Finance for Small Business

Some businesses require little more than pocket change to get started; others need hundreds of thousands of dollars or more. Whatever amount is needed, bear in mind that raising money is meant to be a difficult process. The obstacles and problems inherent in obtaining money, particularly from a lending institution, are designed to filter out those who are unfit to survive. Put another way, if an entrepreneur fails to raise enough cash to get his or her ideas off the ground then he or she has shown a lack of what it takes to run a business. There is nothing new in this. ‘Starting a business is easy,’ they says, Welcome to the world of commercial enterprise where after 50 doors have been slammed in your face the next one must still be approached with courtesy, optimism, and a smile.

Sources of Finance

The trick to finding capital, say some entrepreneurs, is getting it from the right sources and in the right sequence as a business grows and evolves. This means that when searching for funding every available avenue should be explored. Learn from every approach. For example, if a loan officer at a local bank turns down your request, politely ask why and use what is said to improve the next pitch.

Often enough it’s not what a money lender is told, but what the money lender wants to hear that is most important. Furthermore, when looking for lenders, try to find ones that specialize in the specific industry or field in which the proposed business is located. Investors are usually more receptive to industries and businesses they understand.

Following, in alphabetical order, are the most common examples of where money can be obtained. Ask around and investigate to determine how each option in your region can be maximized:

Banks

Winning over a bank is one of the highest hurdles a start-up business faces. Banks are necessary to small business operators for two reasons, (1) they’re a safe place to store money, and, (2) they can be a source of finance and other services. Unfortunately, most banks enjoy loaning money to people and businesses that don’t need it. This is because every bank wants to ensure that it gets its money back.

Note also that:

• Banks are by nature cautious. Requests for money must therefore be backed up with firm facts and figures.
• Banks seek security in the form of proven cash revenues or collateral. If you don’t have one or the other, you probably won’t get a loan.
• If a bank is uncooperative or uninterested in your needs, move on to another one.
• Banks do not exist to help keep businesses afloat.
• People run banks. If you get to know these people your chances of success may increase.
• Banks hate surprises. Therefore, if you manage to secure a loan and can’t make a payment on time, you should tell your bank in advance.
• Banks make mistakes. A study in the UK discovered that up to 20% of the statements banks send out are inaccurate. It’s therefore prudent to regularly check bank statements.
• Always approach a bank or banker having done a bit of homework. It shows that you’re on top of things, which demonstrates integrity and professionalism.
• Most banks are often open to negotiation when it comes to interest rates. Don’t be afraid to haggle.

Corporate Venturing

Some companies loan money to entrepreneurs in the hopes of establishing a working relationship with them. This is called corporate venturing. Needless to say, the skill or product of the entrepreneur must be of benefit to the company being asked and be backed by a solid business plan. The company to which the idea is being pitched may also seek some type of equity share (ownership) agreement.

Crowd funding

The practice of obtaining funds by publically asking for small donations has been practiced for centuries. The cost of the Statue of Liberty, for example, was crowd-funded by a newspaper campaign.

Paying for upcoming military campaigns by selling war bonds and writers collecting cash from future buyers to fund an as-yet-to-be-printed book provide two additional examples. Nowadays, more than two-dozen crowd-funding sites exist online. Crowd-funding schemes usually involve either pre-selling a product (which is similar to a ‘production contract’ arrangement) or the selling of some sort of equity in the business that is producing the product. Either way, it can be extremely difficult to generate the attention of individuals and groups without an established network and/or skillful media involvement. An extraordinary public-relations or marketing campaign (and/or incredibly good timing) seem to be essential to crowd funding success. Don’t be seduced by stories that make crowd funding look easy. Without first establishing a vibrant business network, crowd funding can be as fickle and distant as winning the lottery.

Equipment Loans

Expensive equipment (i.e.: machinery, display cases, tools, etc…) can sometimes be purchased with an extended, low-interest loan from the company that produces or sells the equipment. In return, the entrepreneur may be asked to sell or advertise the company’s products in his or her business (usually via professional signs and displays). Talk with suppliers and manufacturers for more information.

