Pooling resources: Part 2

Continued from part 1.

Having already bought a plot and having collected some cash from new members; we were smiling from ear to ear. By the way, the new members’ share was calculated based on market value of the plot and available cash plus a premium. The essence of the premium was to cater for the work already done and structures already put in place. The capital injection they brought was used to acquire another plot in Kitengela. We seemed to be getting somewhere.

It was now time to do a 5 year business plan; after all targets must be set and well documented. Planning is extremely essential for any business. The business plan ordinarily will:

1.     Outline the vision and mission of the company. Vision creates that momentum of growing anticipation about the future, where change is embraced as a step closer to that very compelling picture of what’s coming next. The Mission defines the company's purpose and primary objectives. Its prime function is internal – to define the key measure or measures of the company's success – and its prime audience is the leadership team and stockholders.

2.     Set out values that the company must adhere to.

3.     Outline the products and services to be offered and the target market

4.  Carry out a serious SWOT and PEST analysis. It is crucial that an internal analysis of the strength and weaknesses of the membership as well as opportunities and threats be analysed. It is also important to analyse the external environment.

5.     Stipulate the strategies that take you to the vision and how to implement them

6.     Outline the management structures are also very key

7.     Give clear financial projections

This is just a paper and it can remain a paper if not well implemented and monitored. The same document is very crucial when you decide to approach financiers.

Our line of business mutated with time from speculation with plots to buying large tracks of land, subdividing and selling plots. With leveraging on credit, it was much easier and faster to expand and the turn-overs were testament of the expansion.

Management structures changed from owner managed to having a team of professionals manage the firm. The shareholders remained as the board members and exclusively deal with strategic decisions that are scaled down to the management team for implementation.

The company eventually pursued other lines of business including development of housing estates. What is nice about such business ventures is the fact that the company largely invests other people’s money. The OPM concept is the sweetest model of investment. Of course another brilliant idea developers utilize if well managed are joint-ventures with land owners. If well managed, you can imagine having a joint venture with the land owner whose land becomes the equity towards a project, then the company approaches a financier who provides the cash for development. Armed with a marketing strategy that works, it essentially means using other people’s cash to make money.

When I look at this chama cum company, the sky is the limit.

More Valuable lessons:

1.     Without a proper business plan, it is almost impossible to make it in business; you’ll end up running like a headless chicken.

2.     Having a business plan is an important thing, implementing it and monitoring the targets is far more important.

3.     Clear strategies on how to grow are important. This goes hand in hand with adapting to the ever changing environment.

4.     Management of a business is very crucial. Sometimes owners of business mix ownership and management to the detriment of the company. It is always wise to let a company be managed by professionals.

5.     There is need to have goal congruence in an investment group. This is very crucial because if this is not the case, you’ll always be embroiled in internal wrangles as opposed to spending time strategizing on how to grow.

6.     Variety of members in the group should be viewed as a strength because it brings in different views and professional outlooks.

7.     The number of group members should not be too low neither should it be too high. Too low means challenges of getting sufficient capital could arise. Too high means serious group dynamics could set in and managing a larger group is much tougher.

Our next lesson will be on making real estate part of your retirement nest egg.

Pooling resources: Part 1

Guest post by Samuel G. Njenga

Soon after I got my first job and in the heat of exciting times of joining the working class, we formed a Christian social grouping together with former campus mates (5 of them). We used to read the bible together as well as organize outings inviting our girlfriends (most of them became wives, others fell by the wayside). Soon we started feeling like we needed to nurture some investment ideas together; after all we needed to live well in this world and beyond. We were newly employed young men bubbling with lots of energy but lacking in finances. Simply put, we were at the same level of financial ability and no-one seemed bigger than the other. We also had a unity of purpose and we shared a lot in common. We could move in the same direction and obviously we respected each other’s view from the onset.

We held a series of meetings that culminated into a decision to be contributing some small cash (4k per month) towards investing. 4k for a guy earning 20k was 20% of my income, but the more I saved and invested, the happier I’d get. We then realized we did not have an account to put the money, neither did we know what exactly to do with the money. We also realized that we were not sure which form to take; company, welfare group or remain as an amorphous group. In a nutshell we needed proper structures in place to get going.

