Alfred is an alumnus of Milestone Institute who received a scholarship from UCL to spend six weeks in Kenya working with local entrepreneurs within the frameworks of Ballon Ventures. With the help of international fellows, Balloon teaches the entrepreneurs accounting, inventory management and strategic planning. Entrepreneurs who completed the programme can pitch for unsecured loans from Balloon with 0% interest and flexible repayments to develop their businesses.
Balloon Ventures’ main objective is “helping local entrepreneurs by leading sustainable business development”. Alfred didn’t think much of this motto when he first arrived to Kenya, it seemed to be too far-fetched, just one of those general marketing lines, which was written by someone in an office in London. He was placed to a city called Nakuru, the 4th largest city of Kenya with 307,990 inhabitants. In 2011, the UN named it Africa’s fastest growing city and the fourth in the world. A 25 minute drive away from the centre is a settlement called Umoja 2, where Samuel lives, a skilled motorbike mechanic with entrepreneurial ambitions, innate cheerfulness and an unbreakable spirit. He is one of the entrepreneurs Alfred was working with, during Samuel’s second time taking part in the programme.
Samuel’s highest level of education is primary school, after which he began working immediately to help his family, and eventually started servicing motorbikes 10 years ago. Currently, he runs his own successful repair shop, where he employs two students. Paved roads are a luxury in many of the rural areas outside of town, making motorbikes the preferred mode of transport and providing him with a solid number of customers. Samuel works from 7am to 8pm, six days a week, and he just never seems to run out of energy.
The first time he took part in the programme was in 2013, when he successfully pitched for a loan, which he used to purchase spare parts for his shop, to use for repair and resell. After receiving the loan, he searched for dealers and wholesalers in the whole country, which could supply him with high quality products for the lowest price. He made connections in Nairobi as well as Eldoret, and has been ordering his parts from these suppliers ever since. Overall, he boosted his business, grew in revenue and customer base, and this was the time when he hired the two students he is still employing today.
He then had a stroke of genius. Samuel realised that his rivals in the area were still purchasing their supplies from Nakuru. Each has to go to town individually whenever they need a specific part, pay the transport costs, and buy the products which are 39% more expensive than Nairobi wholesale prices. What if he could supply these shops? Every day for two months he was riding his motorbike, exploring potential clients and trying out a spare parts delivery service in the small villages surrounding Nakuru. During these months, his idea proved to be so accurate that he hired a driver, filled a van with spare parts, and started a regular delivery. This was over six months ago. When Alfred joined Samuel, the business idea was already in place, but lacked some fine-tuning and the kind of financial analysis that is difficult to do with a pen and paper, rather requires a computer with modelling skills. In the six-weeks that they have been working together, they optimised the parts that Samuel stocks in his van for maximum efficiency. Alfred spent multiple days going on sale rounds with Samuel to the small repair shops Samuel is supplying to get an in-depth understanding of the business. He interviewed the shop owners why they chose Samuel, how often they used to go to town to buy their supplies before Samuel, what are the parts they need most often or which they find hard to obtain for a fair price. He established the best-selling items, the items with the highest profit margins, and the items that don’t earn much money, but are essential for customers to want to do business with Samuel. They spent the testing budget Balloon provided on different small parts to further test these observations.
Today, when Samuel presented his business at the end of the six-week programme to Balloon pitching for a second loan, he supplies more than 50 small to medium sized motorbike repair shops and small retailers. The demand for parts is so high that he cannot fulfili every order with the parts he is buying from Nairobi and Eldoret; he has to make small stops in Nakuru to restock during the week. The problem is that his customers are well aware of Nakuru prices, therefore he can only charge paper-thin mark-ups on top of these products’ prices if any. He asked for a financial boost, which would enable him to eliminate Nakuru entirely from his supply chain. From looking at his monthly figures, it might seem like he is making substantial profits; however, as spare parts are quite expensive and his days sales of inventory (DSI) is extremely short, products sell very quickly and all the profits are being reinvested almost immediately after a sale is made. This prevents him from placing large enough bulk orders to his wholesalers in Nairobi, and without a boost in his capital, he is simply going in circles and is not able to progress his business to the next level.
Alfred and Samuel carefully prepared the pitch documents with a clear goal in sight and a detailed plan towards reaching that goal. Since the first programme, Samuel has been keeping immaculate financial records of his business’ operations, therefore Alfred could support the pitch with cash flow statements, projections for performance and profits with provisions for the repayment of the loan. The panel of juries awarded 70,000 KSH (£450) to Samuel for his business’ development, which is a huge success even though it is 30,000 KSH (£190) less than what he had initially aimed for.
Alfred explained how working with Samuel has shown him the countless ways these entrepreneurs benefit from the Balloon programme. Samuel was awarded a loan in his first round, which significantly helped his business to grow, but would he have been able to do all that without the training he has received? This is often the fallacy that NGOs carry, they forget to keep an eye on the long-term, and their positive effects disappear as soon as the charity tourists return home. Samuel didn’t keep financial records before he first took part in the Balloon programme, he wasn’t sure of his profit margins, and didn’t have a vision for his business. He had all of these things after the programme, making him successful enough to expand, return with a new idea two years later, and apply for another loan. At the end of the day, this is what sustainable development is: the entrepreneurs not only have the chance to receive financial support, but they know exactly how to allocate those funds, how to make the most of it for the benefit of their business. Even if their pitch was unsuccessful, they still gained a solid foundation in business management and are more aware of their operations, which will help them succeed in the future.
It was a mutual learning experience, where Alfred has learned a lot about the enviable attitude of Kenyans. Even though higher education is increasingly popular in Kenya, many of the people have only finished high school. However, this doesn’t stop them from pursuing their entrepreneurial ambitions with unshakable confidence. They excel in realising when to cut their losses if something goes south, and they are not afraid of trying out their ideas in practice. They always manage to keep a positive attitude, hoping that their next venture will pay off (even) better — a perspective that all entrepreneur should strive toward.