Family and Friends

Entrepreneurs that can prove (or have shown) that they’re trustworthy and reliable - and have put together a viable business plan - may be able to find family members or friends who are willing to cough up the cash needed to start a business. Note, however, that these folks should not be rewarded with administrative titles in return for their help (which may create future problems). It’s also usually not a good idea to ask friends and family to invest their life savings in a business (they may not get it back). Since asking friends and family for money is the most personal of routes to take this avenue must be planned with care and forethought.

Government Help

Local, state, and BOT sometimes offer financial resources for small businesses if and when certain requirements are met. Examples include businesses that employ handicapped people (or minorities), businesses located in areas in need of economic assistance, businesses designed to help the environment, or businesses designed to reduce local problems. Contact a local economic development office for details.

Grants

Grants provide money that does not have to be paid back. Universities, professional organizations, governments, and trade associations are typical grant sources. The unemployed, pensioners, young entrepreneurs, artists, and other out-ofthe-mainstream groups are usually the most eligible to receive a grant if they qualify – as are competent people who trying to set up a business in an underdeveloped area. For the most part grants do not involve large sums of money – only a few hundred or a few thousand dollars at most – but for a fledgling business a small amount of cash can go a long way toward reducing expenses. Apart from seed funding, grants can also be obtained for employee training, marketing costs, and insurance. Don’t be ashamed to ask for help in the form of a grant. Just be prepared to fill out lots of forms before and after any money is received.

Issuing Shares

The issuing of shares is a finance option that is only available to businesses that are incorporated.

The advantage of issuing shares is that the people that buy them don’t have to be paid back. The disadvantage is that the people who buy shares are part owners of the business and as such they can hold the entrepreneur accountable for whatever he or she does (or doesn’t do). Shares can be used in a variety of ways.

Small Business Administration Loans

Loans available from the Small Business Administration (SBA) include:

• Direct SBA loans (which have a low interest rate). The name comes from the fact that this type of loan is issued directly from the government. Unfortunately, because Direct SBA loans are intended for minorities and veterans they may be difficult to acquire if the person requesting them does not qualify.

• Guaranteed loans are sometimes available to individuals who have been turned down by a bank. The scheme works by having the government guarantee a loan (via a participating bank) on behalf of the entrepreneur. More leeway is therefore usually given in paying the loan back.

Soft Loans

Loans are declared ‘soft’ when they do not require security or collateral, their payback schedule is long, and their due dates are extendable. That being said, every penny that is borrowed must be paid back, with interest, just like a regular loan. Small Business Development Centers, local governments, business-oriented banks, corporations, business trusts, and other business-friendly associations are the best places to look for soft loans.

Trade Credit

Some suppliers do not require payment for the merchandise they sell for up to 30 days or longer – so that the purchaser has time to sell the merchandise before paying for it. If a small business has a solid customer base and it has little doubt that it can shift merchandise easily, this can be a creative way to lower inventory costs and begin trading with less money than was originally envisioned.

Venture Capitalists

A venture capitalist is a person or group that finances businesses. In return, he or she (as part owner) expects to share in the success of the business in which his or her investment has been made while expecting yearly growth rates of up to 40% or higher. Because most venture capitalists are successful business people in their own right, they’re often adept at determining if a commercial idea is a good one. Note that many venture capitalists are not really interested in providing capital for small businesses. Instead, they look for high-flying enterprise ideas that have big profit expectations and will pay back their investment very quickly. Additionally, since most venture capitalists are only in it for the money (who isn’t?) they may sell their shares to unknown buyers in a few years’ time.

Mixing Up the Options

If the sources mentioned above aren’t enough on their own, consider mixing them up. Maybe a local bank won’t lend TSH 100,000 to start a business, but it may consider TSH 25,000. Additional funds can then be obtained from family and friends, the selling off of personal assets, and so on. Still more cash can come from grants or through trade credits or equipment loans. Don’t be afraid to be creative.

