The Other Side of Business

Quite often the idea of doing business seems fun and like a 'get rich quick' scheme or popularity enhancer. There is a gross mis-representation of what it really means to go out on your own and do business.

As we know, there are different types of business structures, most commonl; Sole Proprietorship, Limited Liability, Non-Governmental, Corporation et al - so dependent on what kind of business you are out to do, it will reflect the degrees of external pressure you are subject to.

I remember when I started out in business I was excited, thinking that by the time I was 35 I was going to be millionaire - it was a flawed objective as I was not able to qualify where the millions would be...did it mean that I wanted my business to be a multi-million dollar business? Or did it mean that I wanted to be worth a million dollars? Or did I want a million dollars in my bank account? Anyway, 35 just recently left me and although I am not a millionaire in my bank accounts I have seen the money come and go and it brought alot of things into perspective for me.

When I first came to live in Ghana in 2009, I noticed that the people who were driving the finest cars and owned the nicest houses were over 50 years old. In 2017, Forbes published a list of top 400 billionaires globally and there was something I quickly noticed...a majority of the billionaires, let's say 99% of them were over the age of 60! The handful of billionaires who were in their 20's or early 30's became wealthy from our new tech boom. My takeaway was that true wealth - takes time!

In today's world a majority of people are marred with the desire of having everything right here and right now. I think it started with instant food, to instant financing to screw the system I want what I want right now and I will pay the consequences, if any, later. So many people are in debt - they have a financed car, house, housewares et al and they do not have enough income to manage the debt. I have seen business people who are living amazing lifestyles and I wondered...wow...how did they get that? only to learn there is another side to business...

The Other side of Business

The truth of the matter is that business can be very dirty! There are a handful of people who are honest, transparent and truly dedicated to their work, then there is a large pool of people who are opportunists, that are in business to get what they want (money) and then go - even at the cost of not getting the job done or to specification.

You then have the challenge of partners and clients who urgently want you to get a job done, but then fail to pay you any attention when it comes to you getting paid for your job. In the contracting business in particular, this challenge is rife - as companies are required to pre-finance client contracts from 30 - 100% of the contract value with payment terms ranging from 15 - 120 days in some circumstances. In addition, if you are fortunate enough to work with a multinational or government, but you are an SME, the financing of your work can be limited.

There are many horror stories of people who have had to close down their business or they stop operation because somebody or a large corporation has not been mindful and have delayed in payment. There are also those who execute government contracts and sometimes don't get paid for over 5 years!!! The truth of the matter is nobody cares about your business, your survival or your growth, they only want what they need from you and that's it. The reality is, if you are not going to do their business, there is always somebody else who is willing to do the work - so it comes down to us taking calculated risks when engaging with a potential client.

I always get frazzled when a client wants our agency to pre-finance 100% of their work and get offended when we say no. We have had, legitimate, multinational client contracts offered to us to the value of over $200,000 but they want us to pre-finance with a 120 day period but for us, it is not a risk worth taking at the stage of the business we are in. The truth of the matter is, the client can pay but sometimes, managers don't want to go through the hassle of raising a PO, getting vendors signed onto their system et al. So they find it easier to ask you to finance and do their work and they will deal with your interests later, when they have got what they want. Although, something to note, some clients want to know the capacity of your establishment, as it becomes an indicator of whether you can handle their business or not.

You also have the clients who sign a contract, then as soon as you start working and they can see results they try to be smart and change the terms of engagement - very bad practice but believe me its done too many times. The stories and the challenges are plentiful - I am sure there are many bad experiences that you as a business owner can share.

Be mindful that the problem is not country or continent specific, it is a global epidemic, the only element which changes is a countries legal system which presents a variable on how easy or difficult it is for businesses or individuals to not pay or get away with bad behavior. The legal system makes your contracts enforceable and you do not need to take a long time to get your matter resolved. Although in some continents where culture has a strong influence in all sectors of life, the legal system becomes your last last last resort in the name of being respectful, understanding and patient as quite often the good people are the ones who get played out as the bad.

There is no fool proof way of preventing these money issues from happening but there are definitely ways you can be more business savvy in how you handle it.

Top tips

1. If in Africa, and you need access to finance, think about purchasing a property that you can use as equity time and time again to finance your projects
2. Always sign a contract or an MOU, even if you have to create it yourself - get an MOU signed by both parties
3. If your client is reluctant to sign the MOU and claims that their legal department need to read over it et al first, then wait for it to happen - it is very important that you cover your back
4. Don't make the fatal mistake of doing business with a friend based on trust without anything legal in place
5. Make sure you build in a caveat which stipulates that if payment is not received within the stipulated time frame a penalty fee would need to be required and interest for every day/ week or month that there is a delay in payment
6. Try your best not to include your OPEX capital into your pre-financing, you need to make sure your business is sound and can run without the money
7. Amend your contract value based on the period of time you would need to finance them. To finance work costs you money and if you are paying interest on the money loaned it is in your best interest to pass that cost onto the client
8. Ensure you include an arbitration clause in your contract
9. If you are getting finance from an outside source make sure you add an additional 30 days to your finance agreement to ensure that you do not have to make a penalty payment if your client delays
10. Don't take on more than you can handle / imagine if your client does not pay and now your business has a debt of $150, 000 how are you going to pay? Only work within your capacity

Remember, nobody has your best interest at heart, everybody is very selfish and are thinking about themselves, their job or their company. So you have to do your best to look after your business - calculate and manage risk and know when to say 'No thank you, maybe next time'.