In the many years of providing credit at Phoenix Capital I am often asked, “What kind of business can I do?’ question. While this is not easy, especially with the current economic hardships I tend to advise based on my own experience as a lender and an entrepreneur. I have documented over the years of businesses to consider and those to avoid. A lot has been written on the type of businesses to explore but rarely do you read about those to avoid and why. It is not to say that those in these businesses do not make money is only that the success factors are more often beyond one’s control or are often too many. Here is my list of 9 businesses to avoid or exercise caution as you invest time and money in them:
1. Transport Business: Be it car hire, matatu, or long-distance trucking this is one business that has driven people to extreme levels of depression from dealing with drivers, conductors or turnboys who constantly cannot be trusted, policemen, petrol stations, fuel stations and pump attendants always exaggerating prices, mechanic not to mention fluctuation fuel prices. How many can be successful with this many factors working against them
2. Restaurants, Cafes and food Business: Making people happy with food is not easy, restaurant or as some Kenyans call it Café (kef) is constantly working against escalating food prices from time to time, and theft by employees. Wastages and a myriad of other statutory payments such as tourism levy fund, KRA. The rate at which these businesses are closing is phenomenal.
3. Agriculture: We often muse on this sector because it is a very well packaged sell for most people such as retirees from growing of capsicum and onions in greenhouses, and avocadoes. Agribusiness requires patience and mastery of a number of factors often not in our control from weather-related rains, and pests to fluctuating market prices and for those in exports one has to be knowledgeable in matters of foreign market standards of the agricultural practices employed during growing to pesticides use and even packaging and transport.
4. Clothing and Apparel: Every new mall will have many stalls with clothing stores, and every corner of Kenya’s towns will be awash with clothing businesses and even back in the estates (mtaani). The competition here is high and it is one of the easiest businesses to start hence the reason every corner of our lives is dotted with clothes businesses. In Nairobi’s CBD, every trader is selling the same thing.
5. Bars and Lounges: Just like their cousins restaurants suffer the same predicament add to this there’s the nuisance of policemen hovering at night, security issues and thieving managers and waitresses selling their stock. Each time you check your CCTV or walk in the places are full but there’s no money. These are characteristics of what my friend Clyde calls “being busy but not making money”.
6. Wines and Spirits; see the challenges of bars and restaurants
7. Consultancy; people leave employment to start a very sexy field called consultancy just to be self-employed. I can assure you out of 10 consultancies 9 will close down before 6 months and the starters go back to employment. Kenya has not reached that level of appreciating professional services except the main ones like doctors and lawyers. Tell a Kenyan company to pay for your marketing advisory and that debate will go on and on.
8. Salons: Besides the bickering, these entities are mainly labour-based and as an entrepreneur or business owner you’re dealing with humans that know better than you on how to run the business they are stealing from you inputs such as shampoos, are attending to clients away from you premises.
9. Barber shops; See the challenges of salons and i’m reminded in barber shops (kinyozi) the best barbers are headhunted by every new one that opens and offers up to a million to bring their clientele, this type will threaten the business owner all the time while earning huge commissions until the next barber shop opens.
The question therefore goes are there no people making money in these businesses? Don’t get me wrong. Yes, there are many but remember clarity often comes from knowing what to avoid rather than knowing what to do. At Phoenix Capital (www.phoenixcapital.co.ke) while offering access to credit from our Zidisha Biashara product we equally give business advise to thousands of businesses that come to us. Stay tunes for our next write up which will touch on how to remain profitable and things to consider while venturing into these businesses.
