Month: October 2020

According to the 1,000 Day Survival Guide For Startups – Courtesy of Sanjay Mehta, If a startup is able to survive for 1000 days, then it is built to last. Now that your business has survived beyond the 1000 grey days, what next? For most of us, the epitome of the current pandemic has definitely changed the game for business models. Getting the right set of customers, investors, and other fundamental stakeholders that keep the business income flowing has not come without challenges. If this was the year you decided to set up a business because you heard your peers mention the famous Kenyan quote, Biashara ina pesa, then think again. Don’t get us wrong, we aren’t asking you to retract but rather assess your business model for long-term survival and health.

That said, let us look at financial health in this context. This refers to the dimensions of the monetary affair of a business - determined by:

• Profitability - the ability to yield profits
• Liquidity – the ability to convert assets into cash while retaining their intrinsic value
• Solvency – ability to finance debts and financial obligations in the long term
• Operating efficiency – ability to deliver products/services cost-effectively

So, what are the measures of business financial health? The fact remains, there is no sure way to determine a business’s financial health. However, there are significant indicators of strength or vulnerability. These are profitability and liquidity.

So many businesses have failed or stagnated, including those, we previously considered to be giants. One of the main causes of business failure that we have witnessed is a change in economies, whereby the economic environment influences purchasing habits, therefore, affecting supply and demand. We are currently witnessing the dynamic effects of COVID-19 uncertainties in the economic system owing to imposed lockdowns and curfew in a bid to control the spread of COVID-19. All is not lost and we have to find ways to adapt to the current economic environment and lead even at the edge of chaos.

We would, therefore, encourage you to assess the competitive ability to generate profits for your business as you strategize your new model. This will help you identify the balance of power, attractiveness, and profitability of your business in the market place. A great way to do so is using Porter’s 5 forces of competitive analysis to determine the following forces:

• Threats of new entry - how easy it is to enter your market and threaten the current position of your business, as well as a number of barriers to entry
• The threat of substitution - how easy it is to replace your current products/services.
• Bargaining power of suppliers - where supplies are controlled by a few players in the market place
• Bargaining power of buyers- where few buyers control a large percentage of the volume market
• Competitive rivalries - the intensity of competition in the industry

This said, what can you do to safeguard or improve the financial health of your business? If anything, prevent business failure?

• Monitor the cash flow of your business - never underestimate the power of cashflow
• Review your non-performing assets
• Measure your financial performance – Return on Equity (ROE)
• Instill the culture of accountability/transparency in undertakings
• Provide customer-centric products and services
• Take stock of your value chains, lifetime value of customers, churn rates, net promoter score, and sales pipelines
• Learn from your competition
• Get business insurance to minimize financial losses in the event of diverse risks
• Create a Continuous Improvement Plan - Plan, Do, Check, Act – continuously study and learn from current efforts to improve future outcomes

 Why, therefore, is it important to monitor your business’s financial health?

• It is a crucial and cautionary step to prevent business failure
• It helps you make informed short- and long-term decisions to drive the business forward
• When you know your business inside and out, only then can you position it for success
• It plays a vital role when making timely growth plans
• Tracking Financial health transforms a culture of innovation and transparency amongst teams.
• It eliminates unwanted and unjustified overhead costs
• It helps to evaluate asset quality
• It clearly reveals vital indicators of the performance of the business – These details are very important for shareholders.
• It is an indication of good business compliance with the set laws in the nation

As we end this blog, we would like to leave you with some food for thought. Would you rather be the biggest or the best in your industry? We task you to marinate on that.

Your bank buddy

IMBA

We Are On Your Side!

Hey, it’s been a minute but it’s always my pleasure to interact with you. Hope you’ve been well, personally I am better now than I was months ago. I bet every business man can now afford a small sigh of relief. When a business man tells you things have been thick, trust me they have been thicker than type K copper pipe… Don’t ask me how I know about copper pipes, I bet I have been subconsciously learning from my engineer friends. Lavington

They say every mess carries with it a message and COVID-19’s message has been loud and clear. Most business people had certain measures, policies and procedures put in place in case of a crisis but what they hadn’t factored in is a pandemic. Especially one that minimizes human interaction, is deadly and can be contracted in a blink of an eye. “Factor in a virtual working plan for your business”…That was COVID-19’s message to most businesses.

I believe most business owners have learned their lesson from the University of Life… Of course no one gets a certificate from that university, experience suffices and with that, I’ll share with you few tips on how to cushion your business against a pandemic or crisis.

For starters, be as transparent as possible with your employees and customers. Without these two sets of people you won’t have a business to run. Your customers need to understand why there is a change in operation, for example if they used to come to your store to shop, but you want to stop physical shopping and adopt online shopping, you need to communicate prior so that they understand why the need to change, for how long that will be etc. This will make them feel you care about them. Your employees also need to have clarity of the situation and you can seek their opinion where possible on how to mitigate certain challenges.

Same way human beings need healthy blood flow in their bodies to operate is the same way businesses need healthy cash flow to stay afloat. Protect your cash flow as much as you can. Reduce cost and minimize expenses where you can to ensure the rate at which money is coming in balances with the rate at which money is going out.

Go digital and be virtual if your nature of business can allow. Instead of paying office rent, your employees can work from home. Instead of having a gigantic retail store you can scale down and branch into ecommerce…The beauty of going digital is that it saves you some coins and allows you to reach a wider customer base.

Last but not least, guess work is the recipe for disaster! Have a proper business continuity plan. This mostly goes out to medium and small businesses. They are the ones often guilty of operating by faith and not having a business crisis management or continuity plan. Have clear set procedure on what needs to be done when there is a crisis and how to resume once the dust settles.

As the country opens up, not all businesses will resume, some died during the pandemic, others are on their death beads while others are heavily panting after a vigorous fight with the challenges the pandemic brought their way. For those who made it the other side props to you! For those who didn’t make it or are struggling, it’s not a loss. Your business might not have made it but your business management skills have been sharpened. They say nothing beats experience, out of it you learn and strategize better.

Before I call it a wrap, you can check out these business solutions https://bit.ly/36KqIa0 The E-commerce service came through for my buddy big time when he decided to go digital with his business. With that said, thank you for reading, catch you later!

Your bank buddy

IMBA

We Are On Your Side