Businesses become really profitable when they expand beyond their home borders. Take, for example, Just Falafel. What advice would you give entrepreneurs trying to expand beyond the UAE’s borders to tap regional and global markets?
My business took me from England to Ireland, then to Hanoi, inVietnam, and finally to the UAE. Running a business in different countries gave me the opportunity to travel, meet new people, make lasting friendships and experience different cultures. More importantly, I realised that doing business in multiple places requires a nuanced and holistic approach.
Before expanding beyond home borders an entrepreneur must have a deep understanding of the inner workings of their entire business. This may sound like stating the obvious.
Often we’re too emotionally close to the business we’ve nurtured to objectively asses its weaknesses and strengths. Working with an experienced external adviser can be a structured and dispassionate way to understand what makes your business tick.
Developing a strategy map – something that drives business processes and objectives – that defines the shareholders longer term goals is a good place to start the examining process. Then chart all your existing business process with a view to identifying, improving and compiling them into an overarching operating manual. The next logical step is to develop performance indicators that allow you to monitor and evaluate a management team wherever in the world they are located.
From there on a successful international expansion will depend on whether you wish to risk deploying internal capital or, like Just Falafel, take on franchise partners who will take the capital and geographical risk in exchange for a chunk of the upside.
Just Falafel’s example is a good one because they sell a successful product that resonates across differing cultures.
It is often said cultural barriers – such as the fear of shame – make people less inclined to go into business for themselves in the Middle East. What can be done to address this?
Eighteen years ago I went on safari to Kenya with a friend and returned with a stunning set of wildlife photos.
We were convinced they would sell imprinted on stationary. A few months later we launched a range at a trade exhibition in England. We soon realised our folly; the market was extremely competitive and we struggled to shift the stock. The eventual failure of that business taught us lessons about market research, cash flow and crisis management and how a good idea is merely just an idea – nothing more. I picked myself up and moved on a little wiser.
Shame is usually associated with failure. Business failure in the UAE has important ramifications as there are no personal bankruptcy laws rendering the cheque a legal instrument.
Today my business has millions of dirhams in postdated cheques issued to suppliers because this is what the norm is here. Landlords, for example, will rarely lease a site without cheques dated years into the future.
Most small and large businesses have to issue cheques based on their cash flow projections and we all know these are at best reliable a few months ahead.
Just one late payment from a customer can cascade down resulting in a cheque being returned. A returned cheque is potentially a criminal offence that can result in prison. In my view, this fear of failure and resultant shame makes entrepreneurs less inclined to take risk in this region.
A combination of measures may help to encourage more entrepreneurs to come here. One is the introduction of a balanced bankruptcy law that encourages routine and reasonable entrepreneurial risk.
Alongside this a transparent way of assessing credit risk so counterparties can assess the risk in dealing with each other. The latter measure would require all new and existing businesses to disclose their audited financial statements annually.
Commercial organisations like Dun & Bradstreet (D&B) provide a risk assessment service to counter parties looking to do businesses together all over the world.
However, the underlying financial data commercial organisations,such as D&B, analyse is driven by government legislation that compels businesses to submit their financial statements annually.
Yunib Siddiqui started his first business in London, England at the age of 22. He is the chief executive and owner of Jones the Grocer in the UAE. He can be contacted at SMEbizCorner@gmail.com
