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Why your small business strategy is not working

Any business of any size needs to establish the long term path the enterprise is set to tread, in the eyes of the owner (s). Setting a small business strategy in Kenya, though, is not as simple.

Everybody knows the importance of establishing the future they want. It’s not limited to entrepreneurship. If you outline your goals, you’re not only able to measure yourself against something but also put in required effort towards that goal. I have been told a lot of things. One of them was that at the end of each day or week, I should assess whether or how much I did towards future goals I had set. It’s a good way to know what you really prioritize at any point in your life.

Every small business owner in Kenya does have some sort of strategy, even if it’s unfortunate that some don’t write it down. A past study had a different conclusion when comparing our businesses with foreign ones operating in Kenya. Kenyan businesses generally don’t see the value of strategy. On some level it’s true but in other ways it’s a problem of perception. This is important because it ties to why small businesses in Kenya fail or don’t grow at all.

The main problem is the way strategic management is taught. One article puts it brilliantly and I couldn’t help but rephrase. If the majority of small businesses in Kenya have fewer than 10 employees, why do business classrooms teach using Fortune 500 case studies? You’ll find that you have the entrepreneurship spirit and have also picked up enough technical skills. But almost nobody is teaching Kenyans to manage a small business in Kenya.

What happens is that would-be entrepreneurs are taught with the mindset of becoming a senior executive, after rising up the so-called corporate ladder. This is world’s apart from the survival challenges of a small business. If you’re in the corporate environment, it’s okay, you can use buzzwords like “strategic synergy.” You can also give 5 minutes of information in a 30-minute “speech.” Small business strategy, on the other hand, needs to answer the questions entrepreneurs ask.

The textbook says you open a small business, acquire external funding, enjoy a few rounds of investments, then exit by selling stake or issuing an IPO. Easy, no? You also need to start writing books on ”How to Become Rich’ to keep you busy. Let’s face it, this is not the typical experience of small businesses in Kenya. Only the tech sector enjoys anything close to this at the moment – and there are specific reasons for that.

The actual context of small businesses is dealing with varying income, liquidity challenges, inadequate external funding, debt payment and collection stories. There is high variable cost which makes productivity appear to be a bad thing. There is also the constant need to put out fires when it comes to day-to-day operations.

A successful small business strategy would therefore need to flush away portions of the rulebook and solely focus on these issues. This also means that there is a time limit for any strategy you come up with that can be deemed useful. You won’t really have enough data to plan beyond 4 or 5 years. The good thing about medium term planning, like this, is that it makes your life appear longer since you make many more plans. In any case, the environment of small business in this country is too volatile (60-80% failure rate??) at the moment to think 7 or 10 years in the future.

A small business strategy needs to answer the question of survival. Once you have minimal working capital problems and are clear about your profit margin then you can think about growth. This means your strategy should be tied around issues like customer retention and keeping costs as low as can be. Once you arrive at the position where you can replicate your business, without trial and error, then you can shift to your business growth strategy.