Entrepreneurial Archives - BOLLYWOOD SURKHIYAN

Before You Take the Entrepreneurial Plunge, Consider Various Business Models

There are some business models that are more accessible than others, to individuals who have little or no collateral, little or no cash, little or no entrepreneurial experience, little or no training, and little or no choice but to pursue an entrepreneurial dream without the benefit of resources which would ordinarily be nice to have. The purpose of this article is to briefly review some of the alternatives.

First, there are product oriented businesses versus service oriented businesses. In the case of the former, questions arise as to the source(s) of supply, how the inventory is to be managed, whether the product is perishable, and how the product is delivered into the hands of the customer. The business may need a substantial physical infrastructure. In the instance of a product like new cars, you need a lot, a parts department, service and cleanup capacity, and a sales, financing, and administration area. You will also need lighting, security, and other amenities to ensure that buyers have a sense of confidence in the business. If you’re selling ice cream, you need to keep it cold; this implies freezers and refrigerated trucks, perishibility, and substantial energy bills. If you’re selling clothes, you need display and storage space for a variety of sizes and styles. In all of these cases, you need the product itself in inventory. You might also wish to categorize this type of business as having one other similarity among others of like kind: these are “brick and mortar” businesses.

Service businesses may also require “bricks and mortar,” so just because a product is not physically stocked or otherwise identified as tangible, one must not jump to conclusions. A day spa, a bank, or a hotel, are all examples of service businesses that are also brick and mortar businesses. Generally speaking, brick and mortar businesses rely on a “place” where they must exist, and acquiring such a place requires capital. The “place” characteristics of a given business may carry great weight in the eyes of its customers or clientele. It should not be a surprise that many hotels and apartment complexes invest heavily in lobby and entrance areas when designing their facilities.

One might expect that professionals such as attorneys would charge significantly more, or less, simply judging by the type of offices in which their practices are located. Let’s compare two hypothetical situations. The first is the instance of an attorney whose office comes complete with marble floors, collectable paintings, and an attractive, albeit somewhat pouty, reception area representative. We could then compare this to another attorney, whose office is combined with an income tax service and a small engine repair business. The difference between the two is about $300 an hour. There’s a reason that high profile celebrity defendants hire so-called “dream teams” for representation: they get positive results.

Some businesses sell undifferentiated products or services. This means that the product or service offered by one business is the same, or substantially the same, as the one offered by competing businesses. A gallon of gasoline is probably a good example. (At the present time, it appears that every provider has the same goal: reap substantial profits from consumers.) One station may attempt to distinguish itself from another through slight pricing differences. Oil companies may proclaim “we do research to protect the environment with clean burning fuels that are better for your car”; but, a gallon of gas is a gallon of gas in the eyes of most consumers. Any slight price differences, auxiliary services such as clean rest rooms and a convenience store, and location largely determine where consumers will ultimately spend their money (in ever increasing amounts, it seems).

All business models require some form of promotion. The “person on the street” typically confuses terminology that is actually quite specific. The terms promotion, advertising, and marketing are often incorrectly used interchangeably, for instance. Marketing is inclusive of price, product, place, and promotion. A business can be promoted through word-of-mouth and referral; therefore, a good reputation and testimonials should be cultivated by any business. Some products require heavy paid advertising. “Paid” is the critical word here, in that it suggests that the advertiser has some choice in placing a message before a desired audience. By definition, advertising is paid, non-personal communication; ordinarily it is underwritten by an identified sponsor; it is meant to be informative, if not persuasive in nature. By far, most advertising is local, even though one might tend to first think of national advertisers and brands in an advertising recall test (a test of what someone remembers).

Another way to promote a product is through personal selling efforts. Some types of businesses use independent representatives for this purpose, because it makes sense. For example, suppose that one has a line of porcelain figures that are sold primarily through gift stores. However, as a small business, it would be hard to afford a staff of in-house sales representatives to call on thousands of gift stores nationwide. One could use a firm that represents several product lines (such as greeting cards, writing pens, and silver) and simply add the porcelain figurines to the list of products that might be presented to gift store owners and buyers during sales calls. In a small business, it is the management team’s job to make sure that someone is doing the selling. It helps if the owner is comfortable with this role, as his or her passion for the business can usually be leveraged. However, if you are a prospective business founder, and you are not comfortable addressing audiences one-on-one, in small groups, or behind a podium, you’d better enlist one or more individuals who are competent in this area, for the sake of your future success.

After reviewing more marketing and business plans than I can any longer count, I can just about bet that material under the heading “Promotion,” will be the Achilles’ heel in a majority of plans. Authors of these plans, who are often lacking adequate financial wherewithal, tend to sum up an entire treatise on promoting a proposed product, service, or business with: “We will use word-of-mouth to advertise [sic]…” Word-of-mouth is a fantastic way to promote, if is nurtured. A large “buzz” can be created with a great product that is professionally represented through an in-house sales force, or independent representatives. Companies selling encyclopedias, vacuum cleaners, and cosmetics were built through independent representatives who approached consumers directly. More recent examples have utilized network marketing, where an emphasis on building organizational teams has been made. Senior representatives’ roles are to mentor the development of new representatives.

There are labor and equipment intensive businesses, and there are knowledge intensive businesses. Either can be relatively easy, or relatively difficult for a competitor to duplicate. It all depends on the degree of investment and specialization necessary to get into a business. This concept also suggests that there are certain “entry costs” into a given line of business or industry, and these costs represent barriers that must be overcome. The opening statement to this article, where I outlined various “little or no” scenarios, should be reiterated here. You should find a business that meets the “little or no” test according to your set of circumstances. A personal service or consulting-type business is far less expensive to launch than a restaurant or a retail store. If you have speaking skills and a set of overheads and hand-outs, consider a training and development business. If you’re good at matchmaking, become a recruiter or a dating expert.

Most of my own prior business endeavors have been service oriented businesses that required some specialized knowledge. Building a clientele and personally servicing that clientele has been a central premise in each of these entrepreneurial instances. That has often entailed long hours, scheduling dilemmas, and few breaks in between: clients want what they want, when they want it, which, more often than not means “yesterday.” With the advent of the Internet, an entirely new realm of entrepreneurial opportunity was opened to me and millions of other would-be entrepreneurs around the globe. Recognizing some fundamental differences in business models, I registered the Internet domain name, “WebPreneurship.com,” along with numerous others.

The main difference in Internet business models has to do with the fact that one can create an online presence, with the capability to represent numerous types of products or services, many of which can be entirely transacted and delivered using the Web as a facilitator of that process. Digital products can be downloaded; physical products can be delivered through contracted fulfillment services. A related concept, known as drop-shipping, can allow an Internet business to overcome this latter obstacle as well. Drop-shipping means that when an order is generated on an entrepreneur’s Web site, the product supplier or manufacturer will receive the order and send the shipment directly to the consumer. There is a virtual presence facilitated by technology and strategic relationships, as compared to a physical presence with associated brick and mortar costs. Hence, my own working definition of “webpreneurship” began to take shape.

Information products such as electronic books and reports have also created yet another new term in our vocabulary, known as “infopreneurship.” Infopreneurship has to do with making a living (on the part of the infopreneur) by providing information of value. Prior to the advent of the Internet infopreneurs did exist, although they operated under a whole different set of constraints that had to do with the costs of advertising, mailing, shipping, printing, and other expenses that the Internet has largely eliminated.

