Business Archives

The Challenge of Turning an Idea into an Income

December 2, 2022 5 min read

Tech product engineers consider themselves to be the geniuses of the 21^st century. They have disrupted the world with both hardware and cutting-edge software, and are still working on some cool stuff that you probably have not heard about. Programmers claim that they rule the world and that the solution to every problem facing the world is just a few lines of code away. This fuels the drive to create the next tech startup with the goal of becoming a unicorn.

However, often these dreams never come to be, in some cases, leaving a very demoralized potential founder.

It always starts with a person with an idea; the next big thing. But an idea on paper does not translate into a successful venture, or as they say in Kenya, vitu kwa ground ni different (on the ground things are different). Many software developers who started a venture with a product slowly abandon their pet projects and become resellers of existing products, or go into employment. It does not take long for someone to realize that it is easier to resell a product than to build your own from scratch. Building a product is hard and painful. The worst part is that even a good engineer needs expertise in the specific niche they want to disrupt. If you are building a solution for lenders, you need to fully understand how their business runs.

What are the challenges that keep people from commercializing and making money from their products?

Your Product is not Good Enough

Not everyone can create a product, even if they are good engineers. It is as simple as reading and writing. While many people can become very knowledgeable in a language, and master all the words possible, not everyone can write a thriller story or novel. And once you have written one, marketing is the other challenge that you face. Many great books have failed to fly off the shelf because marketing was not properly done. In a different scenario, poorly written books that have little or nothing to tell can end up becoming bestsellers. Many people have invested in creating products that simply don’t work. To be fair, many products fail even great ones. However, it takes determination, skill, great talent, and sometimes chance to get a good product.

If you have a product that you want to launch, you may consider getting experienced people who can tell you whether what you are doing is nonsense or the next big idea. Mentorship is important, and people with expertise are able to identify what can work, what may work, and what will definitely never work.

Geographical Barriers

In 2012, when I was required to do a final year project, I was looking for the simplest solution that could give me an easy time and a good grade. I came up with a noise meter that could report via SMS, as well as issue alerts on excess noise depending on the set levels. After school, I tried to find a practical application for it but there was simply no market, and thus no motivation to commercialize the project. Three years later, a company was founded in the US to offer the same product. Airbnb hosts love the idea.

The problem was that the geographical location I was in did not have a market for the product. Somewhere in a different country, it would have made sense. When Google launched a Personal Safety app that detects car crashes and calls 911, I saw some people in West Africa who already had done that years earlier, but they never made news, and possibly sales.

Marketing Skills

When a friend actively sold software, he used to marvel at the great opportunity that existed in the market. He had taken time to study the market and the competition, going into detail to understand what it would take to sell. There were many competitors with inferior products to theirs, and he knew that it would be easy. It did not take long for him to realize that some of their competitors were outdoing them in sales, despite the fact that he had a superior product. Today, he still keeps up with the industry and he knows better; in some cases, the sale comes first, and the product comes second.

Marketing is key, and even if you had the cure for cancer but you cannot convince the world to use it, you are as good as without a product. Unfortunately, many people who come up with products have poor marketing skills. A partner with such skills can help.

Lack of Funds

It requires money to make money. You need to have a business idea that can bootstrap, or else you have to turn to angel investors and venture capitalists. Bootstrapping requires a product that will sell easily with minimal input so as to generate the resources that will fund further development. This is hard, and most people would require an external investment in order to push their products out there. Unfortunately, VCs and angel investors are not that easy to come by, and this is where one needs networks that can help build credibility. Most innovators find themselves limited when they start looking for funds.

It is not just the business funds that may hinder the growth of a product. One other factor to do with money is the background of the would-be entrepreneur. People who have a social safety net such as wealthy parents are able to venture into entrepreneurship more easily because there is always a fallback plan. This helps them to build a form of risk-averseness that encourages entrepreneurship, knowing that they do not risk starving to death.

Conclusion

The world is full of so many people who have great products but cannot make money out of them. It could be due to a lack of entrepreneurial skills, a lack of money to monetize their innovation or simply environmental factors such as geographical location. The best we can do for them is to provide an environment where they can try out their ideas, such as incubation hubs, and also help them to get the right partners who can help jumpstart their ventures.