What is supposed to have guided the form we take? Akin to climbing a tree from the bottom, what we wanted to venture into was to guide our decision on this matter. My love for real estate started way back and it was easy to sell to the group the idea of venturing into some form of real estate investment(s). At least we agreed in that regard; though we felt this was more futuristic than anything else. Back then, the idea of owning plots seemed very distant of course with the kind of incomes we had. But wait, Rome was never built in a day; at least we dreamt big.

A decision was made that we register a limited liability company; after all plots and houses could only be registered in the name of the company whose shareholding we thought was prudent to be equal for all shareholders. The people to lead this young company to glory were the next big question. A chairman, treasurer and a secretary perhaps? A starting point it was. Would we then say that the initial structure was in place? By the way, I look at the minutes of our first meeting and we clearly came from very far.

Six young men armed with a registered company and contributions worth 60k and raring to go. Next big question was how to venture into real estate business with 60k? This is where it gets tricky, but as they say where there is a will, a way can be found. Ultimately, a decision was made that we do stocks for at least one year as we strategize on real estate investments. Stocks for novices and buying interesting counters with no real facts guiding the decisions. Stuff made of nightmares, running around like headless chicken was the order of the day. The learning curve was massive and wrong decisions made but nevertheless we were doing something. We went ahead and pumped in cash for 1 year buying several counters but making no headway in terms of making money. Swimming in the deep perhaps and expecting things to work.

The stock market went south and we soon we realized that we had contributed a lot more money than the market value of our stocks. Time to pack and try something else? Probably adopt a different strategy. At least we were sure something had to change. A strategy meeting was called and lots of brainstorming done. Hard decisions had to be made. These were the decisions.

1.     Ship out of the stock market by way of selling all the counters; after all it was not working.

2.     Look for a few more members to join the group to accelerate the growth and get more capital.

3.     Move to real estate which was our initial idea; thus use the cash from stocks to pay for a plot somewhere and speculate.

After sale of the stocks, the very first plot was bought in Kitengela. Quite a milestone; after all we had started living the big dream; albeit in a small way.

Recruiting an additional 4 members was the next task. We decided that we could only recruit members who would buy into our vision. Members proposed their friends but a stern condition was set that they prepare a business proposal to be evaluated by the existing members. The potential members were subject to vetting just to make sure they have a clear vision for the group and will add value. With benefit of hindsight, it was a marvellous move because it separated wheat from chaff. We let down several guys by out-rightly rejecting their wish to join us. After all this is business and we never really wanted joy riders.

Something was telling me that this group is headed for greatness. Take note of very important points so far:

1.     Strong urge to invest together by way of pooling resources was the starting point. Unity of purpose was also evident.

2.     The members had a lot in common; were of the same age-set and financial ability, they could thus identify with each other’s challenges especially financial.

3.     The members were focused; agreed in principle on what they wanted to pursue. The big deal was how to get going.

4.     Structures (albeit simple ones) were put in place.

5.     When things did not work, a change of direction (not dissolution) was proposed and pursued.

6.     Recruitment of new members was not only based on financial ability but they were meant to add value to existing membership. One of the most important considerations was the characters of the individuals and how well they plan their finances at a personal level.

Sounds like ingredients for a successful chama. The work had begun in earnest and a lot of hope was in the air.

Most chamas fail due to a myriad of reasons but that happens way before the chama even gets going. There is nothing as frustrating as having members who are not progressive; those who argue for no reason and of course those who are not committed. Monetary contributions in most cases are considered the most important thing from members; but we get it all wrong. After all money cannot make itself; a lot of things must be right.

Next lesson will be on how this great chama mutated into a well-managed real estate firm that is doing wonders and will soon be a multi-billion investment.

Do you have traits of an entrepreneur: Part 2

Continued from part 1

Entrepreneurs are always hard-working people. Running a business is not a walk in the park. Ultimately, they put in the hours to get the job done and make sure that the business achieves its full potential. With time, a clever entrepreneur delegates to reliable employees.

You need to build a top-notch business team. No one person can build a successful business alone. It's a task that requires a team that is as committed as you to the business and its success. Of course the most important team members will be your customers or clients. Any or all may have a say in how your business will function and a stake in your business future.

A big driver to starting one's own business is the desire to work for oneself; what I’d call loosely call independence. Entrepreneurs are notorious for this characteristic. They generally hate having a boss and having to report to someone else. They want to call the shots and make their own "destiny."