Even those business types that cannot complete the full product or service creation, selling, and delivery cycle, can enhance their presence over the Internet. For example, you can’t get a haircut on the Internet, but you certainly can look at styling options, pricing and service options, and location information (including interactive maps and directions); subsequently, you can book an appointment time and date. Basic Internet businesses can be created at relatively low cost, and can be maintained with a flexible schedule, assuming that they are fully automated and sell a product such as information and reports as compared to one that requires a physical product to be shipped. An entrepreneur may exercise the drop-shipping or fulfillment services mentioned above, or handle this for him or herself in-house. Of course the latter situation, relative to business models, entails providing availability to customers that confines the entrepreneur to the business during its publicized hours of operation.

Franchises and business opportunities (including buying an existing business) provide one major advantage over other business ventures that are started from scratch: greater certainty derived from a formula that is “tried and true.” If you have no idea where to start, but you are trainable and ambitious with a few dollars to spend, consider a franchise. There are some franchises that use what amounts to a “promote from within” approach, favoring successful managers as candidates for franchise ownership (and providing a helping hand toward financing the franchise fees). Bootstrapping and sweat equity go hand-in-hand, and if you really want a piece of the action, there are individuals out there who are looking for partners–you could quite possibly earn your way into owning a share, or even all, of an existing business.

As for me, I have come to enjoy having multiple roles and avenues for personal as well as professional fulfillment. I teach entrepreneurship at a university, write, and engage audiences as a public speaker. I have invested in several Internet sites. I have created several of these sites myself, while others are turn-key sites. (A turn-key site is one where a system is already in place to provide a product or service as well as technical support, transaction processing, and customer service.) For instance, I have one site that provides Internet domain names, and that is a turn-key site which I purchased for less than two hundred dollars. I am also an independent consultant for a network marketing firm that offers consumable health, wellness and beauty products. A network marketing structure offers me the opportunity to develop, train, and mentor persons who are interested in growing a business opportunity. Meanwhile, as a continual learner myself, I can enhance my skills and knowledge and benefit from peers and individuals who have already blazed a trail before me.

Every business model implies trade-offs and unique characteristics as well as lifestyle choices. I enjoy teaching, but I also think that staying connected as an entrepreneur makes me a better teacher. I like to learn, so I am always pursuing new insights through casual as well as formal research (which I share through writing and speaking). I enjoy helping others, and teaching, mentoring, and guiding others is essential, to me. As a person of humble beginnings whose accomplishments have often been the result of starting from scratch, my most profound lessons have been acquired from the “school of hard knocks.” If I can smooth out someone else’s path, I’d like to do that. I also have enduring financial obligations, like most people, as well as responsibilities and love for friends and family members. Thus, any entrepreneurial decision has a direct impact on every aspect of my life.

In your own way and given your own set of circumstances, you will have to juggle to achieve your own unique entrepreneurial and lifestyle solutions. Before you take the entrepreneurial plunge, consider various business models and their implications completely. Your decisions will impact your life in ways that are to be considered just as seriously as the business models that you scrutinize. The right model will serve as a pattern for your fulfillment and success. Whatever you do, I suggest that you seek spiritual, emotional, and professional balance as a guiding light in your entrepreneurial journey. Making the right choices will enable you to find your “groove,” gain your freedom, and live the kind of life that you’ve always wanted, both on and off the entrepreneurial playing field.

The Entrepreneurial Ability – One of Society’s Scarce Resources

Have you ever wondered what the 4 most important resources in any given economy are?

They go as follows:

1. Land – which includes all the natural resources that go along with it.

2. Labor- people have to work to get anything done, right?

3. Capital- probably not what you’re thinking; this category isn’t money! It includes tools and machinery, and any other productive item.

4. Entrepreneurial Ability- something unique and specific to people! Not everybody has this! Do you?

Isn’t interesting that any given economy must have entrepreneurs! All the resources in the world, including land, lumber, minerals, food, labor, and tools will create nothing without the entrepreneur. Those innovative minds create many of the luxuries that we enjoy today; without them, we’d be without everything!

So what exactly does an entrepreneur do?

An entrepreneur, by simple definition, takes the initiative in combining resources like land, labor, tools, and other items to produce some sort of service or product. They are the ones that start everything! If you don’t have an entrepreneur, no advances in society take place; thus, making it difficult for an economy to grow and improve.

An entrepreneur is also an innovator; or, in other words, somebody who creates from given resources. They collect what is available, and put it together to form something useful for all. If you have no creativity, you may not be fit for entrepreneurial tasks.

Also, one of the reasons why the entrepreneurial ability is such a scare resource is because the entrepreneur assumes ALL of the risk. What happens if the idea flops? What then? Does his or her family end up without means to survive? The greater the risk, the greater the reward! Look at people like Bill Gates, Benjamin Franklin, Thomas Edison, and Henry Ford- these are some of the greatest entrepreneurs and in order to bring us so many great things, these men had to risk everything!

It’s clear that society could not have an effective economy unless the entrepreneurial ability existed within its people.

If you have those qualities and have some ideas, don’t hesitate to create! Your contributions will promote change and improvement in an ever growing economy!

Women Empowerment And Entrepreneurial Revolution

Women have generally been looked upon with contempt for centuries with various strictures inflicted upon them reducing their status to the mercy of men.

They have been confined to hearth and home. But now the perspective of the society has changed and a general thinking to work for the emancipation and empowerment of women is being developed so that they could also contribute in the advancement and welfare of the society.

Women constitute almost 50% of the world’s population. According to the last official Nigerian census in 2006, women comprised almost half of the then 140 million populace at 68.3million. United Nations updated figures for 2010 put Nigeria as Africa’s most populous, as well as most densely populated nation, at 155 million in 2010, the New-York based Centre for Reproductive Rights and the Women Advocates Research and Documentation Centre (WARDC) reported that 600,000 women die in the world annually and Nigeria accounts for 10% of this figure; 60,000 Nigerian women are dying annually due to pregnancy and child-birth related complications. In more comprehensible terms, the number translates to 164 women per day.

According to the Nigerian Minister of Women Affairs and Social Development, the latest Nigerian census revealed that women constitute 49.9% of the nation’s population; the under representation of women (2%) in the nation’s development processes in finance, business and investment fronts, renders 40% of the population inadequately positioned to contribute to the economic growth of the country.

As long as recorded history has lasted, so too has women’s oppression. To many people, it just seems natural that women are worse off, because of their smaller size or their capacity to bear children. Men comfort themselves with the thought that women need looking after. Not just the capitalist system to blame but also in feudal society, women occupied second place to men.

Early anthropologists began to speak of an earlier time when women, not men, ruled society.

The history of class struggles shows the continual effects of the “world historic defeat of the female sex” interweaved with and subordinated to class relations of exploitation.

The woman is an indispensable part of the family, for children are an economic necessity, but her role is a secondary one.

Women, though their economic activity was more centered on the home, played a large role in social life.

Why women are poor/oppressed

Women face many challenges both at home and in the marketplace when they decide to seek employment or engage in entrepreneurial activities.

Religion discouraged women status

Low literacy of women in the world: over 640 million of the women in the world are illiterates (UN Secretary General).

Amongst the world children, 121 million are not in school, most of them are girls.

Two-thirds of the world’s 774million illiterates adults are women (UNICEF statistics)

Girls represent nearly 60% of children not in school.

Educating a girl child is life saving for the world.

