Joint Venture: Is it the ideal business model?

There is an old adage that if you can’t beat them then you had better joined them. True to the saying, a man who has been injured by his enemy in a battle not only finds refuge from further attack by stooping but a possible lifeline on his ultimate submission. The business arena has and will never be different. Just like that man in a battle with his enemy, many entrepreneurs find themselves entangled in a dilemma due to the ever increasing competition. Increasing competition implies that survival and ultimately business leadership can only be availed by achieving a semblance of competitive edge no matter how obscure. One of the many ways of achieving a competitive edge is by forging strategic alliances or what is popularly referred to as joint venturing. Unlike partnerships, joint ventures do not result in a transfer of ownership among the members. The beauty, however, is that they result into what we all love most which is none other than ‘win – win’ business relationships.  

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A typical Ugandan scenario: What are Preemptive rights?

The year 2011 witnessed some heated annual general meetings (AGMs). The National Insurance Corporation (NIC) AGM was one of them. The meeting was expected to draw a feud between the minority and the majority shareholders/ management given the mid year suspension of the counter from trading at the securities exchange, not to mention the highly publicized saga concerning a possible withdrawal of Makerere University dons from a retirement scheme with the corporation. My sources tell me there was tight security.

One of the debatable issues that arose from the meeting was the suggestion by the board of directors to introduce a second share offer to the public. A big cross section of the audience seemed to have bought the idea with the exception of a few shareholders. Among these few was the famous tycoon, Mr. Sudhir Ruparelia, who seemed to have been in total disagreement with the suggestion. Well, Sudhir’s shareholding in the corporation totals to 20% hence effectively placing him on the driving seat among the minority shareholders. In my view, this position bestows on him the right to champion the interests of the minority. We can however not rule out the chance that some of his interests contravene those of other minority shareholders. 

The history of NIC

It is not without reason that a bat prefers it’s upside down posture. Sudhir was not outrageous for no reason. In the year 2005,

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Necessary ingredients in adopting sound money management

George S. Clason, the author of The Richest Man in Babylon, was quoted to have said that money is plentiful to those who understand the simple laws which govern its acquisition. Well, talking of plentiful of money, not only did he mean enough to sustain an individual for a few months but in essence a generational treasure. There is a fairy tale about a proverbial Indian merchant that you probably could have heard about. In a nutshell, it talks about an Indian trader who always rode a small motor cycle to and from his shop and yet he could afford a Mercedes Benz to do the same. The trader however kept growing his business and eventually turned it into a huge manufacturing company and after that bought himself a jet worth millions of dollars. What if the tale was true? We could therefore credit that trader for his superb money management habits. George S. Clason gives a detail of incredibly simple money management principles that each of us ought to pay close attention. It’s my pleasure to detail them to you.

Save a tenth of your earnings  

Top on the list is the need to save not less than 10% of your earnings consistently and invest it wisely.

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Increase Your Risk Appetite and Earn More Money in 2012

The word ‘risk’ is a dreaded one. Whenever this word is alluded to, quite often it’s hardly in the affirmative. You are therefore likely to have overheard such phrases as ‘I don’t want to risk’ or ‘let’s play it safe’ in many business conversations. As much as the word draws mounds of fear, many money coaches say that it is a prerequisite to financial success. A quick snapshot of today’s world business leaders, say the likes of Richard Branson or even quite closer home  Patrick Bitature, will tell you that these individuals were probably the biggest risk takers of their time. However when asked, they say that all they did was to take ‘calculated risks’.  Many folks are therefore left to wonder whether this newly baptized word is as a result of pompous grammar or simply a safer way to risk. 

Quite vividly this dreaded word draws its meaning from the uncertainty posed by future occurrences which can either be fruitful or even quite ugly. This likelihood has led to individuals adopting any of the three widely known risk attitudes mainly depending on their perception of the probable outcomes. These attitudes are; risk averse, risk seeking and risk tolerant. Risk averse individuals are said to be pessimistic as well as cautious and will mainly focus on the potential minimum returns. A risk seeker on the other hand is said to be optimistic and will focus on the potential maximum returns. A risk tolerant individual is however said to be indifferent of a good or bad return. Well, Kenyans have been said to risk seekers and Ugandans risk neutral/tolerant. Where do you fall as an individual? Remember individual risk attitudes are bound to be different from the general perceived attitude.  Determining the attitude you subscribe to will be quite vital in your quest to make more money as well as success in other aspects of life.

