The iGrand End of Year Report: It’s Been Real 2020

Greetings to all of you our esteemed readers and customers. When the year began, we set out to go and conquer the world. For us, our sunrise came in March when plans to escalate iGrand from an idea to a brand that develops and distributes business plans and reviews were born. In July, we published our first ever iGrand Business Review magazine. Since then, we have remained consistent in issuing monthly reviews that are precise and relevant to the business leader. We have chosen to target business leaders only. Business leaders to us are people who are involved in key decision making in an enterprise however small or big. Each magazine has a section for book reviews just to keep you posted of the books we think you should be reading for effective business leadership. We also review the best webinars that perhaps you missed. We are convinced that through such webinar reviews, you’ll be able to catch up with likeminded people without having to sit in a boardroom or attend a seminar. In September this year, iGrand Business Plans was officially registered as a professional service provider in business plan development. We have continued to make progress amidst covid-19 because we are determined to get involved in solving entrepreneurial challenges in Kenya and beyond. We first build relationships with our customers before we can talk transactions. We are coming even closer, we have just finished the technical work in setting up iGrand Business Radio, a podcast channel on anchor FM, Spotify, google podcasts and other distribution channels. We have also finished putting together iGrand Business TV, a channel hosted on YouTube that exclusively features business content. All these developments are geared towards giving you access to reviews that change how you do business. We are in the final stage of developing the iGrand Business Plans App for android devises to purposely democratize access to business development services among small and medium sized entrepreneurs. The app will be ready for public use within the first quarter of 2021. It will make it easier not only to formalize your business and run it professionally, but also reduce the headache in finding a financial partner. At iGrand, we choose to be business partners with our clients. Our progress is yours and yours is our greatest achievement. This report says much about our humble history and more about where we see you if you choose to work with us. Merry Christmas and happy New Year 2021.

This report was compiled by team iGrand Business Plans, led by Rick Okinda, the Team Leader.

Dynamics of a family business

The Family businesses are evident in every industry and are a vital source of affluence and growth in our economy. The most sensitive and widely discussed family business dynamics revolves around ownership, governance, wealth management and succession plan. Balancing the equation of family informality and strong governance has been a struggle for most businesses. Creating an effective board of directors is key to ensuring business longevity and transparency. This is because they will exhibit profound expertise in both the industry and functional areas relevant to the company. In addition, the businesses should develop and formulate a family constitution, code of conduct, strategic plan and shareholder’s agreement to help them achieve their goals and ensure right structural balance. When it comes to the financial health and stability of the business, wealth management must be prioritised to build a cash reserve that can sustain the company for future generations. The key components for managing wealth include developing and implementing a wealth management strategy and fine-tuning it to accommodate change. These should be aligned with the family values and shared vision. One of the predominant feature in family businesses is the strong desire among family members to retain ownership and control of the business. Succession takes time and careful consideration to plan and ultimately implement it. Every business has its own unique succession plan, therefore, it ought to be tailored to specific elements of a business such as family values and expansion plans. Most business creators are always caught in the dilemma of selling the business or passing it on to the next generation. Depending on which option is taken, the family members need to be involved in the decision making for smooth transitioning. Generational differences have an impact Dynamics of a family business on succession plans. The ongoing tussle between honouring traditions is fading out as traditionalists and baby boomers try to maintain business values, while X-gens and Millennials seek to transform and revolutionize the business model .To ensure legacy of continuity and success, these businesses ought to embrace the cross generational engagement and collaboration. Selling a business to a third party happens when there is no clear successor within the family or the business is uncompetitive. This should be structured thoughtfully and done at the right time. The owner has to maximise the value of the business before selling since it is a one-time transaction and if not managed well, the family has a higher risk of losing wealth. In as much as family businesses want to be secretive in their business model and build a legacy, everything should be done professionally. Since businesses undergo various cycles from their formation to exit, they should seek help from professional business advisors to help them strategize, implement and monitor progress and performance.

Columned by Helima Kemboi

BOOK REVIEW – The Emotionally Intelligent Manager

This book outlines a prescription for effective management and leadership, it is based on integral role of intelligent use of emotions and its impact on thinking, decision making, being motivated and behaving. Emotional intelligence refers to a person’s capacity to effectively reason about emotions and to use emotions to enhance thoughts and solve problems. We are taught that emotions shouldn’t be felt and should be expressed carefully and only in certain environment and certain time, although an emotionally intelligent manager replaces the convectional view of emotions with an intelligent view, they combine passion with logic and emotions with intelligence.