Women are more vulnerable to exploitation.

Uneducated girls are more at risk to be marginalized

Women’s rights and access to land, credit and education are limited; not only due to legal discrimination, but because more subtle barriers such as their work load, mobility and low bargaining positions in the household and community prevent them from taking advantage of their legal right.

Women status/employment- 90% of the world female labour are called housewives and excluded from the formal definition of economic activity.

Women work more hours than men and they are unpaid. The paid ones are paid 17% lower than men.

U.K, Germany, Italy, France- women are paid 75% wages. In Vietnam, Sri-lanka and Australia they are paid 90%

Women perform 66% of the world’s work, produce 50% of the food, but earn 10% of the income and own 1% of the property.

However, in some regions, women provide 70% of agricultural labour, produce more than 90% of the food and yet are nowhere represented in budget deliberations.

Women occupy only 24% of senior management positions globally, 34% of privately held businesses globally have no women in senior management. Managerial position- 39% in developed country, 15% in Africa, and 13% in Asia.

In Arab States, only 28% of women participate in the work force.

Women and society laws

First stage of discrimination begins with women when parents about. In Nigeria, most of the small-scale farming enterprises are owned by men. Women by nature have creative abilities, are blessed with ability to persist and pursue their desires, are good and patient nurtures of children, and this tenacity is usually transferred into business, are good innovators, have ability to develop passion for what they believe in.

Many researchers have shown that poverty is a malady that incapacitates its victim economically and indirectly subject him/her to a state of destitution, voicelessness, powerlessness and even violence (World Bank 2000; Okojie, 2002) Unfortunately, the most affected sex by the above incapacitation are women and children. Statistics show that women are poorer than men. The UNDP (2008) estimated that, about 70% of the world-poor are women. Women are poorer because they are more vulnerable economically.

The findings of Thane (1978), Showalter (1987) and Lewis Piachered (1987) cited in Magaji’s Introduction to Project Evaluation (2004) showed that women have been the poorest sex throughout the 20th Century and have formed a substantial majority of the poor since poverty was first recognized. On why women are the poorest sex, the physical strength of women and various challenges limit them to specific soft duties making it difficult to be enterprising.

Entrepreneurship development therefore is a crucial tool for women’s economic empowerment.

The benefits derivable from empowering the women folk are farfetched, starting with family advancement and eventually touching on the national and global economic advancement.

If women are empowered to do more and be more, the possibility for economic growth becomes apparent; eliminating half of a nation’s work on the sole basis of gender can have the detrimental effects on the economy of that nation. It is the nation that blends the strengths of women and men that will lead the world in development (Kiyosaki 1993) in the field of agriculture and other sectors.

A study found that of fortune 500 companies, “those with more women board directors had significantly higher financial returns, including 53 percent higher returns on equity, 24 percent higher returns on sales and 67 percent higher returns on invested capital (OECD, 2008).” This study shows the impact women can have on the overall economic benefits of a company. If implemented on a global scale, the inclusion of women in the formal workforce (like a fortune 500 company) can increase the economic output of a nation.

Entrepreneurship or investing is not an exclusive reserve of any gender. Both women and men generate the same result provided they follow the principles of investment. Kiyosaki (1993) proves with statistical data in Unites States, that women are better investors than men. Also, a study of National Association of Investors Corporation (NAIC), found that women- only clubs achieved average annual returns of 32% since 1951 versus 23% for men-only investment clubs. The verdict is; women know how to handle money and can be greater entrepreneurs than men if the various obstacles to development is removed or minimized.

Furthermore, entrepreneurship will give women opportunities of owning businesses, thereby increasing their personal wealth. Women’s entrepreneurship will of course generate the needed employment in developing economies in Africa and bring in the long excluded population of women into the labour force thereby empowering them.

The best way to fight poverty and extremism is to educate and empower women.

The Limitations holding back women from achieving much like men in entrepreneurship development.

Finance

Manpower and Education

Culture and Tradition

Technology

Erroneous Ideas about Women

Entrepreneurial Attitude

Gender inequality

Common Entrepreneurial Problems

Are you an entrepreneur, investor, entrepreneurship student, enterprise consultant, business educator, regulator, entrepreneurial policy advocate and developer? If your answer is yes then this subject may be of interest to you. What really are the common entrepreneurial problems? Certainly one can come out with a long list. However, some of the problems tend to be minor and also differ with factors such as geographical locations, the nature of business, the level of investment and several other factors. Nevertheless there are common problems that seem to cut across the board. These have been highlighted below.

I. Knowledge and skills deficiency. Most entrepreneurs lack proper knowledge and skills in enterprise management. This deficiency encompasses various aspects of business management. Leadership and managerial limitations fall under this category. Lack of costing knowledge for example, can cause underpricing. Poor understanding of costs of operation may lead to budget deficits and operational challenges. Poor people skills may mean high staff turnover. Bad procurement skills may make your enterprise lose valuable time and money. Poor market research may affect business feasibility. These deficiencies also generate some of the problems indicated below indirectly including inability to learn from mistakes and setbacks. Poor decision-making and implementation result from these drawbacks.

II. Planning and organizational problems. These include lack of strategies, plans, organized systems etc. Processes, procedures, policies are non-existent or are disorganized. Operations may be done haphazardly. This also negatively affects growth and expansion of the business. Lack of record keeping is also organizational. Planning problems also manifest in inability to manage change, such as changing too slowly, failure to consolidate change, etc. Poor accountability, lack of process standardization etc also arise from the above.

III. People problems including hiring incapable staffs such as friends and relatives, hiring the wrong people, inability to attract and retain skilled manpower due to financial and other limitations, inability to place key people in critical positions, difficulty in building teams, hesitation by potential staffs, and others. Reluctance to train and develop staffs also falls under this.

IV. Attitudinal problems such as the craving to do everything without delegation, resulting in burnout, are common. You may also micromanage. Closely connected to this is entrepreneur’s dilemma – the inability to let go because you started the whole thing and feel no other person can take over. The know-it-all attitude may also exist, where you don’t consult, share experience etc. You don’t see value in using experts such as consultants, mentors and coaches. These problems also hinder the entrepreneur from handing over the enterprise to a team of people to manage on his behalf. The enterprise thus remains dependent on the initiator for too long.

V. Money related problems comprising under-capitalization of the enterprise, inability to access funds from other sources, financial indiscipline hence mismanagement of cash, and lack of financial intelligence are common. Additionally, some entrepreneurs are greedy and are too much in a hurry to make money. This is manifested through quick-fix approaches to making money, lack of patience, cheating people and the like.

VI. Personality problems, additional to the attitudinal ones mentioned above, are also common in entrepreneurs. These comprise negative thoughts, too much hence disorganizing fears of uncertainties and failure, lack of self-control, hopelessness, inability to detect and avoid bad advice, lack of critical and analytical thinking, poor stress management, false comfort, taking long but scenic routes to success and being dazed by too many opportunities. Indecision, procrastination and lack of focus also occur. Some entrepreneurs also have the luck mentality and make big business gambles. With false comfort, for example, an entrepreneur may think that if he attains a certain level of sales or profits then his problems are over.

VII. Ethical and regulatory problems. These include challenges in complying with required statutory and regulatory matters, unethical practices by the entrepreneur, reluctance to comply, lack of regulatory and government support etc.

VIII. Poor succession planning is also a major problem with many entrepreneurs. This explains why many enterprises perish after the demise of their originators.