Entrepreneurs have an uncanny ability to take strategic risks while reducing risks in day-to-day operations. Few people in this world take as much personal and professional risk as small-business owners do. But that doesn't mean small-business owners are reckless or without calculation. The most successful entrepreneurs cover their bases whenever possible. What vulnerabilities does your business have?

The reality of owning a business is much more daunting today than it was even a generation ago. The most successful entrepreneurs aren't afraid to navigate change, and they can thrive on it. Many small retailers have found it difficult to take advantage of technological advancements. How equipped is your business to change?

Planning every aspect of your business is not only a must, but also builds habits that every business owner should develop, implement, and maintain. The act of business planning is so important because it requires you to analyse each business situation, research and compile data, and make conclusions based mainly on the facts as revealed through the research. Business planning also serves a second function, which is having your goals and how you will achieve them, on paper. You can use the plan that you create both as map to take you from point A to Z and as a yardstick to measure the success of each individual plan or segment within the plan.

The lifeblood of any business enterprise is cash flow management. You need it to buy inventory, pay for services, promote and market your business, repair and replace tools and equipment, and pay yourself so that you can continue to work. Therefore, all home business owners must become wise money managers to ensure that the cash keeps flowing and the bills get paid. There are two aspects to wise money management.

1.             The money you receive from clients in exchange for your goods and services you provide (income)

2.             The money you spend on inventory, supplies, wages and other items required to keep your business operating. (expenses)

You have but a passing moment to make a positive and memorable impression on people with whom you intend to do business. Business owners must go out of their way and make a conscious effort to always project the most professional business image possible. The majority of business owners do not have the advantage of elaborate offices or elegant stores and showrooms to wow prospects and impress customers. Instead, they must rely on imagination, creativity and attention to the smallest detail when creating and maintaining a professional image for their business.

Entrepreneurs ought to create a competitive advantage. A business must have a clearly defined unique selling proposition. This is nothing more than a fancy way of asking the vital question, "Why will people choose to do business with you or purchase your product or service instead of doing business with a competitor and buying his product or service?" In other words, what one aspect or combination of aspects is going to separate your business from your competition? Will it be better service, better selection, longer business hours, more flexible payment options, lowest price, personalized service, better customer service, better return and exchange policies or a combination of several of these?

You must remain cognizant of the fact that few people will work hard, go out of their way, or be inconvenienced just for the privilege of giving you their hard-earned money. The shoe is always on the other foot. Making it easy for people to do business with you means that you must be accessible and knowledgeable about your products and services. You must be able to provide customers with what they want, when they want it.

It's difficult for most business owners not to take a hands-on approach. They try to do as much as possible and tackle as many tasks as possible in their business. The ability to multi-task  in fact, is a common trait shared by successful entrepreneurs. However, once in a while you have to stand back and look beyond today to determine what's in the best interest of your business and yourself over the long run. Most highly successful entrepreneurs will tell you that from the time they started out, they knew what they were good at and what tasks to delegate to others.

Constant contact, follow-up, and follow-through with customers, prospects, and business alliances should be the mantra of every home business owner, new or established. Constant and consistent follow-up enables you to turn prospects into customers, increase the value of each sale and buying frequency from existing customers, and build stronger business relationships with suppliers and your core business team. Follow-up is especially important with your existing customer base, as the real work begins after the sale. It's easy to sell one product or service, but it takes work to retain customers and keep them coming back.

You may have realized that most of these traits are not in-born but more or less acquired. Success doesn't come easy but once you understand how to operate, it becomes much easier.

Next several lessons will dwell on pooling resources in groups (chama): ingredients for success and / or failure.

Do you have traits of an entrepreneur: Part 1

Guest post by Samuel G. Njenga

What makes an entrepreneur successful? Is it raw intelligence? Is it street smartness? Or is it all luck?

Entrepreneurs are a very particular people; they usually don't fit a common mold. When they look at the world around them, they do not dwell on how things are. They focus on how they can transform things into how they want them to be, and make a profit in the process.

Starting a business is usually risky. Entrepreneurs cannot stand the idea of living an uneventful life. They need to be challenged and succeed. They have a genuine appetite for success.

