building lasting business clubs the pitfalls, principles and investment options

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BUILDING LASTING BUSINESS CLUBS

The Pitfalls, Principles and Investment Options

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Content

Introduction to Business Partnerships; Causes for High Failure of Clubs; How to Nurture a lasting Club; Intermediary Steps to Equity Partnerships.

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INTRODUCTION

Importance of Partnerships: 2 Quotes One relating to a Journey; One on the acronym: TEAM.

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CAUSES FOR HIGH CLUBS FAILURE RATE

Rushed Decisions Originator of idea is more informed than

the other and is in a hurry; Assuming timing is suitable to all parties; No regard for the Person’s on-going

investment programmes; Originator of idea hardly has other options; Remember Ugandans are ‘NICE’ people..

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WHY HIGH FAILURES CONT…

Forgetting that Clubs are Timeless Equity positions are generally long-term; No explicit agreement on handling exit; No provisions for rewarding of additional

efforts/contributions of club members; No agreement how to involve relatives; Remember character sealed when….

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WHY HIGH FAILURES CONT…

Mulwana’s Point of View …… Africans have communal instinct for poverty; If all are poor, tend to work well; Once success comes, greed sets in – seek to

eliminate your partner; Success amongst partners must remain equal

even outside business; Remember: In a club a partner is in the kitchen….

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WHY HIGH FAILURES CONT…

Socially-based Choice of Partners Share(d) school, religion, social joints; Belong to the same tribe, clan, family,

social status; Grew up together, an acquaintance; A quote on business and friendships; Remember: Wealth does not know its…

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WHY HIGH FAILURES CONT…

Biggest Driver is Capital Contribution Blinds one to other realities; Determination of leadership done

informally; Bitterness soon after the reality dawns; Remember: Investment clubs promise

economic gains to their members. These call for more than just capital.

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HOW TO NURTURE LASTING CLUBS

Put Salient Aspects in Writing Date; Contribution, immediate and on-going; Shareholding; Witnesses; Exit Closes; Handling of modifications.

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NURTURING LASTING CLUBS CONT…

Members Should Mirror Each Other on Key Aspects Financial Expectations e.g. cash flow

needs and financial discipline; The vision for the club; The common values; and If divergent/conflicting can you cope?

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NURTURING LASTING CLUBS CONT…

Groom Members on 3 Attributes of Team Players: I…..; I…..; and M…. All others are a welcome bonus.

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NURTURING LASTING CLUBS CONT…

Tap into the Strengths of Members Technical skills; Time; People skills; Contacts; and Capital.

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NURTURING LASTING CLUBS CONT… Unshakable Commitment

Whatever agreed upon, embrace; Deliver beyond expectations; Works when all members have been

honest and never over-committed.

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NURTURING LASTING CLUBS CONT… Work it out: partners are not angels

Members are products of their past; Look at each one’s positive side; Honour and respect each other; Manage conflicts, they are normal; Be prepared to lose part of your identity; Absorb positive criticism; It is a mutual mentorship; and Limit number of partnerships.

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NURTURING LASTING CLUBS CONT… Maintain Open Communication

Talk about all concerns/aspirations; Listen; value each others’ opinion; Have time for club members alone; Discuss all members’ views openly; Pick non-verbal feedback; and Involve third party, but infrequently.

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NURTURING LASTING CLUBS CONT… Celebrate and Mourn with Each Other

Stick with a member at his/her dark times;

Pass the ultimate test of true partnership; Talk well about each other to non-

partners; Know the limits of courtesy.

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NURTURING LASTING CLUBS CONT… Watch effect of families, relatives and staff

Limit discussing negative aspects of a member with your families/relatives;

Beware relatives’ advice and judgement are difficult to ignore;

With staff, toe the official communication channels;

Be wary of informalities when bringing in relatives to the business.

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NURTURING LASTING CLUBS CONT… Walk away from Irreconcilable relationship

Let go irredeemable partnership; Reward each other fairly; People are people, they can change; Remember 3Rs when in difficult choices; No name calling, please!!!; and Keep the lessons.

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INVESTMENT OPPORTUNITIES

Qualities of a Good Business Idea;

7 Sources of Investment Opportunities;

Business Selection Determinants;

Investment Options; and

The Realities.

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QUALITIES OF A GOOD BUSINESS IDEA A good business idea is based on:

A Product/Service customers want; A product/service one can sell at a

price the customers can afford and still give you a profit;

The knowledge and skills you have or can acquire; and

The resources and money you possess or can acquire.

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SOURCES OF BUSINESS OPPORTUNITIES 7 Sources of business opportunities:1. One’s skills – education, work experience;2. One’s hobbies – sport, music, cooking etc3. Entrepreneurial insight;4. People’s needs – basic;5. People’s problems – floods, famine, disease 6. Under-utilized resources - land, equipment 7. Complaints against existing providers.

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SELECTION DETERMINANTS

Selection depends on a combination of the following factors:

Background of Club Members i.e. health, education, work experience, families, hobbies, and environment they grew up from;

Proposed location of the business; Investment capital; Raw materials availability; Proximity to a market; and Government policy.

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INVESTMENT OPTIONS

Deposit/term accounts with banks; Traded Shares; Non-listed shares/own business/JV; Bonds; Venture Capital Projects; Real estate; Precious metals and gems; Mixture of the above.

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REALITIES

It will be difficult before it gets easier; As the Club income grows, expect new

unexpected challenges; Watch the founders’ syndrome; All members must remain willing learners

to outlast the ups and downs; People are wired to detect unfairness; Some members may outlive the Club and

strike out on their own. So be it.