The fundamental emotional skills of an emotionally intelligent manger are;

  • Identifying emotions: we have to read people, by becoming aware of emotions and expressing them accurately in order to communicate effectively.
  • Using emotions: emotions influence our thinking and we should match emotions to the tasks.
  • Understanding emotions; emotions are not random events there are underlying causes, we should predict the emotion future and find out what emotions mean.
  • Managing emotions: this requires us to stay open to emotions and integrate emotions into thinking.
  • Emotionally intelligence people are not necessary great managers and not all great mangers are emotionally intelligent, effective management is therefore essential. Emotions do matter at all times and to ignore it is to deny the wisdom of our emotions and those of others. Integration of rational and emotional style is key to making good decisions because emotions are always at work and they work with and for us.
  • Managers may build effective teams, plan and decide effectively, motivate people, communicate a vision, promote change and create effective interpersonal relationship as they affect and influence people.
  • The major principles of emotional intelligence includes:
  • Emotions is information: it contains data about you and the world, it an events that interfere with thinking and helps motive and guide success. We must be able to differentiate between experience of an emotion and influence of being in a certain mood.
  • We try to ignore emotions but it doesn’t work: emotions will always influence performance in all areas of our lives.
  • We can try to hide emotions but we are not as good at it as we think: your emotions will be read by some of the people, most of the time.
  • Decisions must incorporate emotions to be effective: emotions has impact on our decisions, on us and others whether we want them or not.
  • Emotions follow a logical pattern: emotions are not random occurring events, each emotions has its own move.
  • Emotions universal exist but so do specifics: customs and culture do vary but in case of emotions it can be universally recognized and there are emotional specific which have to do with display rules, secondary emotions and gender.

Emotional blueprint offers an approach to emotions that is intelligent, it does not threaten the importance of logic or reason, an emotionally intelligent manager has to describe the situation, identify the emotion, use the emotions, predict emotional future, understand the emotions and manage the emotions so as to motivate and inspire them. Emotional skills can be measured in an objective way through the use of performance or knowledge test.

“Emotion system is an intelligent system, that’s why it evolved in animals including human, our emotions points us in the right direction and motivate us to do what needs to be done.”

The Webinar You missed- Personal Financial Planning: Debt Management.

How can we borrow wisely? Can debt create more wealth? Is debt good or bad? How can we really manage financial distress? Some of the webinar insights include:

Debt can be good or bad. A good debt is a debt taken for investment and should grow in value in long-term, the income earned should be able to repay the loan. A bad debt is loan taken for consumption purposes, they quickly lose their value and do not generate a long term income.

Causes of bad debt may result from; wrong financial planning, over ambition in financial matters, irregular income, multiple borrowing, unstable lifestyle and lack of financial literacy.

Recommended remedial actions that can be taken to manage bad debt include; saving, investing, purchase in cash, postponed gratification, debt consolidation, counselling and restructuring.

When acquiring debt one should assess their loan repayment ability, sustainability of the repayment plan, the tenure of the loan and available alternatives to fund raise.

Proper investment decisions should be taken into account by considering the risk, expected returns, liquidity of the investment, time horizon, objective of the investment, investment goals and different investment choices available.

The words of Robert Kiyosaki will best summarize the webinar, “It is not how much money you make but how much money you keep and how hard it works for you and how many generations you keep it for.”

Education Sector Review

Kenya has at least 50 chartered universities spread across over 40 counties. There are also many public and private colleges including the technical and vocational institutes. The higher learning sector alone has shaped economies of many upcoming towns in the country. Kisii town for example, has transformed into a busy town ranking as one of Kenya’s fasted growing towns because of being an academic hub. There are also many economic gains in the establishment of primary and secondary schools.

When the covid-19 pandemic ravaged the economy leading to closure of academic institutions, a significant economic impact was felt as every other sector was affected. Could you imagine that the real estate sector in Kenya depends largely on an active academic sector to thrive? Other sectors that perform based on academic sector performance are domestic tourism, retail’s back-to-school sector and education consultancy service sector.

In Australia, the education sector is a highly ranked sector in terms of GDP contribution to the country’s economy. Kenya’s case, parents basically go to work so that they can be able to pay school fees for their children. Post-covid, the conventional academic sector value chain will completely change as e-learning is becoming a new normal. Blessed is him who plans to solve the problems being created on the digital classroom.