In my line of business, I normally enter into strategic partnerships. One of my partners is a former campus mate and a bosom buddy, Paul. He is a guy who has a very huge appetite for success. Wherever we go with him, he sees opportunities that a normal eye cannot. He approaches all problems with a creative solution. One day we were driving with him along Garissa Road past Makongeni and just before the Del Monte farms. Somewhere midway the very dry expansive land Paul excitedly asked me what I saw. “Very dry and rocky land which cannot grow any worthwhile crops” I answered. His eye saw something totally different; in fact the last thing he was thinking about was crops. He saw an expansive estate with wonderful amenities (Golf Park, shopping mall, a school etc.) of course in his dreams and to him transforming the idle dry land to that expansive estate is the key to unlocking some billions. Successful entrepreneurs can visualize how they want their future to unfold. Entrepreneurs hold a clear picture of what direction they want their business to take and possess a plan to guide it from conception to realization.

Paul is not your average bloke; one of his strongest qualities is being able to spot a talent. He easily identifies a diamond in the rough and transforms it into a very efficient and productive person. I usually rely on him to identify brokers who help us source for land. Paul is usually very unforgiving to anyone who wastes his time. In fact he’ll always use the word ‘fake’ and ‘useless’ in reference to anyone who wastes his time. But to gain his trust, just perform.

I am normally a very calm and composed guy, but Paul is the exact opposite of me. Of course we really complement. Whenever we get a potential deal, he takes the role of the tough negotiator. His negotiation skills are amazing; in fact he’ll leave the land owner smiling after really squeezing him/ her. Sometimes, we’ll find land whose owner is demanding as much as 5M but trust Paul to negotiate to 3M.

On a day to day basis, we deal with brokers, agents, lawyers, land surveyors and a few employees we have. One thing that we decided is to only deal with people who buy into our dream. I have no business using a surveyor who does not have a business mind; or worse still one who is not street smart enough establish proper networks in his area of jurisdiction. Just imagine having an employee who does not understand and /or buy your dream. Why would I trust someone who does not believe in what I do to take me to my dream?? It is of extreme importance to get your employees buy into your dream.

In Kenya and especially Nairobi and its outskirts, there is nothing as frustrating as dealing with land registry offices. Have you ever attempted to carry out an official search for a property in Thika Land Registry? When I was very green and wanted to purchase my first plot that side of Thika Road, I decided I wanted to carry out the official search for the property. I went to Thika and paid the official fee and was told to come back in the afternoon. When I came back, the officer told me that the papers were misplaced. What the hell? The guy was telling me to do another payment and collect the search tomorrow; only for the foolish me to do exactly so. You can imagine the answer the guy gave me on the morning of the day after? Not again but same old story that papers were misplaced. Sooner or later, I realized that there are brokers whose sole purpose is to assist anyone who wants a search. I also established that you either need an insider or someone who knows their way into that Office. In essence, you must be street smart and you must know that the world out there is the ultimate shark tank. In our capitalist society you are either the hunter or the prey. Thus, entrepreneurs like to compete with others. They relish the opportunity to measure wits with others and come out on top.

They say real entrepreneurs never give up. It would have been easy to give up on my first deal especially if I failed to muster enough strength to do the all-important due diligence. What I did at least was to find a way around the problem and get what I wanted. More often than not, we are faced with challenges which prima facie look like they are insurmountable, but dare you not gives up.

Entrepreneurs like challenges. They like to push themselves to the limits and test themselves against the world. The thrill of beating a challenge is just as rewarding as the profit that follows.

You must give a convincing reason to people to part with their money and give it to you. What you are offering to them must be rather convincing. After all, you must realize the value of a customer, as the saying goes ‘customer is king’.

Let us pick up from here in the next post...

Why that business had to close shop

Guest post by Samuel G. Njenga

My good friend James is quite observant. Around mid-2008 he was living in Umoja. Back then there were so many buildings (flats) coming up within that estate. He could occasionally observe what was happening in those sites. During the casting of the slabs (koroga), the fundis would have some hand operated machinery (concrete mixers, poker vibrators and concrete hoists) to make work easier and cast the slabs faster. Back then before the advent of the hand operated machinery, casting a slab was quite a task; what with erecting temporary stairs with wooden posts and mabatis and positioning strong men on the stairs. Concrete would be mixed by hand and put in karais, then the karais were passed on from one workman to another till they reach the slab level. This was tedious, wasteful, time consuming and required a huge workforce. The simple machines helped a great deal.