Some startups may also have problems such as poor business model, product quality problems at time of market entry, and other similar challenges. It is important to note here that different stages of an enterprise manifest different problems. The listing of common entrepreneurial problems therefore cannot be complete. I do hope I have provided a good guide, haven’t I?

In subsequent articles we shall be tackling how to overcome some of the above problems.

Should you desire to sharpen your skills in enterprise management, check out Clayton’s book entitled The Wise Entrepreneur at Amazon.

Respectfully,

Clayton Mwaka

ENTREPRENEURIAL CHALLENGES – The Case of Royal Bank Zimbabwe Ltd

Industry Shake-up

In December 2003 Mzwimbi went on a well deserved family vacation to the United States, satisfied with the progress and confident that his sprawling empire was on a solid footing. However a call from a business magnate in January 2004 alerted him to what was termed a looming shake- up in the financial services sector. It appears that the incoming governor had confided in a few close colleagues and acquaintances about his plans. This confirmed to Mzwimbi the fears that were arising as RBZ refused to accommodate banks which had liquidity challenges.

The last two months of 2003 saw interest rates soar close to 900% p.a., with the RBZ watching helplessly. The RBZ had the tools and capacity to control these rates but nothing was done to ease the situation. This hiking of interest rates wiped out nearly all the bank’s income made within the year. Bankers normally rely on treasury bills (TBs) since they are easily tradable. Their yield had been good until the interest rates skyrocketed. Consequently bankers were now borrowing at higher interest rates than the treasury bills could cover. Bankers were put in the uncomfortable position of borrowing expensive money and on-lending it cheaply. An example at Royal Bank was an entrepreneur who borrowed $120 million in December 2003, which by March 2004 had ballooned to $500 million due to the excessive rates. Although the cost of funds was now at 900% p.a., Royal Bank had just increased its interest rates to only 400% p.a, meaning that it was funding the client’s shortfall. However this client could not pay it and just returned the $120 million and demonstrated that he had no capacity to pay back the $400 million interest charge. Most bankers accepted this anomaly because they thought it was a temporary dysfunction perpetuated by the inability of an acting governor to make bold decisions. Bankers believed that once a substantive governor was sworn in he would control the interest rates. Much to their dismay, on assuming the governorship Dr. Gono left the rates untamed and hence the situation worsened. This scenario continued up to August 2004, causing considerable strain on entrepreneurial bankers.

On reflection, some bankers feel that the central bank deliberately hiked the interest rates, as this would allow it to restructure the financial services sector. They argue that during the cash crisis of the last half of 2003, bank CEOs would meet often with the RBZ in an effort to find solutions to the crisis. Retrospectively they claim that there is evidence indicating that the current governor though not appointed yet was already in control of the RBZ operations during that time period and was thus responsible for the untenable interest rate regime.

In January 2004, after his vacation, Mzwimbi was informed by the RBZ that Royal had been accommodated for $2 billion on the 28th of December 2003. The Central Bank wanted to know whether this accommodation should be formalised and placed into the newly created Troubled Bank Fund. However, this was expensive money both in terms of the interest rates and also in terms of the conditions and terms of the loan. At Trust Bank, access to this facility had already given the Central Bank the right to force out the top executives, restructure the Board and virtually take over the management of the bank.

Royal Bank turned down the offer and used deposits to pay off the money. However the interest rates did not come down.

During the first quarter of 2004 Trust Bank, Barbican bank and Intermarket Bank were identified as distressed and put under severe corrective orders by the Central Bank.

Royal Assault

Royal Bank remained stable until March 2004. People who had their funds locked up in Intermarket Bank withdrew huge sums of funds from Royal Bank while others were moving to foreign owned banks as the perception created by Central Bank was read by the market to mean that entrepreneurial bankers were fraudsters.

Others withdrew their money on the basis that if financial behemoths like Intermarket can sink, then it could happen to any other indigenously controlled bank. Royal Bank had an advantage that in the smaller towns it was the only bank, so people had no choice. However even in this scenario there were no stable deposits as people kept their funds moving to avoid being caught unawares. For example in one week Royal Bank had withdrawals of over $40 billion but weathered the storm without recourse to Central Bank accommodation.

At this time, newspaper reports indicating some leakage of confidential information started appearing. When confronted, one public paper reporter confided that the information was being supplied to them by the Central Bank. These reports were aimed at causing panic withdrawals and hence exposing banks to depositor flight.

Statutory Reserves

In March 2004, at the point of significant vulnerability, Royal Bank received a letter from RBZ cancelling the exemption from statutory reserve requirements. Statutory reserves are funds, (making up a certain percentage of their total deposits), banks are required to deposit with the Central Bank, at no interest.

When Royal Bank began operations, Mzwimbi applied to the Central Bank – then under Dr Tsumba, for foreign currency to pay for supplies, software and technology infrastructure. No foreign currency could be availed but instead Royal Bank was exempted from paying statutory reserves for one year, thus releasing funds which Royal could use to acquire foreign currency and purchase the needed resources. This was a normal procedure and practice of the Central Bank, which had been made available to other banking institutions as well. This would also enhance the bank’s liquidity position.

Even investors are sometimes offered tax exemptions to encourage and promote investments in any industry. This exemption was delayed due to bungling in the Banking Supervision and Surveillance Department of the RBZ and was thus only implemented a year later, consequently it would run from May 2003 until May 2004. The premature cancellation of this exemption caught Royal Bank by surprise as its cash flow projections had been based on these commencing in May 2004.

When the RBZ insisted, Royal Bank calculated the statutory reserves and noted that, due to a decline in its deposits, it was not eligible for the payment of statutory reserves at that time. When the bank submitted its returns with zero statutory reserves, the Central Bank claimed that the bank was now due for the whole statutory reserve since inception. In effect this was not being treated as a statutory reserve exemption but more as a penalty for evading statutory reserves. Royal Bank appealed. There were conflicting opinions between the Bank Supervision and Capital Markets divisions on the issue as Bank Supervision conceded to the validity of Royal’s position. However Capital Markets insisted that it had instructions from the top to recall the full amount of $23 billion. This was forced onto Royal Bank and transferred without consent to the Troubled Banks Fund at exorbitant rates of 450% p. a.

FML Saga

When FML was demutualising, the executives were concerned about the possibility of being swallowed by its huge strategic partner, Trust Holdings. FML approached Royal Bank and other banks to act as buffers. The agreement was that FML would fund the deal by placing funds with Royal Bank so that Royal would not fund it from its balance sheet.

Consequently FML would leave the deposits with Royal Bank for the tenor of the loan. The deal was consummated through Regal Asset Managers and was to mature in December 2004, at which time it was anticipated that the share price of First Mutual would have blossomed, allowing Royal Bank to harvest its investment and exit profitably. The deal resulted in Regal Asset Managers owning 57 million FML shares. Royal Bank gave FML some securities in the form of treasury bills as collateral for the deposit.