Advice from the Pros

• When in need of finance, shop around, be persistent, and never be afraid to ask for advice.
• Open up every available line of credit before going into business – even if it means taking on more credit cards. Few institutions will loan money to a cash-hungry business after it has been set up.
• Ensure that all equipment and machinery is bought at the best price and under the best conditions. Used equipment may be seem like a less expensive alternative to new equipment, but make certain what you buy has lots of life left in it. Entrepreneurs that buy cheap often buy twice. Remanufactured equipment, which comes with a guaranty, is a much safer bet.
• Get to know your banker before you need money from him or her (i.e.: while you’re still solvent).
• Being desperately in need of cash is a bad time to introduce you to a money lender.
• Do your homework before seeking cash. You may need more than you thought. Many entrepreneurs claim that every time they turn around there seems to be another payment that has to be made (for licenses, fees, duties, permits, etc…). Prepare for this fact.
• Don’t let your business die a death from a thousand cuts. Little expenses add up and they can break a business. Again, factor everything in.
• After you’ve deduced how much finance your business needs to get up and running, double the figure. (Some entrepreneurs suggest tripling it!)
• The world is littered with failed businesses whose owners were too proud or stubborn to ask for money when it was needed. Borrowing money is not a sign of weakness, but rather a normal, everyday business occurrence. Know that taking on debt is often a necessity if you’re thinking of expanding.
• Consider selling equity (shares) in your business as a means of reducing debt. Although this means that the people with equity shares will own a part of your business, you don’t have to pay them back (which can significantly reduce expenses).
• Lending institutions are more receptive to entrepreneurs that hold production contracts (i.e.: orders for a product). Getting potential customers to order a product before your business gets started may be difficult to do, but it can be done. Use such orders to impress a lender.

According to legend, an enthusiastic patron of the arts once approached Pablo Picasso in a restaurant. ‘Please draw me something,’ she insisted, ‘I’ll pay you whatever you want.’

Eager to continue his meal in peace, the artist drew a few lines on a napkin and handed it over.

‘That will be ten thousand dollars,’ he said. ‘Ten thousand dollars!’ the woman shrieked. ‘But it only took you twenty seconds to produce this!’ ‘No,’ Picasso replied, ‘forty years and twenty seconds.’

In his own way, what Picasso was trying to explain to his admirer is that there is a difference between price and value. A price is the amount of money charged for a product or services that consumers exchange for the benefit of acquiring a product. Value is a perception and may involve demand or additional costs that are not readily apparent (such as labor, experience, or skill; or, for paying customers, the amount of money or time involved in switching over to another product).

Historically, prices for most products were usually established through barter or negotiation. Prices therefore varied depending on the buyer’s skills. In the early part of the last century, however, some business changed this practice by adopting a strictly one-price rule in all his stores – a policy that soon spread.

Facts about Pricing

• Price is the only component of the marketing mix that produces revenue. All others represent costs.
• Price is the most flexible element of the marketing mix. Unlike the other marketing mix elements, a price can be changed quickly.
• Pricing is often the most significant factor affecting buyer choice, but it’s a double-edged sword. If a price is too high, buyers may turn away. If it’s too low, they may sense something is wrong and also turn away.
• Pricing is not often handled well. For example, if a price is cut by 10%, it may result in 50% of profits being lost.

Common Mistakes in Pricing

• Prices that are too cost-oriented (e.g.: customer value is not contemplated).
• Prices that do not reflect the current market (as above, there could be high demand or a lack of demand).
• Not taking into account the other marketing mix components (again, the perception customers have of value may not be contemplated – or perhaps it’s misjudged).
• Not varying prices according to different products, different market segments, or promotions.
• Slashing prices in the assumption that doing so will raise sales (the problem could be ineffective marketing, low perceived quality, or any number of other factors which will not be solved by changing prices).
• Raising prices to increase revenues (again, the problem may lie somewhere else – and if it does, it won’t be solved by raising prices).

Starting the Pricing Process

Before the pricing process begins, it’s necessary to consider what it is you want pricing to do for your business. The obvious answer is generating revenue, but how will this be achieved? By being more competitive? By attracting a specific clientele? By getting more customers to try a product? How about a combination of one or more of these objectives? If your business is serious about making the most of its prices, then it’s worth the time and effort to think about these questions, write them down, discuss them with colleagues, and think them over. The results can be used as a rough draft or a template for helping to set a good price.