James thought it was a nice idea to acquire such machines because the rates were not that bad. One day he decided he’ll acquire an unsecured loan of 300k from a bank and purchase the machines. He started with the two (concrete mixer and Poker Vibrator) and decided that the cash generated from the two would eventually help him acquire the more costly concrete hoist. Back then a concrete mixer was costing 250k, poker vibrator 40k and the hoist 400k. The charges per working day irrespective of the number of hours the machines run were 3k for the two he bought. When having 3 of them, the charges were 7k. The net income per day would be approx. 2k or 4.5k when you factor in transport, fuel and operator fees.

What convinced James that it was a worthwhile business was the fact that if you get 15 working days in a month, then the earnings would be 30k per month. Notice the impressive ROI of 10 months. In his own estimation in 20 months or so, the revenue from the two machines would comfortably purchase the third machine at 400k. The 3rd machine would really boost his income.

James bought the 2 machines from a supplier somewhere around City Stadium. He went ahead and looked for two operators (they are in plenty in Umoja) and entrusted them with the business. The operators convinced him that they’d get business because they knew the fundis who would ordinarily require their services. During the first week of operation, James only got business once on a Saturday; a day when the demand for the machines is usually highest. He realized that he had one big challenge; transporting the machines to sites. Trouble was that the pick-ups for hire would charge around KES 1000 for every delivery to and from site and that was within the estate; much more outside the estate. Notice that this reduces his earnings by 50%, so his net earnings would be 1k. He thought that it’ll get better if at least he’d get an average of 4 days a week. Bearing in mind that the business was still new, he had hopes that customers will come flooding.

During the second week, he also only got a client on Saturday. By end of the 1st month of operation, he had 5 days of working and a total earning of 5k.

The second month started much better than the first and within 2 weeks he got 5 days of work and that was encouraging. His biggest issue was how he’d get a cheap pick-up to ferry the machines but he realized it’d take quite some time with the kind of earnings the business was generating. Unfortunately, he did not have more cash to acquire a pick-up. The second month was not that bad bacause he managed 14 days.

The 3rd month also started very well because by then his operators had passed word around that his machines were new and hence chances of breakdown were minimal. Breakdowns in this kind of business are a common problem. Unfortunately midway the 3rd month, the concrete mixer broke down. That was quite strange because the machine was barely new. When one of the operators called the mechanic who repairs those machines, the mechanic observed something that made James to almost jump out of his skin. According to the mechanic, his checks confirmed that the engine of the mixer was not new, in fact he noted that it was only the body that was new but the engine had only been repainted. In his own words, the machine must have been at least 3 years old. What a shocker for James. The mechanic recommended that instead of struggling with the junk engine he could assist James get a new engine, a model called Lister Petter from UK whose lifetime is at least 8 years. James realized that he was actually conned. This is Nairobi for you! Trouble was he could not afford to buy another engine at that point in time. The mechanic however repaired it and it worked for 2 weeks or so and failed again. When he was giving this story it reminded me of a day as a teenager who was very new in Nairobi I ended up buying a SONQ radio thinking it is a SONY.

After several days of soul searching and reflecting on the problems he was facing, James threw in the towel and sold the concrete mixer for 90k and the poker vibrator for 30k. “Business is not for the faint hearted”, he said. He thought that he’ll never attempt another business; he basically gave up.

Isn't it obvious why he failed?

Let’s see what he got wrong:

1.      He did not seem to have understood the business; it is an idea he just saw and went for. Notice the glaring misses that included wrong expectation on returns. He never got his facts right. Then he ought to have carefully thought through the processes of the business including the transport bit; maybe he thought clients organize for the transport but surely he should have confirmed. He ought to have talked to an investor in that business and not a machine operator. This is a common mistake we make when starting a business. The people already in that business have a wealth of info; unless yours is a totally new business idea.

2.      He bought an old machine thinking it was new. If he engaged the mechanic at the point of acquisition for a small fee, the mechanic would have probably advised him on which one to buy and where. Another common mistake; we often fail to engage professional in the respective fields we put our money in.

3.      He set up the business at the wrong location. Like where I stay, the two machines have much higher returns because they’re not as many as in Umoja. Location is extremely crucial for some business. In fact for particular businesses, it is the most important thing.