In a world where living is a risk in itself, there can never be such thing as a decision that is risk free. The big question is, how do you keep the ugly outcomes at bay and you maximize on the fruitful? The first ingredient will be your ability to do enough homework on the subject in question implying that before you venture, consider doing adequate market research. When carrying out a market research however, it’s prudent to focus on a field based research due to its ability to pin point the targeted customer and product area. Other means of market research such the internet may appear cheaper than a field based research but are likely to lack focus. Once the market research data is availed, consider computing worst case and best case scenarios. For instance a worst case scenario computed using poor demand and high costs while the best case scenario computed using high sales and minimum running costs. 

In my view, the subject of risk is quite akin to driving. Folks that don’t know how to drive, when asked, will say that it’s the riskiest thing ever. Probably they have never figured out how two speeding cars travelling in different directions can avoid a collision on a narrow road stretch. Such folks when given a two – week driving lesson emerge the best drivers on our roads. Well, a two – week lesson is rather superfluous, some taxi drivers in town amazingly learnt how to drive ‘on the job’ or may be let’s call it ‘one lesson a day’. Risk and all its components are no different. In addition, despite the ability to reduce possible uncertainties (through market research), one special ingredient is of the essence. That’s none other than developing ‘clear instincts’ or what some could brand the ‘sixth sense’. You probably could wonder whether folks downtown at Kikuubo did all the research and lots of analysis... Some of them followed their gut feelings and are successful to date!   

Finally, you will need to learn to accept the consequences of your decisions and develop counter strategies fast enough to stay ahead of the competition. This coupled with the suggestions above should increase your risk appetite with a probability of reaping big in future.

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The wealth builder vis-à-vis the income earner

In today’s financial world, the definitions of the terms wealth and income have been used interchangeably hence creating a notion that the two are synonymous. When asked, at the very least most of us would prefer to be wealth builders and not income earners. I’m no exception... This therefore implies that despite our ignorance in interchanging the two terms, each of us has an idea of what wealth and income are. In his book, The Richest Man in Babylon, George S. Clason points out that a man’s wealth is not in the wallet he carries and that a fat wallet quickly empties if there are no golden income streams to refill it. His input therefore leads us to an understanding that there is indeed a connection between the two terms. Well the puzzle is, ‘what qualifies a man to be a wealth builder and another an income earner?’ and ‘where is the connection anyway?’

Without a doubt we can all fill a list of wealthy people from our various vicinities. What’s makes them wealthy? Simply, whatever they own. We regard them as wealthy because we know they own businesses, land, buildings and the different available financial assets such as shares and bonds indifferent of the consumer durables (such as cars and household items) they may possess. One key distinctive element here is the ownership of assets. Let’s not make this feature too accounting oriented but could we borrow some understanding of what an asset is? My loyal accounting tutor reminds me that an asset is simply an item that yields revenues or probably gains to whoever has rights of ownership and or control over it. An individual’s wealth will therefore be the net value of his or her assets after deducting the debts.    

  

The wealth builder

One important characteristic of a wealth builder that definitely reigns overall is his mindset. We know that setting up a business or a building takes huge amounts of time, money and energy while the benefits can only be reaped in future. On earning his wage he (wealth builder) sets aside a small portion of it for the purchase of assets that will yield revenue in future. To garner enough money to acquire assets, he is compelled to live an austere lifestyle that will guarantee minimal expenses. Quite clearly this is a conservative, long – term thinking mindset. Unfortunately many of us would loathe it. Well, he doesn’t rest there. He is also careful enough to acquire quality assets that will yield a considerable return depending on the amount invested. You will therefore spot him in discussions with experts in the field he intends to invest as he tries to evaluate possible outcomes with their help. At the end of the day, his efforts are rewarded with a probable gain on the assets value overtime and regular cash inflows. A wealth builder will hence be said to be wealthier than another by the amount of time that the assets inflows could sustain his living expenses without him working.

The income earner

Have you ever wondered why the highest earning professionals in town are not necessarily wealthy? Well, it’s simply because they’ve perfected the art of income earning. Is there a problem with huge income earning? George S. Clason notes that whatever we call our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary. It’s no wonder that the moment you receive a salary increase or may be a higher paying job, ‘needs’ begin to pop up from all the possible corners. The end result, no money kept aside for investment even with a ‘fatter’ salary. In a nutshell, we could say that income is the sum total of inflows of cash to an individual when he provides a service or product and those from independent assets (say, profits of a business). 

While a wealth builder’s mindset is long term and conservative, that of the income earner is completely the opposite. The income earner’s lifetime is dominated by a struggle to maintain a quality lifestyle depending on his earnings in a certain period. He is hence the type you would brand the ‘irrational’ buyer. 

Ultimately, being wealthy is an enviable financial state. It is however the end result of consistent wealth building. The question is, ‘Are you willing to dedicate yourself to being a consistent wealth builder?’

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