3 Refined Business Criteria

I have concluded that my business’s growth is limited.

For the past several months, I have been mulling other concepts to launch.  These are some of the criteria that I have come up with:

1) Must be scalable.  “Scalable” is a term commonly heard among investment bankers, management consultants, and business executives.  It refers to a business model that can accommodate — ideally exponential — growth with minimal additional investment in equipment, facilities, and people.

Google and Facebook are good examples of highly scalable companies.  Google generates annual revenues in excess of $50 billion (1,100 trillion old Ghana cedis) but only employs 46,000 people.  In other words, the company has sales of $1.1 million (22 billion old Ghana cedis) per employee.  Facebook generates annual revenues in excess of $5 billion (110 trillion old Ghana Cedis) and employs 5,300 people.  In other words, the company has sales of $943,000 (20.7 billion old Ghana cedis) per employee.

Google work space

Google work space

In contrast, restaurants are a good example of businesses that have cost structures that grow with sales.  Each restaurant location can only handle a given level of activity due to physical size, traffic, and population density.  For instance, McDonald’s has global sales of $27 billion but employs 1.8 million people.  That means they generate $15,000 per employee.  Granted most employees at McDonald’s are poorly paid but the contrast with Google is stark.

McDonald's

Other companies that have scalable characteristics include Hollywood studios, oil drilling companies, investment banks, insurance companies, and pharmaceutical companies.  They all have upfront costs but selling additional units of their products incurs minimal costs.

I thought my business was scalable but I realized the quirks in Ghana’s infrastructure, e.g. postal system, import issues, roads, limits the ability to scale our service.  Only when we reach large volumes and/or customers will the business begin to have scale qualities.

2) Employ as few Ghanaian labor as possible.   There is almost no way to describe this nicely.  Ghanaians are just not as productive as equivalently educated people from developing countries.  Part of the reason is infrastructure and part of the reason is cultural.

Infrastructure: Most Ghanaians rely on relatively expensive private transportation, e.g. tro-tros.  They are most active from 6am to 6pm.  There are some that work outside of those hours but they are unreliable and may be more costly.  All of my workers are not keen on working past 5pm because they are afraid of not getting a seat.

In a related matter, the roads are poorly suited for delivering people.  For instance, when it rains, the dirt roads can be washed out. Tro tros have trouble travelling through mud.  I used to insist that my staff be on time despite the weather.  It took me some time to realize that there is no affordable alternative. How could I get annoyed?  Now I just accept that my staff can be up to 2 hours late due to rain.  Thus, on a rainy day, my staff might show up at 11 am and then they will rush to leave at 5 pm.

Can the government please widen this tunnel?

Can the government please widen this one-lane tunnel?

Furthermore, most roads are one lane in each direction.  Highly trafficked roads may have two lanes in each direction.  (Granted at rush hour Ghanaians will use the shoulder as an additional lane.) Thus, a broken down vehicle can severely slow — if not halt – traffic on a road.  Except for the N1 (George Bush Highway) and the Tema Motorway which both traverse Accra from east to west, there are no highways going north-south or in a loop, e.g. beltway.

Map of Accra

Thus, travelling around town during the day can be supremely slow.  For instance, the distance between A&C Square in East Legon to the Labadi Beach Hotel is 14.7 km or 8.8 miles but it can take 45 – 90 minutes in the day.  Meanwhile, at night when no one is around it can take 25 minutes.  Both Teresas come from a suburb called Kasoa which is 34.7 km or 20 miles from A&C Square.  It takes them 2.5 hours the morning to get to work!

I wish Ghana’s leaders would take a page out of China’s development plan.  They should save some of their budget for making better, wider roads so everyone can get to and from work more easily.

Beijing Ring Road

Beijing Ring Road

beijing-road-map

Cultural: Perhaps due to the level of economic development, people here cannot do as many things as those in developed countries.  Most people start using computers around college.  By then, they have limited time to learn and perhaps the will to learn to type.  I have been trying to get Teresa to learn to type for a while but she has no desire to learn.  I think she types at 10-15 wpm.  Since I learned to type in junior high, I can type 40-50 wpm.

Apart from mechanical skills, the education system and culture does not encourage free thought.  Young people are expected to listen to their elders and be nearly invisible.  Schools focus on rote learning.  Teachers and professors want to grade their students in the least challenging manner.  As I have described previously, Ghanaians also cannot do math and their writing composition skills leave much to be desired.  For these reasons, I am reluctant to hire Ghanaians with several years of experience because I would be paying up for people who cannot add, write, type, nor think analytically but would feel entitled to make more.

I’ve noticed that many businesses involve one Ghanaian “brain” and a whole lot of minions.  The brain is either a Ghanaian returnee — someone educated in the UK or the US, a foreigner, or a ruthless local.

Earlier this summer, I hired one sales guy who I constantly told him that he needed to show some initiative.  He always required me to tell him what to do and how to fill his time.

After a while, he finally asked me, “What’s ‘initiative’?”

Doh!

Premium vs High Volume: Lastly, you either sell to the masses who make very little or to the elite.  Eighty percent of the population can support a low margin, high volume business.  For instance, Koko King offers morning porridge and a bread bun for 2-2.5 cedis.  The company has been received with great fanfare.  Albert Osei, the CEO, has been interviewed on the BBC.

Koko King

The 1-5 percent that represent the affluent live at a standard that can pay up for services that reminiscent of those found outside of Ghana.  Many expats and returnees consider Ghana expensive “for what you get”.    For instance, many hotels geared toward the business traveller range from $250  to $400 per night.  I figure they can justify the cost because a) they have to import everything, b) must have a stand-by generator, c) have to pay up for employees that are responsive and quick.

Moevenpick-Hotel-Accra-exterior

Movenpick Hotel Accra – $275/night

Conclusions:  I have found it difficult catering to that 15 percent middle class. I find our business struggles because it isn’t cheap enough for the masses but we also do not charge a high enough premium for the elite.

Right now, I am most interested in developing web-based concepts for the local market that could be scaled up for all of SSA.

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