Internal and External Factors that Affect Pricing

Consider the following when establishing a price for a product or service:

1. Internal Factors (situations or determinants inside the company). These include:

• Marketing Objectives, which are determined by the chosen target market and its position in the overall market. Knowing what targeted customers expect in terms of price can help determine a numerical value. For example:

• Is the luxury market being sought?
  • Is the economy market being sought?
  • Is a survival strategy envisioned (selling below cost)?
  • Will product prices be based on demand?
  • Do research and development costs need to be covered?

• The Marketing Mix Strategy coordinates a product along with its production, distribution, and promotion to form a consistent and effective marketing program. Examples include:

• Target Costing – Starts with the price the business wants to charge for a product, then works backwards (changing production processes, simplifying systems, working with outside suppliers and distributors, and deciding on a marketing campaign based on what the price of the product should be). Many small business operators do this when chasing clients. First they determine what the costs have to be to achieve the target price (based on customer demand), then they change their internal systems to meet the costs that will get them there.
  • Value Pricing is when the best strategy is not to charge the lowest price, but to make the product different (or seem to be different) so that it’s worth a higher price.

Costs are what the product actually costs to produce (and market), which must be covered in the price. Examples include:

• Cost-Plus Pricing occurs when a standard mark-up is added after determining the fixed and variable costs of a product. This type of pricing is sometimes seen in construction companies or with lawyers, accountants and other professionals who figure their costs then add a 20-percent mark-up (or whatever percentage is deemed appropriate).

2. External Factors are situations or determinants outside the company.

• The Market and Demand. For example:
• Pure competition – basing prices on ‘the going price’ (everybody else is doing it so we will as well)
  • Oligopolistic competition – having few sellers that are highly sensitive to each other’s pricing strategies (i.e.: if one company changes its prices so will the others)
  • Monopoly pricing – by being a sole supplier, the producer can price as he or she sees fit

• Consumer Perceptions or basing prices on what customers think constitutes value (Note: This requires a firm understanding of consumer behavior).
• Price-Demand Relationship involves setting prices according to market demand. The higher the demand, the higher the price. The lower the demand the lower the price.
• Competitor’s Costs, Prices, and Offers include basing prices on the overall selling environment.

Summing Up Pricing

When setting prices, don’t sell your business short. According to seasoned practitioners, most businesses should think about how high they can reasonably go with their prices rather than how low while always considering what customers will perceive as fair and ethical. The most common mistake entrepreneurs (particularly service providers) make when it comes to setting prices is not charging for accumulated knowledge, time, and experience.

Advice from the Pros

1. Price your products correctly the first time. It might be difficult to raise them later.
2. Factor your time and skills into your prices. Don’t undercharge for your time and expertise.
3. Always remain aware of your competitor’s prices, sales, and promotions.
4. Try to keep your prices (and therefore your profits) as high as possible by offering additional or unique services your competitors can’t, don’t, or won’t provide.
5. Remain vigilant when it comes to the prices you pay for supplies, materials, and merchandise.
6. Don’t be tempted to buy cheap. As the saying goes, those that buy cheap, usually buy twice.

Conducting Business Research

Sometime after the collapse of the Berlin Wall in late 1989, numerous Polish intellectuals, who had previously been living and working outside Poland, journeyed back to their native country to capitalize on the demise of communism as well as a baby boom that had resulted 20-years earlier due to a strict curfew imposed by communist authorities (as reported in The Economist, Polish workers took to their beds during this period because there was little else for them to do).

In less than two years, over 350 private higher education institutes sprang up like mushrooms after a spring rain. But by 2009, higher education enrollments peaked; and by 2020 the number of 19-year olds in Poland is predicted to fall to 361,500 – which is half the size it was in 2002.

