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Opinions of Monday, 22 June 2020

Columnist: Ellah Makuba

Beyond the obvious: Key reasons why businesses don’t last generations


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In July 2016, John-Paul Iwuoha released a great article – ‘5 Reasons Most African Businesses Do Not Survive Beyond a Generation’.

The business transformation specialist clearly articulated the devils that have long denied capable great potentials in Africa from becoming like the IBMs, the Coca-Colas, the Fords, the Nestles, the Pepsis, the GMs and other prominent businesses which have outlived generations and become truly global brands.

Having had the opportunity to consult for small businesses for a while now, these factors couldn’t have been better-captured/better-phrased, and indeed they are so true.

All the reasons outlined were largely self-inflicted: Poor Succession Planning, Small Thinking, Lack of structure and business systems, being blind to business trends and changes, and having a dominant lifestyle mentality.

What I seek to do in this article is add to the above factors with what I think has directly and indirectly birthed these unfortunate owner/management situations – reluctance to seek the services of able consultant and advisors born out of hubris, selfishness and lack of trust.

Generally, most small business owners in Ghana do not and have never realised the need to employ the services of formal consultants and advisors to deliver critical insight and ideas-based guidance that the business needs at every stage of its life. This is even worse for businesses that have managed to survive and found themselves on the path of growth.

The thinking is often that once the owner himself has managed to steer the business out of its initial challenging stages after launch to this level, they are good to go with the same knowledge and ideas – a very big lie and defective thinking that is almost always bound to lead to self-extinction.

If their assumption was valid, why then would global brands like Apple and General Motors continue paying millions of dollars to consultants? This is a question worth asking.

This has long been a key challenge for small-business owners. I recently had a conversation with a prominent CEO who was lamenting about a friend of his who is investing heavily in a business he has no knowledge of.

When I recommended that he advises his friend to employ the services of a consultant to advise and protect his interests, his first response – which is built from years of dealing with self-made businessmen and women – was that the advice won’t make a difference because it will be ignored. He further said that, often, such people feel they have done it on their own to this stage, and so need no one else going forward.

What is often missed by small-business owners is that the ideas, thinking and structures which worked in the past will be defective going forward in this Volatile, Uncertain, Complex and Ambiguous business environment that keeps changing by the minute. Key success factors keep changing to render irrelevant that which worked yesterday.

Consumer tastes, preferences and service experience needs keep changing. Emergence of new and improved ways of doing things by way of technology is seeing unprecedented innovation.

Disruptions are happening left, right and centre to render business models that have thrived for decades shaky all of a sudden. New and sophisticated risks are being thrown at businesses which require new, fresh and refreshed addressable thinking.

The situation is well-compounded by the bare fact that most small-businesses, especially in the informal sector and those largely owned by illiterate and semi-literate businessmen and women, lack real structures which enable performance and growth assessments to be made at any point in time. For instance, most small businesses in Ghana do not keep books of accounts; and so there is no way of assessing business profitability and strength for planning and advice.

What you find is that 90% of the time they mistake cash flow for profitability and growth. So, they have no way of knowing if the business is posting losses until it is too late. They often have a different orientation of risk, and their unstructured approach to addressing it is often unsustainable.

Could there be other reasons why owners don’t engage formal consultants and advisors?

Yes, selfishness and not realising that consultants and advisors are critical business resources which need to be procured and paid for accordingly. As a result of little value being placed on consulting services, most small businesses fail to see the need to pay for such. Where they are even made to see the need, they are highly unwilling to pay for the services – failing to see that the consultants’ skill and experience has being acquired at a great cost and investment. They are often simply unable to understand it is about value-addition that will increase their size and make them better businesses, and so must be paid for.

Have consultants played a part in the situation?….Maybe

I have heard instances when some small business owners narrated bitter experiences of their engagement with consultants who ended up colluding with employees to defraud the business. For such, trust is and will continue to be a limiting factor that scares them from ever engaging consultants and advisors. They have been badly bruised beyond recovery when it comes to trusting outside advisors and consultants. You can’t fault them for that.

We have also failed to be creative in our pricing strategy as consultants. Given that business owners already place little value on consulting engagements, it will help if we can be a bit sensitive to the cash flow situation of small businesses and structure an arrangement that can stand as accommodating and reasonable. A mixture of a reasonable one-off engagement fee with the option to pay in installments and a small monthly retainer would make sense with built-in clauses that allow for automatic retainer adjustment tied to sales, profit, or asset growth – depending on what would be reasonable and workable. The strategy is to let the owner understand that you care more about the business’ growth and wellbeing than the money: if you grow with the business, they will become more receptive to price revisions as they will begin to see you as a partner. However, remember to capture any pricing arrangement very well in the engagement letter, so all parties are protected.

Maybe we have not also marketed our services well as consultants. Business owners need to know what they need and what value they are paying for. If they are unaware of what we as consultants are offering, no engagement will happen. We also need to let the business community understand that we know what the issues are, and the challenges confronting the various sectors and industries and the solution framework we can deploy. This can be achieved through research articles specific to the Ghanaian terrain.

On this line, I believe the Ghana Management Consultants Association is well in order – provided the vision, mission, purpose and objectives are set right. It has the potential to become a powerful research-house, advancing the small business consulting industry in Ghana. There should be a sub-Board Research Committee in charge of building that portfolio of rich research works as they engage individual consultants into groups to research and write on various useful topics.

The Association can be well-structured to serve as a go-to place for small businesses to seek consulting services whereby projects are distributed to consultants based on their specialties; and perhaps a paltry percentage of the secured engagement can be paid to the Association as introducer commission (or give it a suitable name) for running its operations and research works.

This is worth thinking about

Finally, let consultants develop an unselfish habit of referring projects and works in areas they have no expertise in to members of the Association which specialise in those consulting areas. It will help the general cause and boost quality work and testimonies from business owners.

This is a better option than selfishly taking on engagements one has no expertise in and doing a bad job for the client. It is an image issue that will hurt us all as consultants, because news of bad work spreads fast. A standard introducer commission can be established as a referral incentive.

We can all make it work so that good and lasting businesses are built for the greater good of Ghana as a country.

Ellah Makuba is the Lead Advisor for Wits.Counsel Consulting, a boutique management consulting business based in Ghana and focusing on general small business consulting and financial service businesses.

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