BigTech & Money

The financial industry, once dominated by commercial and investment banks, has undergone tremendous changes, especially in emerging economies as tech companies scramble for a pie of this lucrative venture. Millions of users across Africa and Asia are more likely to pay for services using their phones as opposed to banks. Things have never been easier for these consumers who can now save, borrow, buy insurance, and even invest using tech platforms such as M-pesa, Alipay and WeChat. All these financial tools were thought to be a preserve of the rich and developed world, what made it easier for the underserved communities to easily access these essential financial services? An answer can be found in the short stories herein.

A story is told of a man who wanted to build the largest e-commerce marketplace in the world. This man wanted to ensure that payments were secure and that everybody could conveniently pay upon receipt of their goods. No bank wanted to partner with him, facing such rejection, he set up a financial division which acted as an escrow for holding customer’s funds. The funds could only be released upon delivery of goods. The move built trust in the most populous country in the world and as their business grew, so did the funds in escrow. This forced them to rename their financial division Ant Group which in 2019, facilitated more than $15 trillion worth in transactions, an amount similar to EU’s GDP and way more than what was transacted by MasterCard and Visa combined. With such huge data and financial muscle, the group is eyeing a $32bn dual listing in Mainland China’s Shanghai exchange and the Hong Kong Stock Exchange.

Another story is told of a 20 year old tech company in East Africa which wanted to change its community through mobile money. The firm understood how cumbersome it was opening a bank account which not only required a minimum bank deposit but also knew how expensive it was transaction wise. Their mobile money wallet was launched and its uptake in the first year shocked many. Coupled with violence after a highly contested plebiscite, movement restrictions were imposed and the only way one could send money was through their phones. Over the years, the mobile money segment has increased its offerings from facilitating transactions to savings, loans, and investing. This has been the backbone of the country’s economy forcing all banks to partner with them for survival. As of 2020, the firm’s market share of cashless transactions stood at 85% and it is the most profitable company in East & Central Africa.

Other than filling a vacuum created by the bureaucratic banking system, big tech has also been consolidating its offerings and finance is the last pillar in this system. For example, Facebook has been connecting people over the years and it wants people to send money in the simplest way possible, just like sending a text message. This frontier will help them build on their data about an individual’s consumption behaviour starting from what they buy, at what price and location, not forgetting the time/day they are likely to spend. All tech companies are competing in this frontier with each targeting its largest user markets. For Instance, Facebook is looking to expand its financial services in India and Brazil. Apple is expanding AppleCard in America and Europe while Tencent’s WeChat Money is rapidly expanding in Asia. With such developments, consumers have witnessed a sharp decline in transaction costs with companies such as Ant, through its Alipay, not charging for transactions in Alibaba’s portfolio.

Technology will continue playing a bigger role in the financial sector and with this, there comes more concerns on dominance, data privacy and efficiency. These issues have raised conflicts with commercial banks lobbying for more regulation owing to the fact that their market has been taken over by these firms. A good example is Brazil’s regulator suspending the use of WhatsApp Pay and Chinese regulators delaying Ant’s IPO as they draft new laws regarding online financial services. Kenya has also implemented tougher rules on online lenders to curb predatory lending.

In addition to this, regulators are more concerned about data privacy and competition. This has seen a rise in antitrust proceedings being filed against these tech giants. This is with the aim of ‘leveling the playing field’ which was once abused by banks through predatory lending leading to the greatest financial crash in modern history.

Bigtech in most cases, came to fill certain gaps in the financial sector. These efforts should be uploaded especially in emerging markets where it has promoted financial. Going forward, tougher rules regarding data privacy should be legislated to prevent misuse of personal information. Also, regulators especially central banks should encourage innovations which promote inclusivity as they try to lower transaction costs, which is a business barrier in developing economies.

Opportunities in the digital economy

The ongoing industrial revolution swings on the hinges of tech-powered innovation. The rise of big tech companies in California’s Silicon Valley has greatly impacted how business is done and will be done going forward. Google, Microsoft, Facebook, Cisco, Adobe, Oracle, Intel, Apple and Hewlett Packard are some of the companies whose contribution in the fast growing digital economy is largely significant. These companies, among other non-silicon valley big tech players have set up regional headquarters in Kenya purposely to fill the market gap.

In his state of the nation address, delivered on the 12th of November, President Uhuru Kenyatta reported that an average of 300 companies are registered in Kenya every day. Looking at this figures in the light of job losses during the covid-19 pandemic, it is clear that many employees are now considering to venture into ‘side-hustles’ and those who have lost their jobs to the pandemic are starting their new companies. If we try to connect dots, we will realize that the cost of starting a company and running one has reduced thanks to the digital migration to e-commerce.