The Reserve Bank and the curator wrote off this investment because at that time FML was suspended at the ZSE. However the fact that it was suspended did not invalidate its value. Recent events have shown that this investment has generated huge capital value for Regal Asset Managers as the ZSE rebounded. Yet the curator valued this investment negatively. Around March 2004 there had been a contagion effect at FML due to the challenges at Trust Bank. This resulted in the forced departure of the FML CEO and chairman. FML was suspended from the local bourse as investigations into the financing structure of Capital Alliance’s acquisition were carried out. Because of the pressure brought to bear on FML, it wanted to withdraw the deposits held by Royal Bank, contrary to the agreement. FML could not locate and return the treasury bills that had been provided as collateral by Royal. Royal Bank suspected that these had been placed with ENG, another asset management company which collapsed in December 2003. A public row broke out. Royal Bank executives sought counsel from Renaissance Merchant Bank, which had brokered the deal, and the Chairman of the ZSE, who both agreed with Royal that the deal was legitimate and FML had to honour the agreement. At this stage FML sought court intervention in an attempt to force Royal Bank into liquidation. Even the curator contested the FML position resulting in his taking it for arbitration. Royal’s position remained that if FML fails to return the securities then it will not get the funds.

Royal bank directors claimed political interference on the issue. The Royal Bank executives believe that the governor, against his better judgment, decided to act against Royal Bank under the pretext of the political pressure. In retrospect, the political support for cracking the whip at Royal gave credence to the rumour that the governor had an underlying agenda in taking Royal and merging it into ZABG because of its strong branch network.

Royal Bank had been warned by friendly RBZ insiders that if it ever accessed the Troubled Bank Fund it would be in trouble, so it sought to avoid this at all costs.

However on 4th August 2004, Royal was served with papers that effectively placed it under the curator. Interestingly, the curator’s contract was signed two days earlier. Until this time no depositor had ever failed to withdraw his deposits from Royal Bank.

The lack of credibility of the Reserve Bank in handling this case is exposed when one considers that some banks were given more than eight months to stabilise under curators, e.g. Intermarket and CFX Banks, and were able to recover. But Royal and Trust Bank were under the curator for less than two months before being amalgamated. The press raised concerns about the curators assuming the role of undertaker rather than nurse, and hence burying these banks.This seemed to confirm the possibility of a hidden agenda on the part of the Central Bank.

Victor Chando

Chando was an excellent financial engineer who set up Victory Financial Services after a stint with MBCA. He had been the brains behind the setting up of the predecessor of Century Discount House which he later sold to Century Holdings. Royal Bank initially had an interest in discount houses and so at inception had included Victor as a significant shareholder. He later acquired Barnfords Securities which Royal intended to bring in-house.

Victory Financial Services was involved in foreign currency dealings, using offshore companies that bought free funds from Zimbabweans abroad and purchased raw materials for Zimbabwean corporations. One such deal with National Foods went sour and the MD reported it to the Central Bank. On investigations the deal was found to be clean but the RBZ went ahead to publish that he was involved in illegal foreign currency transactions and linked this to Royal Bank. However this was a transaction done by a shareholder as an account holder, in which the bank had no interest. What confused matters, was that Victory Financial Services was housed in the same building as Royal Bank.

After failing to nail Chando to any criminal charges, the Central Bank issued an order for Royal Bank to force him out as a shareholder and board member. It is ridiculous that the Central Bank would vet who is a shareholder or not in banks – particularly when the people had no criminal records.

Negotiations with OPEC were underway for it to take over Chando’s shareholding. The Reserve Bank was aware of these developments. OPEC would then help in the recapitalisation as well as open up lines of credit for the bank.

The Arrest

In September 2004 the executive directors of Royal Bank, Mzwimbi and Durajadi, were arrested on five allegations of fraudulently prejudicing the bank. One of the charges was that they fraudulently used depositors’ funds to recapitalise the bank.

Three of the charges after police investigations were dropped, as they were not true. The two remaining charges were:

a) a conflict of interest on loans that were made available to the directors. The RBZ alleges that they did not disclose their interests when companies controlled by them accessed loans at concessionary rates from the bank. However the enterprising bankers dispute these charges, as they claim the Board minutes prove that this interest was disclosed. Even the annual financial statements of the bank acknowledge that they accessed loans as part of their employment contract with the bank.

b) money was owed to Finsreal Asset Management. However Mzwimbi argues that Finsreal actually owes them money and not the other way round. Royal Bank shareholders needed to inject money for recapitalisation of the bank and were requested to deposit their funds with Finsreal Asset Management. Since some had not paid their portion of the recapitalisation by the due date, Royal Financial Holdings, which had an account with Finsreal, paid the money on behalf of the shareholders – who were then indebted to Royal Financial Holdings. Somehow the RBZ confused this transaction as the bank’s funds and therefore accused the

shareholders of using depositors’ funds to recapitalise.

By retrospectively analysing the court case wherein the Royal Bank executive directors are accused of defrauding the bank it appears that the RBZ created a falsehood in order to frustrate the bankers. The curator who initially refused to take a stand before the RBZ appointed Independent Appeal, has in court clearly testified that no monies were stolen from the bank by the directors and that the curator did not (contrary to RBZ assertions) recommend charges against the bankers. In January 2007 the former executive directors of Royal Bank were acquitted by the High Court on the remaining criminal charges after the prosecution failed to present a convincing argument.

Royal Bank assets were sold by the curator to ZABG barely two months after being placed under the curator, without any audited financial statements. The speed at which an agreement of sale was reached is astonishing. The owners of Royal Bank went to court and, after a protracted legal struggle, the court ruled that the assets were sold illegally and hence the sale was “illegal and of no force or effect and therefore null and void”. The court then directed that the owners should appeal to the Central Bank for a determination of the actions of the curators. The Central Bank begrudgingly set up an “independent panel” to adjudicate the case. Strangely ZABG continued to trade on the illegal assets.

The panel advised that the appeal by Royal bank be rejected as it would be difficult to disentangle it from ZABG. They also cited the fact that ZABG had some contractual obligations with third parties who may not want to do business with Royal bank. This strange ruling fails to explain why these considerations were not made when the amalgamation was done. The ruling also redefined the agreements between the curator of Royal bank and ZABG as not being an “agreement of sale” even though the parties which entered into the agreement clearly intended it to be viewed as such. This was a way of circumventing the Supreme Court ruling that the agreement of sale was null and void.

But the panel did not explain how this disposal of the assets should be considered if it was not a sale.

Consequently the major shareholders of Royal appealed to the Minister of Finance who upheld the RBZ decision. Mzwimbi and his colleagues have therefore appealed to the courts. In the meanwhile there was a failed attempt to sell the disputed assets by ZABG despite the outstanding legal challenge. Just ice delayed is justice denied.

Mzwimbi and his team have been denied access to all bank records and yet are expected to defend themselves. As he characteristically puts it, “We are going into this fight blind folded and our hands bound, while fighting someone who has armour and a sword.”

Around 2002-3 there were press reports indicating that the ruling party/state wanted to have a stake in the profitable banking sector. A minister of government at the time of the arrest confirmed this to Mzwimbi and his team. Another bank, NMB, had allegedly been assaulted and the major shareholders were told to dispose of their shareholdings to certain politically connected persons. They refused and had to leave the country after some trumped up charges were preferred against them. Unfortunately, the governor faced resistance and the politicians distanced themselves. One indigenous banker reported how he was summoned to the Central Bank governor’s office and informed that he should leave the country, as his bank would be closed. This banker credits Royal Bank’s resistance to being manipulated as the reason why his own bank survived. The bank was placed under curatorship on 4th August 2004. Mzwimbi had secured potential investors for the recapitalisation of the bank just before the deadline of 30th September 2004. Three days before that deadline, Mzwimbi met the curator and explained in detail the position for the recapitalisation exercise. Investors who had shown interest and were in advanced negotiations were OPEC, Fidelity Insurance and some South African investors. He further asked the curator to request the Central Bank for an extension of about a week. The very next day he was arrested on the pretext that he was about to leave the country. Mzwimbi and his team believe that his arrest at that critical stage was meant to intimidate the would-be investors and result in the failure to recapitalise. This lends credence to the view that the decision to acquire the bank and amalgamate it in ZABG had already been made. The recapitalisation would have scuppered these plans. Notably, other banks were given an extension to regularise their recapitalisation plans.

