the micro enterprise bracket. They share the common mentality of survival for the fittest, rather than seeking sustainable growth. They will lack entrepreneurial skills and will only purpose to survive one more day. PHOTO | NATION 

In Summary

• The only competitive variable is pricing, or some other form of leverage that has nothing to do with the business as such, like patronage by your friends and relatives.
• They share the common mentality of survival for the fittest, rather than seeking sustainable growth. They will lack entrepreneurial skills and will only purpose to survive one more day.
• There are disturbing overlaps that cause friction and infighting. The persons charged with these responsibilities end up in unnecessary turf wars and competition for supremacy.

By DAVID MUTURI
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Not so long ago, I was invited to share my experience with business advisers who were just about to go to the field to help entrepreneurs manage their business more effectively.

I was expected to share the experience I have had interacting with entrepreneurs who are at different stages of operating their business and requiring different forms of help.

The entrepreneurs included the upcoming crop of social entrepreneurs.

There are a couple of challenges here. First you will find that some of them do not have clarity of purpose. Their focus is hazy. They do not know what they intend to achieve and even who their key stakeholders are. Their vision is completely challenged.

As the advisor, you have the important role of helping the entrepreneur discover and clearly see the purpose of the enterprise.

There is then the common challenge of lack of innovation and creativity in the business.

There will be the copycat mentality where the entrepreneurs will start a business only because someone else has a similar business.

The only competitive variable is pricing, or some other form of leverage that has nothing to do with the business as such, like patronage by your friends and relatives.

In such contexts, business applies unethical competition, such as undercutting. This can only bring it down in the end.

CYCLE OF DOUBT

Many entrepreneurs will be informal or in the micro enterprise bracket.

They share the common mentality of survival for the fittest, rather than seeking sustainable growth. They will lack entrepreneurial skills and will only purpose to survive one more day.

There will be little drive to see the business flourish to the next level. For some it is will seem entirely impossible for the business to grow. This is where as an adviser you will find experiential learning invaluable.

This means that you will work with successful entrepreneurs who started small to share their experience with starters. This way, they begin developing the faith and confidence that they can survive.

Many start-ups are caught up in the trap of doubt regarding their long-term financial viability.

They are unable to access finance. Potential financiers require things like security, track records, professional employees, structures and succession plans, among other demands. Wherever they turn to for financing, they are faced with the credibility trap.

Most of these entrepreneurs will have insufficient networks and linkages. They are not able to create channels through which they could grow their businesses. They hardly get credit from their suppliers due to the credibility trap.

They also do not have effective networks amongst themselves to support each other.

They will be lonely and isolated entities in a crowd. Helping them build those networks that could lead to integrations that would support their businesses will be a great service to them.

Ignorance limits their access to such resources as new technologies that could make their businesses more efficient and effective. They require advice on new technologies that are easily accessible and affordable. Broadly speaking, lack of information is a major challenge.

Then there is the challenge of corruption and poor governance as they grow, particularly for the community-based enterprises and other forms of joint ownership.

All will be well when starting and when there is little or no money.

GOVERNANCE STRUCTURES

However, the moment money starts flowing in — or even signs of money begin showing — that is easily the beginning of big trouble that could even lead to collapse of the enterprise. It therefore helps to set up appropriate governance structures well before you have seen any signs of money flowing in, to safeguard the enterprise.

The structures should allow for transparency and rotation, to safeguard against the creeping in of misguided sense of entitlement by some people within the enterprise.

The other challenge faced by the entrepreneurs at this point will be bureaucratic regulatory environments.

Some businesses are burdened with so many regulatory bureaucracies that they are not able to breath and grow.

There are disturbing overlaps that cause friction and infighting. The persons charged with these responsibilities end up in unnecessary turf wars and competition for supremacy.

Finally, external regulatory environments are also very important. It is useful to be thoroughly schooled in them, for avoidance of penalties and even blackmail by corrupt external officials. Such characters like it when you are confused so that they keep coming to you for bribes. Avoid this like the plague.

Business advisers should particularly be keen on this for sound advice to their principals.