Inasmuch as millions of websites and social media accounts for business have already been established, it is critical for the investor to learn that the digital economy is still largely unexplored. There are market gaps all over from production, to storage, distribution and selling in every industry. There is also a large space for intellectual enterprise for consultants who wish to meet their customers on their handsets and personal computers.

Book Review- What They Don't Teach You at Harvard Business School

This book basically talks about the resourceful skills needed to succeed in a business and ultimately grow. It is a “street smart” book that emphasizes on the human aspect of running a business. “Business schools are not meant to teach you everything about succeeding in the real world, personal interactions and self-disciplines are more important than theories, raw data and Excel sheets” Mark McCormack emphasizes on the importance of reading people, creating impressions, taking the edge, getting ahead, making sales, negotiating, problem solving and general business growth.

McCormack believes that everything in a business revolves around people. You are either selling, managing or working with people. Therefore, giving insight into people by observing how they carry themselves will tell you more about the person. When watching people it’s important to listen and observe aggressively, talk less and listen more, take a second to look on someone’s first impression, take time to use what you’ve learnt, be discrete and detached. Always be aware of your strengths and weaknesses and how these are likely to slant your reaction to others, nothing blocks insight into other people more than your own ego.

The Best salesmen possess a sixth sense. They can tell by the tone of someone’s voice, atmosphere and mood. They understand that rejection can be the greatest motivation overtime. Salespersons should not be discouraged by failure. In sales, rejections are never personal, you have to understand that timing is critical. Timing is everything in business that even a good idea could fail at bad timing. Know when to follow up and look at the right moment. Perfective selling is tied to timing, patience, persistence and adapting to your clients. It is critical to know when to talk and when to keep silent. Market your product with enthusiasm and understand when someone won’t buy from you. Learn to take initiative and do not be greedy, pushy or impatient but keep looking for the edge. If you don’t know find someone who knows and learn. Admit you need help by simply asking and expanding your knowledge. Acknowledge that sometimes you could be wrong.

Mark McCormack extends the argument to the quality of entrepreneur’s life. Big performance in business require nurturing of passion .It is very important to understand what you are good at and grow at your own pace. Schedule out your entire day, this helps in time management and trusting your system. In building a business always do what you’re passionate in, start small, have realistic goals, grow slowly, diversify expertise and keep learning. If you focus on excellence and efficiency you are assured to make your way to success much clear.

The Webinar you missed; Personal Financial Management for SMEs during Crisis

The journey to financial management starts with determining current financial situation. This will give you a platform to develop your financial goals, identify alternative courses of action, evaluate alternatives; consider life situation, personal values and economic factors, assess risks and time value of money (opportunity cost). Once this is done, you will be in the right position to create and implement your financial action plan. To attain precision, it is recommended that you review and revise the financial plan to attain an equilibrium.

In financial management, creativity when making decisions is vital for effective choices. The common courses of action from which to draw alternatives are: continuing the same course of action, expanding the current situation, changing the current situation or taking a new course of action.

These recommendations are suitable for both personal finance and management of finances for SMEs.

Review of Insurance Sector Profitability

Insurance exists on a premise that the insurer assumes liability should the risk insured against materialize. As such, insurers receive premiums in advance to cover these risks. Part of these funds go to investment making insurers one of the largest investors in private equity and the capital markets. Over time, assets managed have increased their impact on their financials.

The year 2018 was a challenging one for most companies and the insurance industry was no exception. In 2018, some insurers reported huge losses with Britam and Sanlam leading the pack at Kes.2.3bn and Kes.2.0bn respectively. This could have been attributed to a tough economic environment and an underperforming stocks market. These were the explanation put out but all the losses stemmed from investment decisions which were impacted by the new financial reporting standards, IFRS 9.

Simply put, IFRS 9 is an accounting standard that deals with the reporting of financial instruments. Previously, investments were reported at book value but with the standard taking effect, these instruments were to be reported at fair value with any gains/losses recorded in the year they occurred.

With implementation of the said standard, fair value losses were recognized contributing to the groups’ losses. When these financials are compared to 2019’s, both companies recorded profits with Britam recording its all-time high profit of Kes.3.5bn. The fair value gains on their investments were also on a high of 4.7bn from a loss of Kes.3bn. From such revelations, it is evident that financial assets (equities & bonds) pose a short-term effect on insurance companies’ profits.

Other than insurance, collective investment schemes (mutual funds) are susceptible to such losses in the short-term and this may impact their value. Going forward, insurance and collective investment schemes have to re-evaluate their investment decisions to avert the adverse losses especially when confidence in the markets is at its lowest.