The Power of access to Information

September 3, 2022December 3, 2022 2 min read

One of the most astounding findings I recently came across is the study of the effects of mobile phones on the Kerala fishing market in India. The research by Robert Jensen is best summarized by the figure below which shows how mobile phones led to the stabilization of fish prices in different markets.

From the figure, it is seen that the fish prices are very volatile in the three regions, but stabilize almost as if by magic when mobile phones are introduced in the region. It seems that access to information leads to the damping of the price curve and the consistency that follows is just incredible.

Responding to Demand and Supply

Jensen offers various explanations for the impact of communication on the market. It is argued that fishermen had access to price information and thus were in a better position to know where to sell. This helps them to respond to the demand and thus normalize supply in different markets.

The same could be said about buyers who had information on where the prices are low and would flock there, leading to increased demand, hence prices. Overall, the availability of information leads to a natural form of price control as market forces are able to respond more accurately.

This is one study that shows how access to information continues to impact the world in ways that many people would not have imagined. Buyers are able to get the best value for their money, while fishermen can expect more consistent prices. The social impact of this may not be easy to quantify but I can imagine the benefit of being able to plan effectively and budget.

Information age

While the information age may have peaked, there are still opportunities that are yet to be unlocked especially in marginalized societies and communities. There are still places where people have not enjoyed the full benefits of access to information, due to skill levels or lack of resources.

It is hard to imagine what will be the real impact when this happens. Imagine a scenario where all children have equal access to education, where all people have equal access to skills necessary to thrive and produce optimally, and where farmers have access to the best available agronomic information. We could solve a number of problems that we are facing in Africa today.

Let’s make it happen.

The Sachet Economy

May 30, 2022December 3, 2022 3 min read

Sachets dominate the retail industry in many parts of Africa. I had always imagined that Kenyans are the masters of buying goods in these miniature packaging, but Nigerians seem to be the masters of this game. This week, images of goods packed in sachets were all over social media with discussions about their costs and the impact of their packaging on the environment.

Why are so many fast-moving consumer goods (FMCG) packaged in sachets?

For those who know the industry, the answer is almost obvious. Fast-moving consumer goods are nondurable products that sell quickly at relatively low cost and account for about half of all the regular purchases made. They include products such as soft drinks, milk, detergents, cooking oil, cereals, kinds of toothpaste, and many others. They sell fast.

Small Purchases

They also sell small. One surprising piece of information that hit me this year is learning that more than 70% of all FMCG transactions that occur in Kenya involve consumer spending of less than KShs 55. This is a trend that has pushed manufacturers to package their goods in smaller units, usually targeting a specific price. If a certain product costs KShs 120 per kilogram, the manufacturer packages the products in 75 grams packages and sells each pack at KShs 10.

This is the lifeline for most people who have less than a dollar to spend every day and enables them to survive on a day-to-day basis. Take the example of informal settlements. In a place where there are many people earning casual wages, I am told that it is possible to shop for everything you need to prepare a decent meal for only KShs 50 (that was a few years ago). One would buy maize flour for KShs 10, cooking oil for KShs 5, Vegetables for KShs 5, onions and tomatoes for a similar amount, kerosene for KShs 10, Chocolate and sugar for a similar amount, and one is set to prepare a full meal. As a bonus, one could get a cracked egg for KShs 5 for a balanced diet.

With such a trend, sachets become very useful because they are cheap. Cheap for the manufacturer – not for the consumer.

Single-use Packaging

Besides targeting the poor, sachets are very useful when packaging single-use products such as the soaps used in high-end hotels. This also includes products such as sugar, tomato sauce, and shampoos. The demand for this continues to grow as the hospitality industry grows. These are sachets for the rich.

This use case may be more common in developed countries than in developing countries, but it is found everywhere in the hospitality industry.

Downside

The Cost

While this packaging helps people access goods at an incredibly low cost, the unit cost of these goods is way much higher than those bought in large quantities.

Consequently, the people who buy goods in these small quantities – the majority of whom are poor – end up paying more for goods than those who buy in huge quantities. The poor pay more than the rich for the same basic goods.

