The Fidelity SME Forum is a weekly radio programme organized by Fidelity Bank Plc to educate, inform, advise and inspire budding entrepreneurs in Nigeria with knowledge and expertise that will enable them build sustainable and successful businesses. The interactive radio programme features subject matter experts and model entrepreneurs as guests on a weekly basis to share their insight and unique success stories. In this interview, Chukwuka Monye, Managing Partner of Ciuci Consulting identifies key factors for effective business financial planning and management. Excerpts.
Question 1: Tell us briefly about your entrepreneurial background.
Monye: I moved back to Nigeria in 2002. At that point, I actually wanted to work as an employee in the banking sector. I did that for some time till I realized that I wanted to do something more interesting, even if it wasnt paying a lot. So I decided to do independent advisory. I did that for a while until I noticed that every client complained about one thing; they complained about human capacity problems. Theres only one way for you to learn and understand how to solve human capacity problem and that is for you to run an organization in which you have people working for you. That way, you will get to really understand it. In 2007, I started Ciuci Consulting and now were a little over 10 years old with over a hundred people in the alumni body. I have gone through all kinds of people and I believe I now have what it takes. One of the things that I believe strongly in is that small businesses are the heart of any developing economy. That is the reason why we decided to position our organisation to be one of the key SME advisory companies in the region. Since then we have grown at large all through the ten years of operations.
Question 2: Tell us about the relevance of financial planning for business growth.
Monye: Financial planning is crucial. Most times I try to simplify this thing because when people hear business concept it sounds very serious to them. It is serious, but if you dont unpack it you would not understand it. Try to look at financial planning in a personal context and then it will be easier for you to translate it into a business context. In the personal context, you have to remember that there are different things you would do from an investment perspective. In your day to day activities, there are certain things you need to do to manage your income and your expenses. You can look at it in that simple manner. What are the things you need to do for your business to be successful and to operate optimally? What are the investments you need to make? What are those expenses? How do you break it down? How do you budget for it? Financial planning is crucial and is perhaps one of the most important aspects of your business plan. Sometimes people think they are different things, they dont know how to segment it when they are creating a document. A financial plan is a component of a business plan.
Question 3: What are the key priorities or factors that must be considered for effective business financial planning and management?
Monye: When you look at your expenses and you look at your costs, they appear so huge because most times people focus on revenue alone, but it always goes beyond just generating revenue. You can generate all the revenue and it will see huge to you. The same thing happened to me in my first year of running a business; we made millions and I was so excited until after the costs, we saw that things werent as exciting as we thought. You have to actually look at your cost base. There are different types of priorities for different sectors. There are certain sectors that human resources take a huge chunk of their costs, there are some other sectors that its their generator, their operating costs are massive for running the business. When I look at the financials of certain businesses, I discover that they are going to struggle because of the ration of the cost in relation to other costs. So there are different priorities depending on the sector youre addressing.
Question 4: How can SMEs ensure steady cash flow through financial management?
Monye: You must be able to budget, plan and anticipate things that can happen in the future. Projections are crucial. When you look at your entire business planning process and youve done the other things before the financial plan, such as your marketing plan and sales plan, then it is easy for you to map the corresponding budget to all other plans that precede the financial plan. Once youre able to do that then you can anticipate what needs to happen in the future.
Question 5: What roles do the financial institutions play in order to do more for SMEs?
Monye: A lot of SMEs come to me saying that they dont want to go to the bank because they wont help them. I hear that all the time and I tell them that it depends on what kind of help they are looking for. Are you going to them for the wrong type of help? If youre going to them for a certain kind of help that theyre not configured to offer then they will not be able to help you. So I tell people that if youre going for a certain type of advice or advisory service, you go to the right institution. If youre going for a debt funding you go to a bank; if youre going for xyz you go to this kind of institution. You need to know who you go to for what. Banks today have access to single digit loans from the likes of Central Bank of Nigeria (CBN) and Bank of Industry (BOI). Have you been able to position yourself to access these facilities? So many times when people come to my organization for advice, we try to coach them and position them right to access some of these facilities from the banks.
Question 6: As a consultant, what do you find that SMEs dont get right, especially at the point of starting a business?
Monye: Many people go into business believing that it is almost impossible for you to trust people. They come in and for a business that requires 10 people, you see the first business plan and realise that its just 3 people; the owner, his sister and his wife. How can you put the burden of 10 people on 3 people? You have to trust people but you need to put systems in place to manage your human resources. I saw someone last week and I said to him, You need to understand that as an entrepreneur you goal is to become a systems builder. Most times people commend the white man for being amazing, but that is not accurate. Some of them are bad people as well. Some of them have issues but there are systems that just put them in check that make them more disciplined. So as an entrepreneur you need to learn how to build systems that help you organize your business.
