I am 25-years-old and currently working with a basic salary of Sh12,000.
I have a capital of Sh50,000 and willing to start a small wines and spirits venture in one of the Eastlands estates.
Is this capital sufficient to start this type of business? What are the legal procedures of starting such an undertaking?
How much would it cost to get the licences? Could this be a viable business and how can I procure my products directly from manufacturers to enhance profitability.
From the information provided, you are trying to build a foundation for the fulfilment of your dreams by seeking all the necessary information so as to start on the right footing, which is very commendable.
The capital required to start the business depends on a number of factors. First, you have to determine whether you only want to operate a wines and spirits shop, or a wines and spirits establishment where you serve drinks to customers.
If it is the latter, then you are likely to incur higher establishment costs such as employing waiters, buying glasses and furniture, and other items needed for it to function properly.
Rent might also be higher since you will require more space. The former might be a better idea for now since start up costs are likely to be lower and once the business picks up, you can expand depending on future prospects.
You can visit your location of choice to get a sense of rent charges. It is important to determine how much your first stock would cost so as to get a sense of how much working capital you need.
It is important to draw up a business plan before you get started. It should estimate the amount of capital required, viability of the business and projected cash flow.
It’s important to project cash flow especially if you choose to raise capital through debt since you will be required to make regular repayments.
This will inform you whether the business can comfortably service the loan while ensuring there is enough working capital for operations.
The business plan should address the issue of viability by looking at the strengths, weaknesses, opportunities and threats, and their impact on your business.
The strategies you employ to increase sales will greatly determine your profitability. The legal procedure involved is seeking a licence from through the office of the district commissioner.
A committee will assess your application and make a decision on whether you will be provided with a liquor licence depending on the extent to which you will have met the provisions of the law.
You can visit the district commissioner’s office to get all the information you need and the licence fees required.
You can contact manufacturers of the goods you wish to procure directly to get information on their terms and conditions.
It is also important to note that most manufacturers tend to have wholesalers who distribute their products within certain locations and you can determine the one nearest to you so as save on transportation costs.
If the capital required to start the business is higher than the amount you have, you could defer the project.
Alternatively, you could borrow from friends, relatives or a financial institution, but you would have to prove your case to them in terms of viability of the business. We wish you all the best in your endeavours.
Moses Kibet, Research Analyst at Zimele Asset Management. Write to: firstname.lastname@example.org
How do I rejuvenate my income stream?
I am a 29-year-old teacher. I took a loan of Sh400,000 from Kenya Commercial Bank and started a property management business which was managed by my husband. Unfortunately, the start-up failed.
Further, I have invested with Pan Africa Life and Madison Insurance where I pay Sh5,000 and Sh2,500 respectively as premiums.
At the end of the month, I receive a net pay of Sh10,000. With the prevailing harsh economic climate and given that my husband is jobless, I am struggling.
How can I generate more income? Which is the best investment? How can I get capital? - H, Awaka.
Making do with Sh10,000 net pay can be distressing and finding ways to supplement your income would ,be a welcome relief.
You can generate more income by starting a business that requires low capital and in your area of speciality or your husband’s area of expertise; this would help since you already have prior experience.
However, before embarking on any venture even low capital ones, it would be wise to evaluate why the property management business failed.
Identity what you did wrong
Identifying what you did wrong and also the positive aspects of the business will help you have an idea of how to run your small business and the do’s and don’ts in order to attain success.
Establish whether you came up with a proper business plan and business model to operate within and learn how you can do better.
Once you have identified a low capital business that would suit you without adding undue financial pressure, the next step is how to raise capital and making sure you come up with a well documented business plan that will act as a guide in running your business.
You can start by evaluating your current expenditures and identifying those items that you can do without in order to save money for your business.
Next you can look into your current investments in Pan African Life and Madison Insurance. Is it possible to reduce the amount of premiums you are paying out until you are better placed financially?
If so, I would suggest you reduce the amount of premiums to ease your current financial burden and once you have more income you can resume paying your current premiums or even higher amounts.
On getting the best investment there are some key rules you should take into consideration as you look into investing.
A good investment should be one that ensures the safety of your funds i.e. loss of your investment should be minimal if any at all.
Unit trusts are good investment options since they are under regulatory bodies that ensure that they are run lawfully.
At this stage it’s also good to consider an investment that will give you a guaranteed rate of return in order to help you grow the business that you decide to start.
You also need to choose an investment option that will not require your full time attention since you already have a full time job.
Once you have identified these features in any investment, then learn more about it and what requirements you need to start investing.
Remember that no matter how much funds you have at your disposal, with proper budgeting and financial planning you can ultimately increase your income and grow your small business into a large entity and sufficient inflow of income.
– Winnie Macharia