Shakeman Mugari reported that the central bank has in principle agreed to enter into a scheme of arrangement with Royal, Trust and Barbican banks which could see the final resolution of this issue. He argues that the central bank disregarded the value of securities that the banks had pledged to the central bank for the loans. If these are factored in, then the bank shareholders have some significant value within ZABG. If this scheme had been consummated it would have protected RBZ officials from being sued in their personal capacity for the loss of value to shareholders. From the article it appears like a memorandum of agreement had been signed to effect a reduction of Allied Financial Services’ share in ZABG while the former banks’ shareholders will take up their share in proportion to the value of their assets. This seems to indicate that the central bank has noted a weakness in its arguments.

If this proves true Royal Bank could regain a fairly big stake of ZABG due to its assets which included the real estate and its paper assets which had been undervalued.

The legal hassles show that entrepreneurs in volatile environments face unnecessary political and legal challenges. The rule of law in these countries is sometimes nonexistent. The legislative and political environments, instead of supporting investors, pose serious challenges to entrepreneurs. Entrepreneurs in these environments have to assess the associated risk in setting up their enterprises. However a new breed of entrepreneurs who do not fear the vicissitudes of political interference is making a difference. Entrepreneurs recognise that the environment is a constraint but can be manipulated until worthwhile opportunities are exploited for commercial value. These entrepreneurs choose not to be victims of the environment.

Assault on Entrepreneurs’ Character

The information asymmetry whereby the Central Bank played its case in the public press while the accused bankers had no right of response created a false impression, in the minds of the populace, of entrepreneurs being greedy and unscrupulous.

The Central Bank accused Jeff Mzwimbi and Durajadi Simba of siphoning funds from the bank. An example appeared in a press article in which it was alleged that the sale of Barclays Bank branches to Royal Bank was annulled and the refunded funds were remitted to Mzwimbi and Durajadi at Finsreal Asset Managers and not Royal Bank’s account. This was a clear case of deliberate misinformation as the Central Bank was aware of the truth. Royal Bank had included the purchase of the Bulawayo Barclays Bank branch building which Barclays Bank would lease a portion of from Royal Bank. When Royal Bank fell short at the Interbank Clearing House, it renegotiated with Barclays. This was after Royal was threatened that if it did not clear this amount it would be placed into the Troubled Bank Fund – which carried severe penalties.

The result was that Barclays refunded the amount paying it directly to Royal’s Central Bank account. The RBZ acknowledged receiving these funds. How can they now accuse the founding shareholders of siphoning the same funds which went directly to the RBZ account? Mzwimbi insists that Barclays can easily testify to this.

The RBZ also alleged that Mzwimbi and Durajadi withheld information from their CVs on application for the bank licence and hence questioned their integrity. They claimed that Mzwimbi withheld information on his involvement with a failed bank, UMB. But the business plan for Royal Bank which was filed with RBZ clearly states this involvement. The Central Bank would have these records anyway. They also queried Durajadi’s source of funds and cast aspersions on the net worth statement. Yet Durajadi had been involved in Zimbabwe Trust and a transport business with his brother, which gave him sufficient net worth value.

The RBZ contends that the Board of Royal Bank failed to comply with a directive to recapitalise by 29th July 2004. Royal Bank executives and Board state categorically that they never received this directive. Mzwimbi and his team argue that this is misinformation, as all banks were required to have recapitalised by 30th September 2004.

The regulators also allege that the balance sheet of Royal Bank had a deficit of $140 billion, which the bankers dispute. If one were to consider the disputed $23 billion for statutory reserves and the $20 billion as accommodation from the clearing house, this would amount to $77 billion with interests. However with the undervaluing of the assets and the $160 billion which was written off as uncollectible, there would be no negative balance sheet. The contention of the Royal Executives is that the curator, at the behest of the Reserve Bank, deliberately tampered with the accounts to provide a reason for the take-over. This may be validated by the fact that the curator’s balance sheet kept changing whenever he was challenged and he increased the write-offs, even of funds that had since been collected. Since Royal and Trust Banks were amalgamated into ZABG, the bank is still profitable, without any recapitalisation having been carried out. The very fact that this new amalgamated bank can operate for this long from insolvent banks’ capital without recapitalising lends credence to the argument of the Royal Bank’s owners.

The entrepreneurs contend that they were dealing with a Central Bank which was determined to see them sink and not to protect the integrity of the banking system. This environment was not conducive to survival and it amplified normal weaknesses which could have been resolved in the course of normal business.

Entrepreneurial Determination

Mzwimbi and his colleagues refused to give up under challenging situations. Despite intimidation they took the Central Bank to court and refused to budge until justice was done. They were presented with numerous opportunities to quit the country but would not.

It is reported that they have not given up on their dream. They have set up Royal Financial Services in Kenya, despite the challenges in Zimbabwe. Indeed a sign of perseverance. Press reports indicated that they are in negotiations with Trust Bank so that once they win their case they can merge and continue their operations in Zimbabwe. Trust did not confirm or deny this. The more likely scenario however is that both Trust and Royal could reach a compromise with the central bank resulting in them taking up equity in ZABG subject to an independent revaluation exercise of the assets which were taken over.

Entrepreneurial Principles

The entrepreneurial journey is fraught with risk but can be very rewarding. Some lessons that can be learned from the case study are as follows:

• Entrepreneurs take calculated risk. Mzwimbi did not use all his resources in the bank but left his shareholding in Econet intact. He also sought to diversify his wealth by keeping some investments with FML and Screen Litho. This has been the mainstay of his wealth creation strategy. The disaster that befell the bank did not completely wipe him out because of this prudent investment strategy.

• Entrepreneurs learn from their experiences. Mzwimbi’s vast experiences taught him critical lessons. His international banking experience enabled him to see the emerging trends as Barclays and Standard Chartered withdrew from country towns, creating a route for his entry strategy. His work with Econet taught him perseverance as he and his colleagues fought legal battles with government for the award of the licence. Little did he know that this was just training ground for the battle of his life – the battle for Royal Bank.

• Entrepreneurs need to continuously scan the environment for threats and opportunities. Whereas Mzwimbi and his team were good at noticing the emerging positive trends in the environment at inception, they failed to pick the changes in the regulatory environment when the new governor came on board.

• Entrepreneurial strategy emerges and therefore entrepreneurs should be flexible. Although Royal Bank had a plan to grow at a steady pace, when the opportunity arose to acquire other branches cheaply the entrepreneurs seized the opportunity.

• Entrepreneurs are faced with credibility challenges as customers, regulators and suppliers test the credibility of newcomers. Royal Bank minimised this by recruiting experienced and well known personnel in the market. However the lack of institutional shareholders led to credibility gaps with some corporate clients.