Many universities, both in state and private sectors, are now under threat because there are simply not enough students to fill available classrooms. The result is that departments and faculties are feeling the pinch and financial cutbacks are taking their toll. International students are being targeted more than ever before with tuition and accommodation costs that are lower than those in their respective countries. And admission standards are reportedly lower than ever. ‘Some colleagues say that the average student in the 1990s was much better than the current ones,’ says Benjamin Stanley, who taught at a university in Warsaw from 2011-2013. He adds that Poland now has too many university students of doubtful academic quality and that too many are graduating with degrees that cannot get them a well-paying job. This sentiment is echoed by former Polish Prime Minister Donald Tusk, who publically put this situation into perspective for young adults by remarking that it’s better to be a well-paid welder than an unemployed social science graduate.  

What does all this mean for the entrepreneur? No matter how good a business opportunity is, and

No matter how good a business opportunity is, and no matter how successful a business becomes, the need for gathering, updating, and interpreting information for the purpose of benefiting from constantly changing markets and then acting upon this information - never ends.

Conducting External Research

The moment a business starts trading it cannot stand still. Economic environments and demographics are constantly changing, which means that an astute entrepreneur should not only be aware of what is going on inside his or her business, but also the dynamics that are in play outside it. And that’s because the external environment of a business (which the business often cannot control) does affect the internal environment (the systems and procedures that operate inside the business).

Vigilance and action is therefore required to ensure that a complimentary match exists between the two. Let’s start with the external environment. The following steps are designed to help explore the external environment in which an entrepreneur conducts business:

Step #1. Define what you have and what you wish to do.

This includes identifying current resources, short-term goals, and long-term goals. Remember to commit everything to writing. The honing of goals and the defining and clarifying of thoughts and solutions always improves during the process of writing.

Step #2. Evaluate your idea (or product) and the industry to which it belongs.

Gather as many opinions as possible. Understanding how customers interpret an idea or product is always more significant than the entrepreneur’s interpretation. Among the many questions to ask when conducting external research are:

• What is the history of the industry in which the business idea is located (both in general and locally)? Is it on the rise? Is it declining? Why?
• What are the benefits of the product or service?
• What are the product’s uses?
• Is there a real need for the product? How long will that need last?
• Can the proposed product be measured against an existing product? How?
• Can the product be adapted for other more profitable uses? How?
• Will the business have the ability to provide what is wanted, when it’s wanted, and how it’s wanted?
• Does the product require a previously unforeseen special license, insurance requirement, distribution system, or other expense?

Step#3. Know your customers

• Who will use the product? (Be specific. No product can be sold to everyone. A good customer profile takes into consideration: sex, age, ethnicity, religion, income level, education level, stage-of-life [i.e.: singles, students, parents, retirees], transportation needs, etc. Contact a local census bureau for details. In the USA, this information can be accessed at www.terforum.org).
• Where are the most ideal customers located?
• Why will customers use the product?
• How will they use it?
• What benefits will they derive from the product?
• How much of the product will they use? Can the product be sold in the right amounts?
• Can prospective customers afford the product – and afford to keep using it?

Step #4. Demographics.

• Is the population of the targeted customer base on the rise or is it decreasing?
• What is the current (and projected) economic situation of the area?
• What are the local purchasing trends?

Step #5. Research the competition.

• Is there a business that currently provides a similar product?
• Can another business produce the product cheaper or better?
• Will local stores carry the product?

Step #6 (For existing businesses)

• What do our customers think of our current business, products, and service?
• Are our marketing programs working? Why or why not?
• How many customers do we know on a first name basis? Have we asked their opinion?
• Are we using purchase and credit records to build customer profiles and data bases? Can we use this information to determine what our current customers might want to buy in the future?
• Do we offer incentives for return visits? If not, why not - and what can we do about it?

Step #7 Analyze your research

• Do the demographics support a sustainable market?
• Does the information gathered from steps 1-5 fit into the demand needed to sustain sales?
• Do any changes need to be made to my idea or product?
• Will providing/producing the product require more capital (or time) than was originally thought?

