Let us share with you 7 of the most beneficial tips for starting business in Africa. Please note that these practical guidelines could be questioned or even improved by more experienced Africa-obsessed businesspeople or managers.
Delve deeper into diversity and build an interactive personal roadmap
Many people say that in business school you mainly learn to dance and drink. Not only is this true, but the Business School also gives you the opportunity to delve deeper into multiple and diversified topics. For example, the YIP matrix was tremendously useful in identifying and addressing the decisive drivers of the French and West African economies. As marketing is easily transferable and trade policies are favorable, use this knowledge to take advantage of the interdependence between France and West African countries.
Entrepreneurs don't start their business roadmap with statements like "Nigeria is the next China" or "South Africa is the only food self-sufficient country on the continent." First they bought a large map of Africa and annotated it with all the information from their research, readings and interviews. They learned that drones were banned in Nigeria and competition was tough in South Africa. Thus they realized that there were areas much more accessible to them (Ivory Coast, Ghana, Tanzania, Morocco, Tunisia)
The thing is this: before you act, think. Trusting your intuition is important, but it can also be misleading (unless you're Steve Jobs). Frames of reference, concepts and ideas are necessary to question your beliefs and remind you of what is essential. In Thinking Fast and Slow, Daniel Kahneman illustrates this idea. He argues that outdated and boring analytical frameworks are key to making conscious decisions. So don't get carried away by your instincts. Make an effort to dive deeply into the topic that interests you and always take advantage of outside experience before making any big decisions.
Open your eyes, take flight!
Africans innovate daily because the more limited your means are, the more creative you must be. When visiting one of my partners, I realized that he had modified his drone to mount two batteries instead of one. The result was an increase in flight minutes - from 35 to 70 - and flight coverage. Because of the challenge of finding a remote area to place the drone station, I had to maximize coverage every time I found one.
One of the most important turning points in African history is that the continent does not need to rely as much on Western market economies. It is increasingly expanding its local markets to build a balanced economy and therefore less vulnerable to commodity price cycles. The SOCFIN group manages thousands of hectares of palm oil in 8 African countries. Therefore, it no longer needs to send its production abroad, since the local market absorbs its production today. Furthermore, the price of palm oil has started to rise since domestic demand exceeded supply. If you propose a B2B service, for example, it will need to be innovative and adaptable enough to target both Western multinational companies operating in Africa and up-and-coming local businesses. In precision agriculture services, working for Western companies producing in Africa (for example, KKO international in Belgium or SOMDIAA in France) and for emerging local companies (for example, Dal Group in Sudan or Harvest Flowers in Kenya) allows diversify risk and take advantage of international innovation.
Manage your income statement and find your magical balance of payments
Build your revenue pipeline
Income first! Focusing on the income you are able to generate is essential because you need to confirm that the services you propose are relevant and allow you to take strong positions in the market. It's okay to wonder if marketing is transferable or if your operating margin is thin enough, but it's essential to determine the extent to which your solution is bankable. I remember spending a lot of time looking at the total cost of ownership of a drone in the Democratic Republic of the Congo (DRC), when I should have looked at the revenue potential first. In reality, it was not relevant for us to start a business there, since the proportion of farmers growing the products for which we had services (cereals, rapeseed or potatoes) was negligible.
Finding a balance in payments
Managing payments and treasury is essential and finding the right balance in payments is really appealing. Paying up front is the safest option, but it sends a harmful “lack of trust” signal to your partner. One of the solutions could be to negotiate favorable payment terms with your suppliers (up to 6 months) to cover as much as possible the payment delays that you will face.
Model your business
It is very important to model your operational plan. The fluctuations are even greater in Africa, where some economies remain dependent on raw materials (especially oil) and face investment cycles, not to mention political instability. Being agile is essential and having a flexible steering tool is a great help.
Establish your business hypotheses, understand your revenue drivers, break down your costs, drill down into all your business thinking, and build your own steering tool.
Don't forget the margins
Margins are important even for a start-up. A start-up is a temporary organization designed to pursue a repeatable and scalable business model. So you will make mistakes and make difficult decisions, but it is essential to think big and start a viable win-win business. Closely monitor your service's contribution margin and set measurable goals. In this way, your client will be your best investor!
Train, develop and, above all, LISTEN
Africa continues to have the image of the "hopeless continent" despite having tripled its GDP in the last 20 years. This image is so widespread that some people prefer to invest their time in well-established companies than in young Africans who have a lot of potential but lack the resources to develop their projects. Not only is it rewarding to train young Africans with great potential, but they also end up fueling your own project. They are the best advocates because they have already come a long way to identify your company, understand your technology, and size your market. Additionally, they have excellent knowledge of existing technologies and have been speaking with multiple solution providers.
Africa is very diverse and information about the market is scarce. We tend to present our services first and then find a way to adapt them. You should never prejudge any potential partner. Listening to them is key to obtaining crucial information. You have to understand your interlocutor's journey, show empathy and feel their journey. No one is interested in your service if it doesn't have clear direct value while being easy to use.
Patience is bitter, but its fruit is sweet!
Trust is necessary to do business in risky environments and patience is key. You have to believe that the result will be positive. Some projects are difficult to establish and giving time and support to your partners is crucial. Think long term and build relationships that are based on values, passion and ownership and not simple business deals.
Obsess with the continent, focus 100
Africa is not just an opportunity to earn additional income, it is a passion. There are so many challenges in establishing a win-win business that it requires a concentration of 100%. Africa is an obsession, not an alternative, and we must believe in the fact that it holds extraordinary opportunities for the world. There are companies that are willing to die for it, so don't go if it is a default option.
Be resourceful, predisposed to action and multitasking
Don't give up after your first failure, insist. Find the right people to contact, don't hesitate to let them know about the impact your business could have, never miss the opportunity to convert any decision-maker to your plans. You have to get involved with passion. Don't just attend big conferences, make your case whenever there is an opportunity and share as much as possible with potential clients, scientists or influencers. There are moments (Kairos) when life opens its arms to you, don't miss any.
Africa is now.