5 greatest pitfalls of African startups

Earlier this year in January, I received a lot of notifications from LinkedIn – people in my network were congratulating me for a work anniversary, 5 years, since I co-founded Endlesstec, a software company for web and mobile platforms. Looking back, from our days in the dormitories of College of Informatics and Virtual Education (CIVE) at the University of Dodoma, to date, it almost feels surreal. It has been 5 years! 5 years! Oh, how time flies! In our journey, we’ve had ups and downs, great success as well as our fair share of mistakes. We’ve had to adapt, and reinvent ourselves over the years, and adjust our focus to accommodate the changes.

The mistakes we made are too many – some because of sheer ignorance, some of carelessness, some of failure to learn from past mistakes; and maybe this article is not enough to address all of them. I’ve selected but 5, which I think most Tanzanian startups are more prone to, and which I believe they can overcome. This is a subject I can write on, since I have personally lived it, I have made all the mistakes in this article as a startup, and I learnt the lesson the hard way. A roman soldier, senator and historian, called Marcus Porcius Cato (234-149 BC), famously known as “Cato the Elder”, once said: “Wise men profit more from fools than fools from wise men; for the wise men shun the mistakes of fools, but fools do not imitate the successes of the wise.” Everyone makes mistakes, and it is important to learn from your mistakes, but it is far more honorable to learn from the mistakes of others.

Not Knowing

‘The cumulative fines for the tax offenses you’ve committed amount to Tshs 51m’, said the tax officer I was sitting across. I was shocked. I didn’t believe it. And in all honest, we hadn’t done the mistake intentionally, we simply didn’t know. The tax officer added, ‘Ignorance of the law, is not an excuse for breaking the law.’ Now although we managed to reconcile the issue with the Tanzania Revenue Authority (TRA) and are now in a good standing with them, we learned an important lesson: If you want to be an entrepreneur, know! Many Tanzanian startup, just mushroom into existence without fully grasping what it means to own and operate an entity legally in the country, and what sorts of compliances will be required, how banking works, and basic understanding of how things work. Am not saying you should be an expert in everything, but as an entrepreneur you should at the very least make the effort to learn and get a general and basic understanding of how things work in the business world. Ask those who have done it before you, ask experts, search online, visit offices – learn, learn, learn! Trust me you do not want to be sitting in that seat, hearing the news I heard. [A book I’d recommend here is a short free eBook called Start Smart by Dale Partridge.]

Too Broad

‘What does Endlesstec do?’, asked a prospective client early in our first year. To which I responded confidently, ‘Endlesstec does everything…’, before I could finish my sentence, the prospective client, who was in his late 50s, interrupted me, and said: ‘I do not want a vendor that uses the word “every”, because most likely, it is bullshit. I’ve lived long enough to know there is no such company that does everything, that can serve everyone’. Here was a learning moment, which we took and applied, and now are more focused in our delivery. Most Tanzanian startups want to be everything to everyone, but in real life you can’t. You must have a target audience, and very specific offering you are giving them, with that focus, it is easier to distinguish yourself in the market, and you can attract return customers. So be laser focused when you start, and only when the priority is set, should you add the peripheral. Ask yourself, what is the Minimum Viable Product (MVP) you can offer, and do that as you start. [A book I’d recommend here is The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries.]

Money First

‘The website you’ve built is the best. But I am going to be frank with you. You guys don’t care about your clients – you only care about money.’ In our second year of business a certain client, told me this after we had finished her work. The way we had handled her, indicated that we were ‘money-first’ kind of a business – how we pushed for payment, how we handled her, how our contract language was set, they all spoke volumes. Now I know that making a profit is the underlying goal of any business, after all if you don’t sale and make profit you will be forced to close. But this drive has to be balanced, and you have to take care of your clients for who they are – people. And be respectful, and open in your communication. Don’t trick clients with words that tie them to pay you even if you don’t deliver. Manage your clients with honor and integrity. One satisfied client is far more important that making a little more profit. In the long run it is the clients referred to us by our past satisfied clients that have given us the most business. Seek to deliver true value to your clients and you will see returns. [The book I’d recommend here is People Over Profit: Break the System, Live with Purpose, Be more successful by Dale Partridge.]

Pricing

‘I want you to make profit, that is too low a price to make profit.’ said a South African client to me some 3 years back. This mistake arose from us attempting to fix the previous problem. I’ve come to learn that most Tanzanian startup really don’t have a pricing strategy – and most young entrepreneurs do not know how to assign value to their product and services. Almost always you find people who overprice (since what they are delivering is of zero to no value to a client), in that when they find a client who doesn’t know they try to make as much as possible, squeezing to the last sent. But equally, most young entrepreneurs I’ve met actually under-price their products and/or services. And few actually know how to create a business model that will see their business sustainable. And these two extremes are like twins – when you under-price in one areas, because your business is struggling, you will want to overprice somewhere else to compensate. Take a good study of what it takes you to create that product or service, and then define clearly and justifiably your profit margin, and price your offering accordingly. Some businesses fail just because of the price they give. We sometimes think that charging less will mean getting more customers. Rarely does this ever work, and in a few times it does it is backed up by research and data, not wishful thinking. [A book I’d recommend here is Never Split the Difference: Negotiating as if your life depended on it by Christopher Voss and Tahl Raz]

No Execution

‘You have very elaborate plans for this new year, what stopped you from executing them in the previous year?’ asked my investor 3 years ago. Many young entrepreneurs, have many plans, but very few actions. They spend too much time in developing strategy, and planning, and studying the problem, and consulting people, and reading on the issue. In the end, after a full year, they start planning again. And in the few times they execute, they are not consistent. I’ve come to learn that a simple plan executed consistently is far more rewarding that a complicated plan that is executed rarely. So dear entrepreneur, take action, don’t be passive, implement that plan. Execute today. Start doing what you said you will be doing today. Don’t be afraid to fail, just fail first and learn from your failure so that you don’t repeat the same mistake twice. And fail fast, so that it doesn’t take you years to know it doesn’t work. [The book I’d recommend here is Getting Things Done: The art of stress-free productivity by David Allen.