Making Adjustments

Don’t ignore research results if they don’t reveal what is expected. Almost every business idea either needs a bit of tweaking or an outright alternative somewhere along the way. ‘Negative results should be seen as an opportunity, not a threat,’ says the owner of Arpi Holding in Oslo, Norway. For example, if the entrepreneur needs more money than was originally envisioned, perhaps he or she can sell the original idea to an existing company. Or maybe the business will have to start small and stay small for a longer period of time than previously thought (there’s nothing wrong with that). Perhaps an office or shop can be rented or leased instead of purchased – or maybe working from home is a better option (if licensing laws permit it). If research shows that customers don’t want to go out and buy a proposed product, might they consider having it delivered instead? For example, if a restaurant is envisioned but no one seems interested, would customers take to a specialized service (e.g.: meal deliveries, catering, wholesaling, take-aways, cooking lessons, etc)? The point is to investigate all the alternatives and stay open-minded. Determining whether an idea should be doggedly pursued, modified, or abandoned, is one of the most difficult decisions an entrepreneur has to make.

Conducting Internal Research

Assessing a business’s internal environment requires honesty and openness and should not rely solely on the judgment of one person. Whether a business is in the design stages or has been up and running for years, regular internal evaluations should address the following:

• Skills. How well can (or will) the business and its people do what is supposed to be done?
• Systems. How efficiently does the business serve its customers?
• Structure. Does the set-up of the business promote peak performance?
• Values. What are the priorities of the business?
• What are the strengths and weaknesses of the person or people behind the business?
• What are (or will be) the overhead costs?

Researching the Cost of Overheads

Expenses associated with the everyday running of a commercial enterprise are called overheads.

Generally speaking, overheads must be paid whether or not a product is made or sold. Overheads are therefore an important factor in determining long-term costs. Examples of overheads include:

• Raw material costs
• Equipment and supply costs (including raw materials and office supplies)
• Insurance premiums
• Telephone bills, printing costs, leasing or hiring fees, travel expenses, repairs, etc.
• Legal fees
• Rent and utility expenses
• Advertising and marketing costs
• Shipping and storage fees (the monthly costs of transporting and warehousing)
• Wages and salaries
• Accounting fees

Many of the successful business operators interviewed for this book said that they always eye their overheads with a desire to reduce them (e.g.: switching to lower-cost suppliers, finding cheaper premises, reducing packaging needs, etc.). Put another way, endlessly exploring new ways to conduct business operations helps ensure that expenses are kept low, less waste occurs, and greater efficiency becomes standard.

SWOT Analysis

Much of the information from external and internal research can be graphically represented by what is called a SWOT analysis (SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats). The purpose of a SWOT analysis is to depict internal and external environments in an easy-to-read format. When a clear picture of the opportunities and challenges faced by a business are laid out, it becomes easier to identify, add to, and investigate areas that need to be addressed.

Note that the more honest and thorough an entrepreneur is with his or her SWOT assessment, the better the chances are of tackling the challenges involved with starting up a business. Note also that most businesses will have many more critical factors listed (i.e.: factors that are crucial to business success and can be measured against competitors) than the few depicted in the diagram.

Advice from the Pros

• When starting a business, don’t remain focused on the internal happenings of the little kingdom you plan on running. You must also stay on top of external trends (demographic changes, competitor, marketing schemes, and so on).
• Learn to handle negativity. The point of research is to locate problems and openly discuss them not shy away from them or deny they exist.
• Be open to advice and feedback. Listen and act upon what others say.
• In the never-ending battle to keep expenses down, focus on eliminating waste and improving efficiency rather than simply cutting costs. All too often, constantly cutting costs results in a reduction of quality that can turn off potential customers

Although the statistics show that inflation has decreased, but why still the cost of living and the prices of important things such as food, transport, health and communication have been seen to rise higher?

Currently, the cost of living and operational general has increased by 4.9% inflation rates 2022 compared to last year 2021 when it was 4.0% but also last month was 4.8% which is an increase of 0.1% and as an increase of 0.8% from last year 2021.

Basic needs like foods and non-alcoholic beverages, the prices have increased by 9.1% 2022 compared to last month where it was 8.3% and 3.9% for last year 2021. We expect a further increase in the price of foods and non-alcoholic beverages because we are entering the season of Christmas and New Year and the demands of these products expected to increase more.