Environmental Concerns

Many of the sachets that are used today are never recycled. They end up in landfills, water bodies, and many other places, where they remain for hundreds of years. It is a curse we are living with.

How can we reverse this?

How Much can you Make from a Website in Kenya?

November 26, 2021November 29, 2021 4 min read

You’ve probably heard about this person who runs a website and is making thousands of shillings every day by placing ads on their website. The next thought that comes to mind is that you can also do the same and earn some extra income. It is supposed to be passive income which you will make even when you are sleeping.

How true is this, and how easy is it for someone to make money from a blog? How much money can one expect to make?

We take a look at this question which many people have considered, and others have tried with mixed level of success (or failure).

Online Advertising

Online advertising has provided website owners and creatives with an opportunity to make money using their online content. Advertisers pay ad platforms such as AdSense to place their ads on various websites or apps, and these ad platforms share the revenue with the owners of the websites. The unique thing about this arrangement is that advertisers are often charged only when someone clicks on the ad. This means that if an ad is shown and it is not clicked, the advertiser will not pay anything (in most cases).

This advertising strategy is attractive because ideally, the advertiser is assured of value. On the other hand, the ad platforms try to march the ads with the audience that is most likely to click the ads. These ads are dynamically inserted into a website when one accesses the website, and the ads differ from one person to another. The ads you see on this website is not what someone else sees.

By allowing ads to be placed on their websites, websites owners can make some money.

How Much can you expect to Earn?

The amount of money that one can earn through ads is dependent on a number of factors. These include the number of views, the ad density – which is the number of ads showing on the page, the type of content, and even the source of the traffic.

The more the views that a website has, the more one is likely to earn because it means that there are more people who are likely to click an ad. Success here requires one to have a website that has a high traffic.

The number of ads displayed per page will also be another factor. Website owners usually decide how many ads appear on a page, and the higher the number of ads, the more the earnings. This is because there are higher chances of ads being clicked. However, too many ads negatively impact the user experience.

The source of your traffic also matters, and the earnings per click vary from one country to another. A website with visitors from the US will earn more per click than one with visitors from Kenya. This is because advertisers in those country pay more for the ads, hence more payment per click.

The quality of traffic also matters. If you have some niche traffic, like the legal profession, you are likely to get higher returns as opposed to websites with a general audience. This is because an advertiser targeting lawyers is likely to pay more than one targeting the general population.

How Much are People Making in Kenya?

How much money do website owners make in Kenya?

Based on the factors discussed above, it is extremely hard to tell a general figure for everybody. The amounts vary. However, from experience, I can share a few figures that I have seen people making from three different websites.

Type of Website	Earnings (KShs) per 1000 page views
News website	300
Entertainment website	115
Topical blog	380

Based on above figures, one needs to have quite a huge traffic to make meaningful money from online ads. Even on YouTube channels, 1000 views will give you something in the neighborhood of KShs 75. A more realistic conclusion is that ad supported website is not a viable business in Kenya, for the amount of input required is too high, compared to the returns. (I wish people with websites and YouTube channels can share what they earn to give a better picture).

How then can one make meaningful amount of money from a website? How do the existing ones survive?

In my opinion, one needs to have a greater objective than just making money from ads. This way, a website can be sustainable since money from the ads will be a minor motivation for having the website.

A good source of income from website is the promoted posts, where website owners publish marketing content on a website at a fee. Popular websites charge anything from KShs 15,000 per single article, with niche website earning more to publish content that is industry related.

If you have some good traffic, this could be a good starting point.

Kune Foods is not about Racism

August 5, 2021 3 min read

After a few years in the startup world, I came across some stats showing the startups that had managed to raise a significance amount of money in Kenya. The most noticeable characteristic is that almost all of them were led by white people.

This was already raising complains in the Kenya startup ecosystem, with people concluding that there is a racism problem in the way startups were funded. I also concluded so.

Last month, there was an uproar after Kune Foods raised 1 million USD to help solve the problem of lack of great food at a cheap price. The major concern was that a non Kenyan came to Kenya, identified a market gap which most Kenyans think does not exist, went ahead to raise an insane amount of money, then went ahead to publicize the raise by peddling half-truths, lies and a few info that are outright insults to Kenya.