4.      His business was under-capitalized. Notice that if he had a pick up and the hoist, he’d generate an income of approx. 8k per outing.

5.      Why do I suspect that the operators would even get jobs and fail to inform James especially because he was an 8 to 5 guy? I think in the evening when they met their peers, they’d say “tumepata kafala hakajuangi nini kinaendelea”. More often than not we trust people to run our businesses without performing proper due diligence on them. Sometimes they are our relatives whom we think have our interests at heart. For this type of business trust is very important a factor.

6.      He failed to manage risks properly. Notice that he got stuck when the engine failed. Each business has risks and we are better off having mitigation strategies against those risks.

Each business is unique and failures would vary depending on the business. Each failure must however be treated as a learning experience.

Interestingly, my friend James mentioned that business he wanted planning to venture (import and sale of finishing items for houses). I think he has overcome the fear of failure. I am also very sure, he’ll plan better and understand the business better. My gut feeling is that he shall succeed this time round. After all his mentor is also in that business, so he’ll draw lots of advice from him.

Next lesson will be on traits of successful entrepreneurs. Do you have them? If not, can they be acquired?

Will you get me out of the rat race? Final Part

Continued from part 2

Hosea 4: 6 “My people are destroyed for lack of knowledge.”

Flashback: James had finally managed to set aside a minimum of 8k per month for savings and investment. We had agreed that he’ll think through and have several options which we would consider.

On one Saturday morning, I passed by my friend’s place and as usual picked him up. We drove to Kitengela. I took him round several schemes we had subdivided and sold plots. We later drove on to Kiserian via Isinya and settled on a joint called Whistling thorns approximately 10km from Kiserian along Pipeline road.

When we sat down, my friend was curious on how I had made serious in roads in real estate. I expected that question bearing in mind what he had just witnessed. I told him that investing must start in the mind. You must see possibilities where others see obstacles. “What about the massive capital needed for such projects?” He asked.

I told him when you have passion for something, then that will override those limitations, capital included. After all, which financier will decline to give you credit if you have a viable project? Did you know that banks make money not from deposits but loans? A strange thing that people forget is that bank takes money from savers and gives it to those who want credit. What do you make of that? Isn't it that the saver does not know what to do with the money but that guy who knows how to leverage on credit knows what exactly to do with other people’s money? In business they call it OPM (Other People’s Money); this is the highest level of investment and as soon as you reach this level, capital is never a limitation.

I cheekily reminded him of the trip to Syokimau and his verdict that we’d get conned by the Land buying Company. I actually bought that 100k plot and 3 years later sold it for 600k. I went and got some loan from my Sacco of 500k, and then my employer gave me some end of contract gratuity of 400k. In total I had 1.5M and that bought me an acre and half in Kitengela. Notice that upon subdivision, the resultant plots were 12. The plots were sold at an average of 300k each and the turn-around time was just 7 months. The total proceeds were 3.6M and all expenses were almost 300k. A profit of 1.8M (100%) at first attempt was quite a good deal. Think about the 3.6M as the seed for reinvesting and repeat the process.

He thought it sounded very simple. “But who said you need a complicated plan to make a million” I asked him. However, I insisted that the hardest bit is to crack the market and convince people to buy whatever you are selling. Anyway, I cut the story short and reminded him we had some matters we needed to deal with from his end.

I therefore wanted him to tell me what he had in mind regarding the 8k per month cash. He had the following options:

1. Saving the in a bank for future investment
2. Saving in a Sacco so as to acquire cheap credit and acquire assets.
3. Buy some stocks

I wanted to know from him why he wanted to save because saving on its own can never make you rich. You may have noticed that I have been mentioning saving / investing. We shall replace / with ‘and’. So you must save and invest.

I went further and advised him that what should guide what his does with the 8k per month is his investment goals, short term and long term. In other words he had to set realistic targets which will guide him on what to do with whatever coin he could set aside for investment. Then, this 8k per month must be looked at as a seed that must at some point produce fruits. Look at it this way, is it wise to save and then think of what to do with the money or it is wiser to plan what you want to do and then save and invest with that in mind?

This got him thinking. At least he tried though I threw him off balance. I further told him that option 1 is not really an option. Why save money in bank where inflation, bank charges will keep diminishing its value and with minimal interest.