Products like alcoholic beverages and tobacco prices have dropped by 0.9% 2022 compared to last month where it was 1% and 2.5% for last year 2021. The same goes for products like clothing and footwear costs have dropped by 2.5% this month from 2.6% last month and 4.9% last year. Housing, water, electricity, gas and other fuels, furnishings, household equipment and routine costs have increased by 3.7% 2022 compared to last month. Fuels, electricity, water and gas are the important products that have multiplier effects to all people because everyone will need water and everyone will need electricity, therefore the increase price of these products have very big impact on the individuals economy, family levels up to the national level.

The use of consultants by small enterprises is now an established trend in business. As activities relating to the conduct of business become more complex, the need for outside assistance usually increases. Managers of small- scale enterprises who want to remain competitive need to consider using consultants as they would use other support services, such as bankers, lawyers, accountants and trade associations.

Consultants can play an important role in economic development by assisting people to set up small enterprises. For new entrepreneurs, the start-up phase is the most difficult; consequently, more and more consultants focus on this important aspect of enterprise development. Consultants and small-business development centres often arrange training for entrepreneurs who intend to initiate new enterprises.

Existing small enterprises use consultants mainly to solve specific operational problems. The duration of the consultancy will depend on the specific problem but most consultancies can be accomplished within a few months. Longer consultancies may be required if the problem concerns expanding business operations. Expansion takes time and the consultant may be involved periodically for one or two years.

Managing in the knowledge economy

The competitive position of economies in particular of the highly industrialized countries – is already or will be determined by their capacity to create value through knowledge. This structural change is reflected in theories of endogenous growth, which stress that development of know-how and technological change are the driving forces behind lasting growth. Knowledge is increasingly recognized as the principal source of value generation .  The most recent economic growth comes not just from general advances in knowledge and the state of technology, but also from intangible financial products, entertainment, and computer software. Quah calls this “the weightless economy”, which he defines as not just more and better technology, but a reduction of distance between knowledge production and consumers, removing the intermediaries of traditional intellectual property protection and manufacturing. With fast interactions across countries, international learning processes become faster, and new competitors enter traditional businesses. The newest technologies – computers, the Internet also allow consumers to get closer to knowledge production. The traditional trade- off between reach and richness of interactions between producer and consumer seems to be no longer valid. The newest technologies produce new weightless goods – software, video entertainment, and health and financial consulting services – that can be considered as if they were knowledge. Little sits in the chain between knowledge production and final consumption. As information and communication technologies are the main drivers of this new economy, authors talk about the digital or information economy.

Currently, Tanzania inflation has reached 4.8% compared to last month where it was 4.6%, within a one year inflation rates has increased by more than 0.8% from 4.0% for 2021.

Foods and Non-alcohol products have contributed to rapid increase in inflation rates, which currently inflation rates hit 8.3% compared to last year's by 4%, with an increase rates of 4.3% (51%).

The demand for food has become higher due to the rapid increase in the number of people in urban areas, most of our urban areas do not produce food, dependence on rural areas where by agriculture productions takes place, which increase the demand for alcohol and non-alcoholic drinks.

Transportation costs have increased by 7.9% compared to last month where it has decreased by 0.2%, compared to last year the costs have increased by 2% from 5.9%. The increase in inflation rate on transport was due to the increase in the price of fuel but currently the situation is stable.

You've been approached about buying a business. What do you do first?

The demographics tell an exciting story: we're likely to see hundreds of thousands of small owners looking to retire over the next decade. Does the big question then become what will happen to all those companies?

One possibility is that we might see a boom in opportunities for younger people to acquire those businesses. Maybe you even work in a company like this where the owner has already approached you about taking over. While that might seem like a dream come true to finally own your own business--there's also some considerable risk you'll need to evaluate before you go ahead on a transaction.

I've identified a few critical high-level questions any prospective entrepreneur should ask before taking the plunge to buy a business of their own.

1.     Does the business have recurring revenue?

One of the riskiest aspects of any business is the stability of the revenue. That's why one of the first questions you need to ask a seller is how their company earns its revenue. Knowing if the business you want to buy has predictable, recurring revenue streams in place is critically important. 