Where is the Problem?

After I wrote this article about a ‘white male CEO need,’ I decided to further do some research about it and talk to the people who had received funding due to their association with a white person. I did not manage to get many people, but at least I talked to one.

From the discussion, it was clear that it is not about skin color, but other dynamics at play. The guy said that when he was looking for capital, he was not looking for black or white capital, but people who could afford to invest in his business. Unfortunately, he lacked a relationship with such people, and the person who helped him was a white guy from UK, who knew people who were willing to invest in the business. In exchange, he made him the executive chairman of the board.

With this guy as an executive chair, it was easy for him to bring on board people who were willing to invest because they knew the white guy. They were comfortable because they had one of their own who they could trust. It would have been impossible for the investors to leave UK, come to Kenya for the first time, identify a business and invest in it. That would just be too much risk.

This script looks very familiar.

Do Nairobians Invest in Businesses in Marsabit?

How many of us have helped an entrepreneur in Marsabit, unless if you were born there, or work in an NGO where supporting entrepreneurs in Marsabit is part of your work?

Even when we do it, it is about relationships. I have helped someone based in Marsabit, because I know them, and I got to know them because they are from Kisumu and we met in Nairobi. He is running a good business in Marsabit, and my support for him is not a vote against the locals in that area. I cannot support any local business unless I get to know them first.

How would I get to know them? They would need to reach out, or I would need to go there. I would also have to spend a lot of time doing some due diligence, in an environment and culture that I am yet to familiarize with.

Racist Capital?

Startups with expatriate founders seem to get the funding, but we need to find way to help local founders get the much-needed funds.

How do we create those relationships? How do we create structures that allow local founders to get funded? How do we create the right image as a country? How do we guard investor interests? I do not know, but we need to. Investments will not be done based on emotions, and it is not a matter of the rich helping the poor – a wide anthropological question that is beyond the scope of this article.

Unfortunately, the whole debate is reduced to skin color, something that shifts the responsibility of finding the solution to ‘other people’ because we are not the problem. If the problem is racism, then it is the racists who need to change. This shifts the burden of finding a solution to ‘them,’ and it does not help the situation.

When it Comes to Data, The More, The Merrier

January 12, 2021 2 min read

What if I gave you a list of all the phone numbers that are registered in Kenya? What would you do with this information? Nothing much, unless if you wanted to blindly text every Kenyan. Perhaps, you could if you are running a presidential campaign, or sell Kensalt which is a product used by almost all Kenyans, but this would not even be a good marketing strategy.

What if I added the names in addition to the phone numbers? You could easily search for the phone number of any person you want, as long as you know their name. This could be useful, although you would need time to sort out through the different John Does. There would still be limited commercial uses.

Add the date of birth, and the data becomes more useful. You can now target people on their birthday, and you can as well decide to text all the people aged 18 years telling them of the great courses you are offering. The data begins to make sense.

If location data is included, the data becomes a real asset. You can SMS people of a given location telling them about a new hospital that you opened. You could SMS residents of a given ward to ask them to support your political ambitions of becoming a Member of the County Assembly. Through a combination of age and location, you could text people who are likely to be parents and tell them about a new school you started.

Add gender, and you could message ladies of a certain region, telling them of your beauty products shop and the offers that you have. Since you have their names, you would be addressing them by name and it would feel even better.

We can add more and more data which can help make the data even more useful. For example, if we added work related data, something better can even happen. You could contact all the teachers and tell them of useful resources for their students. You could contact all the farmers and offer to sell them effective pesticides. You could target people just about to retire and help them invest their pension funds. Data becomes even more valuable.

If we added some information to that data, like the information on who is expecting a baby, we could easily sell to them various baby products. If we add information about who loves football, it would be easy to tell who to tell a sports jersey to. If we add information on who loves to travel for holidays, we can message people who are likely to take a vacation and give them irresistible offers.

The more the data points, the more useful is the data. Better, if one can have a real time access to that data, the more it would be easier to make use of it. This is one advantage that platforms like Google, Facebook and Twitter have.

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