Option 2 is not bad especially if it is aimed at accessing cheap credit in future. Option 3 is also OK but there is need to understand which counters you put your money in probably to the extent of analysing the books of the companies. I am not a stocks guru but I bet there are many around if you seek.

I also gave him another very interesting option. I reminded him of that company that had taken us to Syokimau and they had a very attractive option of acquisition of plots in 36 months. In other words he could afford a plot worth 300k if the payments are staggered within a period of 36 months coz the instalments are KES 8,333. Better still he could join a Sacco and contribute say 4k as shares and 4k towards purchase of a plot. There are many Saccos doing that of late. He went for the later and immediately started paying for some plot in Kitengela. By the way, soon after he got a pay raise and was able to contribute much more as shares and fast track the plot payment. The option was attractive because it meant say 1 year down the line he could acquire another property after getting cheap credit from his Sacco. I also encouraged him to set aside just a small amount to buy a few counters at least to learn some important lessons. I reiterated to him the importance of having relevant knowledge before he puts in his money.

I also mentioned to him the importance of keeping track of his growth via a net worth statement. It is as simple as they come, just listing assets on one column and liabilities on another column. In the case where liabilities outweigh the assets, problem galore because it simply means if you sold all your assets and paid all your liabilities, you’d end up with nothing plus of course a debt. If they balance then you actually owns nothing. Finally in a case where the assets outweigh the liabilities, it means you are OK. However, investing must be geared at continually increasing the asset column.

Later in another of our many meeting he mentioned to me some of his short term and long term plans which included:

1. Purchase of as many plots as possible; at least two per annum (For this one, we will call him a speculator).
2. Doing a residential house for his family (this will only save him the rent and lift the psychological barrier of being a tenant);
3. Several flats in the future (for this one we he’ll have grasped the concept of investing for purposes of cash flow);
4. A holiday resort (this may be self-actualization, am not sure).

I told my friend that it was amazing that he had such dreams and told him everything is possible if you believe and work towards your dream. I was keen to know how he intended to achieve the above. His answer was quite interesting. “You keep insisting that I must build my asset column” He said. “I am therefore targeting to grow my net worth by at least 70% per annum and to achieve that I will keep buying plots, a bit of stocks and am also thinking about import of finishing items from China”, he concluded. That to me was quite amazing. I told him that it is possible to make money in so many sectors but the most important thing is to have the relevant info; what I keep calling financial education. I therefore did not want to get into details of his plans because to me he had already acquired the basics that would propel him towards his dreams.

I reminded him the importance of giving information to others who need it, being charitable and encouraging people. After all, there is so much abundance for all of us. Saint Luke put it aptly in Chapter 6 verse 38: “Give and it will be given to you. A good measure, pressed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you." This concept applies across board, whether a staunch Christian, a pagan, a Muslim or a Hindu, or anyone else.

My parting shot was a story about the eagle. Notice how it teaches its eaglets to fly. It’ll fly to great heights and release the young one in the air. The eaglet will of course start coming down and soon realize that it is heading to its death, its natural reaction is to attempt to fly. It discovers that actually it can fly on its own. James being the sharp mind he is understood that it was time for me to let him go into the world full of sharks, but I knew he was armed to the tooth to deal with all that comes his way. After all, I had to let him take grow and mature. I hoped and prayed that one day one time, he’ll change and be living testimony that a turn-around is possible.

Fast forward to the present: James fast tracked payment of his first plot and cleared 1.5 years later. I knew as soon as he tasted the sweetness of speculation, I’ll not even need to tell him to buy some more plots. At present he owns 3 plots (Kitengela, Ruiru and Membley) and wants to build a residential house in one of them located at Membley. I hope when it is done he’ll invite me for the house warming. I am sure to have time to remind him of that other house warming 3 years ago that catapulted him into the great re-awakening.

Take note a valuable lesson: James had to contract (through reducing on spending by simplifying his life) before expanding (acquiring assets). I knew at this point that something beyond reality was driving him. He is now a very energetic young man bubbling with loads of positive thought and always looking forward to acquiring assets.

I hope this true story has inspired people to move out of the rat race. It is important to note that there is only one person who can get you out of the rat race, yourself.

Next topic will be on why his first business flopped before it was even 6 months old.