Article from BD Africa
23rd June 2006
Against every small business is ranged a set of challenges so fierce that many just don’t make it.
But lately it’s been striking me that among the worst is something economists bag, neatly, as ‘economies of scale’. In plain-speak, the sheer, weighty burden of being small.
It works thus: I have a small office, several employees, and a growing number of clients. One of them says, enthusiastically, ‘scan it in. I’ll look at it right away’. And a bolt of horror strikes my ribs.
‘Scan it in’ means a scanner. A scanner we don’t have, a scanner that will eat the last Sh10,000 of headroom we had on this contract. But the client is in South Africa, and a feeble offer to post instead is akin to saying: ‘go find yourself a competent supplier next time’.
The document must be scanned. Our cheap offices, some way out of town, are not close to the kind of handy little bureaus that offer scanning per sheet. So sets off our office manager, for what will be a three-hour return journey to get the thing scanned. One fortieth of her monthly salary later, we shall have sent the most expensive scanned document known to business.
And that was just the scanning.
Small businesses, struggling to fund equipment that is barely utilised, performing services for one client that would cost the same for six clients, and paying full whack for every single thing along the way, represent the opposite of ‘economies of scale’.
But desperate times have a way of breeding solutions. And my business surely lived a desperate time in early 2008. It’s probably worth memory-wiping the five cancelled contracts, the email from the South African investor after its long-awaited January board meeting that concluded ‘it would not be in the interests of the company to invest in Kenya at the current time’, and the swift, ensuing death of the training market that had been our business backbone.
Instead, we now have every right to break into Dolly-Parton-like choruses about having survived. We’re fine now, and better than fine. But one of the big reasons we’re fine is that desperation saw us discover the real point, value and bonus of ‘partnerships’.
The key, we now know, lies exactly in ‘under-utilisation’. Anything we don’t fully use, anything anyone else doesn’t fully use, is game, in our new life as ‘sharing’ junkies. It began with office space. That isn’t so novel: lots of companies do it. But it surely slashed our overheads.
When we got talking to a tour operator, similarly blitzed (and now similarly re-emerging as a growth story), and a local training company, then enjoying “a lull in registrations”, getting together to share offices spelt win in every direction.
It’s not just that we each only needed so much space. The real bonus was the shared Internet connection, the shared toilets (and toilet cleaner), the shared water dispenser, training room, server, router, printers, common electricity bill, shared security guard, and on.
All legal, and all took time to cement. We couldn’t, any of us, get into unofficial sub-letting. We all need that City Council Licence, and that means offices in commercial premises with official sub-letting agreement.
So talks with landlords, checks on contracts, much head-scratching on ways of sharing and dividing the payment across all, and we moved May 1st: to better facilities at half the previous cost. But office-sharing has only been first base. It turned out our new partners needed some administration and marketing services that was easy for us to provide, so we’ve split some salaries too.
And, certainly, we’ll be discussing a scanner: because one-third of a scanner might be worth it for two scanned documents a month. More profoundly, we now think partnerships on auto-pilot.
One of our businesses is PR. The point is to get stories out. But clients, not surprisingly, also want to know what stories ran, where, for their spend. Press monitoring is like buying a scanner, only much, much worse.
It brings on the “we only monitor print” moment (aka “go find yourself a competent supplier next time”).
As it is, we now buy newspapers by the tonne and pay a PR assistant who reads them all looking for coverage relevant to just a few clients. It would obviously be worth someone paying us a thimbleful for keeping an eye out for coverage on another company, or three. Same time reading, more things we’re looking for.
Better still, we haven’t yet found a way that we can afford to monitor the electronic media. Hazy images of a wall of TVs simultaneously running the news bulletins of NTV, KTN, K-24, Citizen, KBC, CNBC et al are surely set to stay hazy images.
We’ve gently looked into house-wife earnings: paying individuals to watch just one channel’s news each evening. But the sum looks nasty, still, against a few, tightly negotiated PR contracts.
We just don’t have the pricing power of big PR agencies, or the wide book of clients to carry these kinds of overheads, either in-house or by outsourcing to monitoring services. Not on our margins.
Yet we know that there are other smaller agencies out there – so our hunt begins for someone who’d like our press pick-up for their electronic pick-up, or some form of sharing. Competition transformed into co-operation.
Luesby is CEO of African Laughter, publisher of online jobs portal www.webarazacareers.com.
