- January 14, 2020
- Posted by: Ali Kasa
- Categories: Articles, Entrepreneurship Article
Written By: Ali Kasa
What is Entrepreneurship?
Sometime back, I asked my business associate, Mr. Puru Sotman what he understood entrepreneurship to mean? He shared with me his understanding as “the ability of an entrepreneur to withstand the punches and knocks of mistakes he/she makes in planning, building, developing, growing and cashing out from a business”. According to Puru, an entrepreneur is like a professional boxer who is able to stand the knocks from his opponent and not just by punching hard.
I am fortunate today after 18 years of entrepreneurship experience to relate to you what I have learned from the setting, building, growing and selling more than 30 companies in Australia, Albania, Greece, Kosovo, Malaysia, Singapore, Philippines, United Arab Emirates, Saudi Arabia, and the USA. To date, I have traveled to 35 countries to do projects and business dealings. I have been able to survive the knocks of my wrong decisions, competitors and market. Throughout my entrepreneurship journey, I have learned a number of important lessons that I would like to share with you in this article. These lessons are from my personal experience and may or may not resonate with you.
My Entrepreneurship Lessons
1.Timing is the most important aspect of new venture creation
Every new venture to succeed requires a unique idea, money, management team, timing, and execution. In 2005 I started a fleet management business in Malaysia, Albania and Saudi Arabia. The business required hardware, software, and mobile data services. The data services were at its early stage and it was expensive. Customers did not understand the technology and we had to educate them on basics such as how GPS works. We invested about USD 1 Million in the business and after two years we ran out of money. New competitors came in with the new and better technology, the data services improved from GPRS to 3G and they were getting better traction than us. I sold the business at loss. The million-dollar lesson I learned was that first-mover advantage is not real when the timing is not right for the new venture.
2. Build a business around your capabilities and not the market needs
In 2007 we started a trading business in electronics and electrical appliances. We established our own brand Maselino and identified suppliers that were willing to do contract manufacturing for us. We had a number of key clients and we were making money and enjoying 10-20% gross margins. One of our people came up with the idea of setting up our own manufacturing plant In 2007 we started a trading business in electronics and electrical appliances. We established our own brand Maselino and identified suppliers that were willing to do contract manufacturing for us. We had a number of key clients and we were making money and enjoying 10-20% gross margins. One of our people came up with the idea of setting up our own manufacturing plant for instant water heaters. The rationale was that we have the customers, we can make up to 30% margins and the government was giving incentives in the form of grants and tax exception to start manufacturing activities. We put about USD 800,000 to set up the plant and start the business. What we learned was that our production cost was higher than our competitors and we had pre-sold units with our previous prices. We had a long queue of orders which we could not fulfill on time. After 2 years of struggle, we realized that it was a business that we did not know, the profits from our trading was subsidizing our manufacturing. We sold the business to one of our competitors at loss. The lesson learned was that you do not simply start a business because there is a demand for it. The starting point should be are you capable of doing that business and be competitive?
3. Less is More
By the end of 2008 after 5 years in the business, I was involved in corporate learning, market research, fleet management systems, trading, manufacturing, and distribution business. The mindset when we started these businesses was more is better. We realized that it was true that we were busier and looked better to the outside world, but we were losing money. I started to sell or close businesses that I was not good at and I did not have the competency to manage them.
4. Buying an existing business may be better than starting a new venture
A lot of entrepreneurs underestimate the pains and challenges that come with starting a new venture. It looks cheaper to start a new business than buy an existing business. The better question to ask is what will provide you better return on investment and effort- starting a new business or buying an existing one. Let us take an example. You have USD 300,000 to start a new business. Depending on the industry and country with USD 300,000 you may buy an existing business that delivers annual profits of USD 100,000 per year. If you put you USD 300,000 in a new business the chances of survival for the next 5 years are 10% let alone making money. During 2019, we acquired almost 20 existing businesses and we managed to achieve 30M annual revenues within 12 months. This approach requires that you have the competency of mergers and acquisitions and have a pool of professional people to help you with the due diligence process.
5. Decision making based on accurate information
When I was student, I started an ice cream kiosk business. I was doing this alone with the help of part time staff. At any given time, I know the stock level, revenues, margins, profit and who were my customers etc. While I did not have the business acumen that I have today, I was using my common sense to make good decisions with information that had. Throughout my entrepreneurship journey, I have made stupid decisions simply because information given to me was wrong or was never available. Having the real time management information systems is critical to building and managing any business.
In conclusion, entrepreneur is like professional boxer. This means that you need to train and get fit otherwise you will be bitten up. You may be knocked out by your own mistakes, the employees, the market, the competitors or even suppliers. It is my hope that you become wiser than me by learning from my mistakes and successes shared with you.