That might include long-term contracts or a customer base that pays a fixed amount every month. Having these kinds of recurring revenue streams not only makes the business less risky, but it also becomes more valuable if you ever want to sell it yourself. On the other hand, if the business requires you to go out and make a new sale every day, you will be taking on a great deal of risk.

2.     What are the relationships with customers?

Ask a seller what the status of their customers is. Are they happy and likely to continue buying from you? Or, are things messier, where some customers might be at risk of leaving? The other key question to ask is about sales concentration. 

Does the business have 20 to 30 customers representing no more than 10% of company revenue? Or does it have 3 or 4 customers, two of which account for 90% of revenues? The more distributed and secure the customer base is, the better. Otherwise, the business becomes riskier.

 3.     What's the nature of competition in the business?

No business operates in a vacuum. So, it's essential to understand what kind of competitive pressures it's been facing. One area to look closely at is gross margin--the business's revenue minus the cost to deliver service. Is gross margin is growing over time, which means the company has found ways to keep costs under control while raising prices? 

Or, is gross margin eroding, which might indicate rising costs and pressure from competitors and customers to squeeze prices? This could also result if the business is being pressed on price by its biggest customers. Any company that erodes gross profit should be a big red flag. As the old saying goes, nobody wants to catch a falling knife.

4.     Is there a growth engine?

A stable business can be great for an owner who wants a simple lifestyle business. But if you're looking to acquire a company, you'll need to find some levers to help grow the industry to help you pay off the seller over time. Ideally, there are opportunities to grow the business by 5% to 20% a year. That way, you'll be buying an appreciating asset, not one that's stuck at the price you paid for it.

5.     Is the business dependent on the owner?

Many small businesses revolve around their owner or founder. They are the most skilled and vital people in the company, and it's hard to imagine operating without them. This would be another red flag for a potential buyer. 

While you might have a healthy enough ego to believe you could step in and provide those same skills, you should be wary about if the business will transition well to a new owner. That can be an especially tricky scenario if the seller plans to stay inside the company for a while to help the buyer and new owner. 

It's a double-edged sword. While the seller can provide some guidance about how the business had been run, they can also become a dampener to innovation--putting the brakes on any changes the new owner might want to make. 

6.     Is the owner willing to take back financing?

Some new business owners might not be aware that it's common for sellers to provide "seller financing"--meaning they will be paid out over time, maybe five years, through the business's profits. This can often be a win-win for both the seller and buyer: the seller typically can get more for the company while the buyer doesn't have to secure outside financing to make the deal. 

The problem can be if the seller wants their money right away. If that's the case, it becomes a more risky and challenging deal for the buyer because they know they must either come up with a pile of cash or take on debt from a bank to buy the business.

As I said earlier, these six questions are just a high-level primer to help see if the business makes sense to buy or not. It might be wiser to walk away if you see too many red flags. But suppose you get excited by the answers you get. 

In that case, you can then proceed to the next level of due diligence, where you could begin to dig more deeply into areas like bad debts, the quality of inventory, the maintenance history of the equipment, etc.

Just remember that while it's exciting to think about finally becoming your own boss, make sure you take the time to ask the right questions before leaping to ensure you're buying a Cadillac and not a lemon.

The study focus on looking on youth employment along with their entire economic situation but also the study advising what the government and other organizations should do to help youth and free them from all life challenges including youth employment and the entire economic situation they face.

The findings of the research show that many young people are still unmarried by 91% of the youth interviewed even though a few are married by 5%, but also many young people have been seen living in families with people less than 3 family members, but also within those families it has shown that there is almost equal depending ration between people who work for salary or wage and people with no work or job but are actively looking for a jobs.

Many young people have shown that they have completed their first degree education from the first enrollment of 466,985 students by more than 91% and 9% of them have completed their first and make a total of more than 54,799 (11%) of all graduate where by 38,111 graduate first degree each year and 302 graduate second degree. Youth goals many of them respond at the moment are making a contribution to society, but many also wish to be more successful than where they are now. Many young people currently like to work in private organizations, but also in multinational corporations, and some would like to be self-employed by starting their own business as shown in the study below.