Question 7: What are some of the factors that can affect proper business and financial planning?
Monye: Ill use some practical ones in this instance. One could be, when youre so confident in your instinct. Your instinct is great, but you need to be able to validate it. Sometimes were wrong; you need to remember that were human. So if my instinct tells me that Im in Lagos and people need tomatoes, I need to just find tomatoes. It is a nice idea, but at what cost will I farm tomatoes in Lagos? Because already Im at a disadvantage from the price of the land in Lagos. So when my fellow competitors bring their tomatoes from the north, theyre already ahead and at an advantage, because sometimes theyre not even paying for the land. That instinct is great to rear tomatoes in Lagos but if you dont validate it, you will get in trouble. Second one is to give people a chance, build systems and recruit people; the right kind of people. I tell a lot of people that these human issues that we talk about at times lie in the recruitment process. If you get the wrong person, you will get the wrong output. Its not true that people dont like the good things of life. If you get good people and you give them the good things of life they will stay.
Question 8: Why is business planning critical to SMEs especially?
Monye: Your business planning process captures almost all aspects of running an organization. Most times when people hear business plan, they just think it is one big document that the banks always ask for. However, sometimes it is as simple as articulating your action plan for different aspects of the business and theyre not really that many. By the time you talk about your marketing, your sales, operations, your human resources and then your finances, youre more or less done. What kind of product are you creating? Who is the market segment? Is there competition? By the time you look at all of these, you have a business plan. Its important because it forces you to think about your business in its entirety. If you just go into the business without a plan, you will end up spending all the money without achieving your goals. So again I tell people that the business plan is a living document. Depending on what youre doing, the flavour of the plan may differ. I can literally tell the objective of the plan when I read the plan. So it may be different, but at the end of the day it is something that guides your business operation.
Question 9: We have a staggering mortality rate where small businesses are concerned, would you blame this on poor business planning?
Monye: I would say yes.
Question 10: How about the recession?
Monye: Recession has its role to play is a risk still a risk if you have plans for it? So just imagine you had planned for the recession. You can plan for recession because your economists and all your different analysts kept talking about it months before. That way, when I get into recession, the numbers dont look good, the projections are not great, you begin to fill up your store houses because things are not tightened in belt. We heard all these things before, but people didnt take it seriously. Many people could afford it, but they just didnt want to plan for it. If you had planned and saved your money, when the time comes you will pull from it. Its all about planning to be honest.
Question 11: Theres a common argument that some of the hugely successful businesses today didnt have business plans in the beginning. Are you for or against that argument?
Monye: Some of them did not have business plans, thats true. Did they generate business plans to sustain it? Yes. You can start off by being lucky. There is a component in business success called luck. It happens to some of us. Sometimes heaven shines on you and you get started but dont stretch that luck too far. You start off but at the moment you see that youve got momentum that things are working out, then you have to put things in place, just so that when its time for expansion or further growth, you are prepared for it. There is some type of growth that is bad growth. If youre not prepared for the growth, it will literally drown you.
Question 12: What key strategies would you recommend for Nigerian SMEs to enable them keep up with the market and the competition?
Monye: I think one important thing is to remember, regardless of what the economy says, is that the markets will still be markets. And what is a market? A market is a group; a constellation; a collection of people that demand a product. So people have distinct demands, products are still in demand, people will still eat, people will still buy different things, so you need to review your business plan to ensure given all these different factors and the current trends that youre still sort of positioned to take advantage of whatever the market position is because people, the market are still there. So I tell people that if something is not working out here, look at the place thats working out?
Question 13: What are the key 3 things to have as an SME?
Monye: First thing, make sure that your product is relevant. If the product is not relevant then you will not make money. Secondly, make sure that your business plan is articulate. Once you have done these 2 things then the final thing is to ensure that you have a realistic budget and a financial plan that has been mapped to this business plan.
Question 14: How long is my financial plan supposed to be for?
Monye: You look at your planning in 2 ways; theres a short term and a long term. The short term plan is for you to look at the next 12 months, the longer term plan is for you to look at the next 3-5 years.
Stay tuned on this page for next week’s episode of the Fidelity SME Forum as we bring you quality interviews that will aid your Business Growth.
Share this using the social share icon below.