• Entrepreneurs need to craft into their organisations both managerial and leadership competences to ensure both the ability to exploit opportunities (entrepreneurial activity) and sustainable company performance (strategic management). The more contemporary view of entrepreneurship transcends just the venture creation and now encompasses strategic growth. Although Mzwimbi was an excellent leader he needed a strong and powerful manager to consolidate the gains and create solid systems to sustain the rapid growth. Leaders thrive on change while managers thrive on handling complexity and creating order.

• Business is built on relationships as these help in the scanning of the operating environment e.g. critical information about opportunities and threats was obtained from close relationships

Lets close this article with a few questions that an entrepreneur should consider. For instance, if Mzwimbi had expanded less aggressively, would Royal Bank have been safer from the regulators? How could Mzwimbi have protected Royal Bank from political and regulatory interference if he anticipated those risks? If Mzwimbi had selected to pursue his enterprise ideas in a country with a more dependable political and regulatory environment, how would he have performed? Would it have been wiser to keep the equipment, real estate and other assets in Royal Financial Holdings or other corporate entity and only lease them to the bank? In that scenario would the predators have been able to pounce on the bank?

Sources: I Dr Tawafadza A. Makoni confirm being the author of this work. The material for this case study was drawn from my interviews with Mr J Mzwimbi CEO of Royal Bank in February 2006 and two Royal Bank Board Members. Some material was drawn from an unpublished Royal Bank Strategic Business Plan, (2000)

Caultivating an Entrepreneurial Skill Set

Entrepreneurship is a skill that seems elusive. No one seems to have a satisfactory answer to the question of whether an entrepreneur is born or made. Some people claim that there are people who are born with a special skill set – ambition, business sense, independence, creativity – and that this is the makings of an entrepreneur. They point to cases like Rockefeller, Steve Jobs, and Bill Gates to make their point.

There are other successful businessmen who didn’t start out in an entrepreneurial vein, however. Many successful businessmen started in managerial positions, or even lower positions, before catching entrepreneurial fever. These people are what could be called “made” entrepreneurs.

The question then becomes whether there are certain traits that are common to all entrepreneurs, and necessary for successful entrepreneurship. The answer is yes.

First, a strong sense of independence is crucial. By default, an entrepreneur is independent. For someone to be willing to leave behind a secure position or even a promising career for the risk and uncertainty of going into business for themselves, there needs to be a fierce drive for independence. Any successful entrepreneur will value the ability to chart his or her own destiny over the value of being safe and secure in a regular job.

The ability to maintain focus is the second necessary skill for successful entrepreneurship. It’s not easy starting your own business. There are so many little things that you have to keep track of. Everything from finances to inventory to marketing to employee relations is all your responsibility.

You have to be able to keep your focus on your goal. If you can’t, then your mind will wander and your profits suffer. Business success requires focused effort. All successful entrepreneurs know this, and are able to be disciplined about matters.

The drive to succeed is the final key ingredient to successful entrepreneurship. Without this strong motivation to be successful, it will of course be very easy to lose heart and let your business simply fold.

The startup period is a difficult and critical period in the life of a business, and it can be most disheartening. There is so much work that needs doing, and there are so few clients at the outset! A big part of the entrepreneur’s challenge is to stay motivated during these bleak periods. Plus, to keep your business moving forward you also have to safeguard employee morale.

These three components are the ones that I believe are utterly critical for any person who hopes to be a successful entrepreneur. That does not mean that other qualities, such as creativity or patience or even luck, aren’t also important. But, to me, the three I have listed above are the critical ones that will mean the difference between success and failure.

Entrepreneurial Thinking – Connect With Your Higher Business Potential

When you think of a successful entrepreneur your immediately think of personality traits or values that define who they are. Richard Branson is associated with fun. Anita Roddick was an environmentalist. Steve Jobs lived by simplicity. Each one of these evokes an emotional connection with what they were good at (Richard still is).

So what is an entrepreneur? What is entrepreneurship? There are many definitions, but the one that rings true to me is that of Peter Drucker

“This defines entrepreneur and entrepreneurship – the entrepreneur always searches for change, responds to it, and exploits it as an opportunity.”

Does this ring true with you? Do you aspire to think like an entrepreneur?

Here are five features of entrepreneurial thinking based on my work with clients who I mentor to shift their own internal barriers to move on to create incredible change. If you are a business owner and are stuck in a rut, use these strategies to break through the chains that are holding you back:

1. Have a goal and a plan – and work on it

Make sure that your goal is as specific as you can get it. If your goal is to increase your income, be specific about how much. Decide your time frame – when you want your goal to be achieved by. Create your plan to achieve your goal and get started. Don’t procrastinate. If your plan isn’t going the way you want it, don’t give up. The secret is to have a plan. The content of the plan may change, you will make corrections as you go along, but as long as you persist on a regular basis, you will reach your goal. It may be uncomfortable at first. You may feel that you’re not making progress, but after a time things will start happening very quickly to help you reach your goal. Persistence works.

2. Get over your limiting beliefs

It’s very likely that the one thing that is stopping you from achieving what you want to do is YOU. Your attitudes and behaviours are influenced by your self-belief. Stop and listen to the voice in your head. Is it negative, telling you you’re not good enough, or that you can’t afford xyz? Where is that coming from? When you face a problem, sit down and try to write down as many reasons as you can think of (and some) on one half of a sheet of paper why you can’t. Then on the other half, write down the exact opposite. Focus on why you can. It is a really good exercise for working out what in your past or childhood influenced your mind to believe the way it does. When you’ve finished – FLIP THE SWITCH. Use positive wording. When you wake up in the morning, make your first thoughts positive ones as they will influence your mood for the rest of the day.

3. Your five best friends

Jim Rohn, a well-known entrepreneur and motivational speaker said “you are the average of the five people you spend the most time with”. Look around, who are you spending your time with? Are these people able to motivate you to achieve your goals? Can they help you on your journey? If you friends are living a mundane existence, chances are it is comfortable for you to do the same. Snap out of it. Seek out new alliances to help you get to where you want to be. Start with your goal and identify what skills and supports you’ll need. Identify five people and connect with them. One may be your mentor. One may be someone with characteristics you wish to emulate. One may be someone with the contacts and networks you need. Examine your networks. Are there new networks you can join that can open doors for you.

4. Get a mentor

As Richard Branson said, when you think about the missing link between a promising businessperson and successful one, mentoring comes to mind. On a lonely journey to discovery and success, a mentor provides a trusted arm and beacon along the way. You don’t have to be a business owner to have a mentor. You just need to have a goal and a strong desire to get there. A good mentor will guide you along the way.

5. The power of the master mind

Napoleon Hill in “Think and Grow Rich” told of the power of the master mind. Bring two or more minds together and you create “a third invisible intangible likened to a third mind (the master mind). Bring two or more people together to work on their own businesses in a mutual, trusting, tough love environment, coupled with voluntary accountability, will over time, strengthen each business. A master mind group that works well will achieve results through learning, sharing new ideas and stimulating new ideas and business models.

Put these strategies into place and watch as the world moves to make way for you and your goals.

Options for Entrepreneurial Retirement – Gaining A Real Peace of Mind

At some point in every entrepreneur’s life, they have dreamed of starting their own business. When that newly minted entrepreneur steps away from corporate employment and into the wild west of self-employment, they take on the full responsibility of their financial destiny. Gone are the days of contributing to a matching company 401k plan.

These small business owners are now responsible for setting up and contributing to their retirement plan. According to a recent TD Ameritrade survey 7 in 10 self-employed people are not regularly saving (if at all) for retirement. I recently spoke with Heather Banks, a Certified Financial Advisor with First Bank Wealth Management in Asheville, NC. Heather shared with me her impressions of how retirement savings has shifted over the years. “For too many years, U.S. citizens have been reliant on social security benefits to fund their retirement. Social security is simply not capable of fully funding a retirement with any realistic expectation of maintaining the lifestyle they grew accustomed to during their working years. It is vital that small business owners take advantage of the retirement benefit options available to them, and work with financial professionals (financial advisors, accountants, etc.) to determine which option is the most beneficial for them.”

There are several programs a self-employed person can utilize to help them achieve their retirement goals.

SEP IRA(Simplified Employee Pension plan) is a retirement plan that allows a self-employed or solo-entrepreneur person to make pre-tax donations. It is a plan that is similar to a traditional IRA. It does, however, allow you to have a much higher contribution level. This type of program is one of the easiest of open and maintain. Most banks and investment firms can help your open and maintain this kind of account. With this plan, you can contribute as much as 25% of your net earnings from self-employment. The contribution limit for 2015 is $53,000. The deadline to open an account is April 15th following the tax year.

ROTH IRA is a retirement plan where the contributions you make are not deductible in the year that the contributions are made however they grow tax-free and are not taxed when they are withdrawn. The maximum contribution in 2015 is $5,500 if you are under the age of 50 and $6,500 if you are over 50 years old. These amounts begin to phase out for high-income earners who make $116,000 (single/head of household) and $183,000 (married). The deadline to open an account is April 15th following the tax year.

SIMPLE IRA Plan (Savings Incentive Match Plan for Employees) is a deferral of the compensation plan. It is easy to open and maintain with banks and investment firms but keep in mind it has a lower contribution limit. This plan is good for businesses where the owners have other income sources as it allows them to set aside a larger percentage of profit. You can put all of your net earnings from self-employment in the plan up to $12,500 in 2015 through salary reductions. If you are over the age of 50, you can increase your donations by $3,000. The employer can also contribute up to 3% of employee’s contribution. This plan is best for self-employed people with fewer than 100 employees. The deadline to open an account is October 1.

The SOLO 401(k) Plan is easy to open and requires little maintenance. It is designed for companies without employees and, therefore, the program is only available to the owner and his/her spouse. This plan follows the same rules and requirements as any other 401(k) plan. You can make salary deferrals up to $18,000 in 2015 plus an additional $6,000 if you are over the age of 50. If you hire employees and they meet the plan eligibility requirements, you must include them in the plan, and their elective deferrals will be subject to nondiscrimination testing. The deadline to open the account is December 31. The program will be required to file an annual report with the IRS if it has $250,000 or more in assets at the end of the year.

For more information on each of these plans, I recommend you contact your local Certified Public Accountant and Certified Financial Planner. They will be able to help you choose which plan is best for you. I agree with Dave Ramsey, who said “I believe that through knowledge and discipline, financial peace is possible for all of us.”

Entrepreneurial Approach to Resources

Howard Stevenson and his colleagues at Harvard Business School define entrepreneurship as “the process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled.” This approach, Stevenson maintains, has greatly contributed towards the success of entrepreneurs. He points out that entrepreneurs seek to use the minimum possible amount of all types of resources at every stage in their venture’s growth. These resources include human resources, financial resources, assets and a business plan. Rather than own the resources entrepreneurs need, they seek to control them, according to Stevenson.

Studies indicate that entrepreneurs with such an approach towards business substantially reduce the risk in pursuing opportunities.

1. Capital: Since the amount of capital required will be smaller, it will mitigate risk by reducing the financial exposure and the dilution of the founder’s equity.

2. Flexibility: Entrepreneurs are in a better position to commit and decommit quickly when they do not own a resource. The flexibility of business thus gained can be very useful to a firm, since it enables them to respond faster and reach decisions quickly. In addition to this, the entrepreneurial approach to resources allows strategic experiments, which means that ideas can be tried and tested without committing to the ownership of all assets and resources in the business. For example, it is wise to raise capital gradually as the need arises, otherwise one may end up spending it too early on wrong decisions. Inflexibility also results from committing permanently to a certain technology, software or management system.

3. Low Sunk Cost: The cost of closing down a firm or a venture will also be lower if the ownership of resources is less. If the up-front capital commitment is huge, abandoning such a project will also be very costly.

4. Costs: Fixed costs will be lower, which will have a positive affect on breakeven. Of course in that case variable cost may rise.

5. Reduced Risk: Apart from reducing risk in general, other risk events such as risk of obsolescence of resource are also lower. For example, biotechnology companies have used venture leasing as a way to supplement sources of equity financing.

One should not assume incorrectly that this approach means that a firm cannot afford to buy resources. The fact is that not having ownership has its own advantages and options in the form of flexibility of business and reduced risk. However, at the same time these decisions are very complex, and considerations such as tax implications of leasing vs. buying and other existing laws and regulations have to be thought of thoroughly and carefully.

How to Develop Your Ability to Synthesize Information – A Key Entrepreneurial Skill

Successful business ownership is all about gathering information, picking through it to decide what makes sense, and making sound decisions based on all available data. Synthesizing information in this way can be a difficult task to master, but a little time and practice can make you an expert in no time.

Synthesis is the final step in critical thinking — after you analyze, evaluate, and organize information from different sources, this step requires you to put it all together. Many people struggle with this step, but really all you are trying to do is select the best answer, or combination of answers, from a wide range of data. In fact, the odds are that you do this on a regular basis anyway, whether you are aware of it or not.

As you may have noticed, the internet is flooded with all sorts of conflicting information on just about any subject. Trying to find the best answer by surfing the web requires that you consider the merit of a variety of sources and choose for yourself which idea makes the most sense to you. You might find yourself coming up with an entirely different answer than those you read about…this is synthesizing.

Essentially what is happening is that by examining and evaluating a number of sources, you are identifying consistencies and relationships between and among the data. With these connections, you are better able to create a new idea that can be supported by the various knowledge you have picked up along the way. Not everyone will come up with the same solution, and your own solution may not always turn out to be right, but by starting with a wealth of data you improve the odds of missing something important.

In the context of entrepreneurship, synthesis is a critical skill for every step, from planning your business idea to growing your company. Most first-time entrepreneurs do not have a complete toolshed of basic business knowledge, much less the details of their own product, market, and competition. Gaining this knowledge is essential, but very little of it has clear right and wrong answers. In any type of business, there are hundreds of small decisions to make along the way, each of which has the potential to make or break the entire venture.

For example, a critical portion of business planning is developing your marketing plan. In order to create an effective marketing plan, it is essential to study the basic tenets of marketing, the various routes for getting your message out, and the best ways to convince your target market that your product or service is the way to go. Search for “Marketing Plan” on the internet, and you will get hundreds of results, millions of ideas and opinions, and several dozen sales messages telling you that they hold the “secret” to effectively marketing your product. The reality is that there is no right answer for every business, so you must review and analyze a multitude of information, then come up with a plan that incorporates the best of these ideas that will be most effective for your business.

The key to effective synthesis is to collect enough data to understand the fundamental concepts. Use a variety of sources and mediums to develop your knowledge base — read articles and books, talk about your ideas with those in the know, watch what happens around you. Look for opinions that differ from your own to ensure you have considered all different perspectives. The more information you have to draw from, the easier it will be to make informed, justifiable decisions to keep your startup on track and on the road to success.