BUSINESS PAGE is dedicated to providing objective information and issues of intrest to the business community and the public at large. The articles in Business page are prepared and contribuated by CHRISTOPHER RAM. Christopher Ram is the Managing Partner of Ram & McRae. Chartered Accountants, Professional Services Firm.

Introduction

Anyone familiar with the economic difficulties through which Guyana passed in the seventies and eighties would not be surprised at the success of Guyanese business persons in the Ernst & Young Entrepreneur of the Year 2001 Programme. For close to two decades so-called informal entrepreneurs were demonstrating true entrepreneurial grit by taking all kinds of Guyanese products abroad and returning with 'banned items' of which flour, bread and toilet paper became a negative symbol. Unfortunately in that period the policy was not only to discourage but to penalise and criminalise entrepreneurship, treating its practitioners as enemies of the state and worse than drug dealers.

State dominance

Meanwhile the state - usually the least enterprising sector in any economy - took charge and under the concept of party paramountcy, the country's leading companies and sectors came under the control of politically dominated boards with the CEO's often operating at best at the level of middle managers. To compound the problems 'profit,' the lifeblood of a business was considered a bad word, eliminating one of the most important incentives and measures of business success. Through all sorts of devices including misguided economic policies, stifling bureaucracy, bungling and incompetent management and soul-destroying corruption, a band of entrepreneurs comprising what was then regarded as the parallel economy, took it on themselves to keep the economy afloat if not moving forward.

Entrepreneurs of necessity

With no foreign exchange available through the official banking system, America street responded by providing money-changers from whom US dollars in particular could be acquired, delivered here in Guyana or at an address abroad. Interestingly, those arrangements were invariably honoured, certainly by the more reputable dealers, many of whom now operate licensed cambios.

The collapse of the road transportation system spawned the advent of the mini-bus and it may escape our memory that one of the country's top businessmen began his path to success and honed his entrepreneurial skills with two buses on the West Demerara. With a decreasing range of items on the store shelves, a number of women in particular turned to trading and for better or worse set up shop on the pavements and then onto the streets, often directly in front of long-established trading houses. The unfortunate result in many cases was that a number of these trading houses went into decline and eventually disappeared.

Another remarkable piece of modern entrepreneurship made Business Page possible. David de Caires, a leading corporate attorney gave up a lucrative law practice to set up the Stabroek News when former President Hoyte, following the death of his predecessor, introduced his brand of perestroika to Guyana. To have successfully established two separate businesses makes Mr de Caires one of this country's truly remarkable entrepreneurs.

Support

Business Page makes these points to emphasise the importance - both negative and positive - of government policies. Even in the poorest country, there will be opportunities for the truly enterprising person. But a country needs not only a few outstanding entrepreneurs but a strong economy driven by policies that allow many businesses to thrive. Former Vice-President Al Gore recognised this in his letter to the Chairman of the Ernst & Young Entrepreneur of the Year Institute when he wrote: "Providing effective support for the entrepreneurial economy has been a key component of our Administration's policy over the past six years. Thousands of new businesses and hundreds of thousands of new jobs that entrepreneurs have created during this period have contributed significantly to the economic revival of communities across the country."

Notables

Entrepreneurship of course is not new to Guyanese and we have excellent examples of men who have demonstrated vision, courage, determination, adaptability and business judgement in establishing businesses that last. The name that comes immediately to the fore is the late Peter D'Aguiar, the founder of Banks DIH who also set up a highly successful brewery in Barbados. The John Fernandes empire which began in the earlier part of the last century continues to expand creating opportunities for second and third generation Fernandes.

Mr Yesu Persaud who celebrated his seventieth birthday several months ago, combines leadership and entrepreneurial skills and in launching new initiatives including the Demerara Bank Limited he demonstrated the same restive energy that makes DDL such a successful company. Some would ask if Mr Persaud is indeed so good why did GA2000 fail so soon after he led a group of Guyanese investors into the venture. The real reasons are yet to be clear but there is no doubt that the airline was woefully under-capitalised and could not survive the setbacks for which this highly volatile industry is well known. It also underlines the fact that not all initiatives will succeed and that entrepreneurs do make mistakes.

Mr Kayman Sankar, the ultimate rice magnate, whose pioneering efforts revolutionised the rice industry and made him into an icon courted by politicians and bankers alike, provides an example of the proverbial rags to riches story. The problems which his legacy is now experiencing are well known and it is a matter of speculation whether those have anything to do with the issue of succession planning or cyclical difficulties facing the sector.

The forestry sector too has been characterised by entrepreneurship while in gold the pioneering spirit of the pork-knocker is legendary. Times have changed and many of our first generation entrepreneurs are no longer around while in the case of the forestry sector and mining, the increasingly high standards demanded by the marketplace leaves little room for the small entrepreneur.

Misconceptions

One of the misconceptions about the entrepreneur is that he is a maverick: a wild risk-taker who is more of an individual than a team-player but our group does not conform to that inaccurate stereotype. When we take a look at these persons, who are without doubt the creme de la creme of our business class, it can be seen that like all entrepreneurs they have been forced to overcome obstacles that would deter the average individual. This is the true essence of entrepreneurship which, when linked with vision, unswerving commitment to quality and single-mindedness of purpose produces the legacies left by these persons. They have built businesses which, while bearing their mark, have long left the realm of the sole trader and have evolved into entities of substance.

The real entrepreneur is not a gambler but one who seeks out opportunities and pursues them with evangelical fervour. Where the risk lies is in the fact that starting a business is generally only feasible in industries where there are usually no barriers to entry, no brand or other proprietary asset and where failure could be costly if not fatal. In Guyana we have a very unsophisticated financial market and unlike the USA and even some of Caribbean territories there is no venture capital. With their commitment to protect depositors, commercial bankers have little interest in supporting or forgiving mistakes.

Another fallacy is that entrepreneurs are born not made. While successful entrepreneurship does require strong personal qualities, many of the tools and techniques including business planning, management and organisational strategy, can be acquired. Since its inception IPED has been running training programmes mainly for very small entrepreneurs but opportunities for the medium size operations are very scarce.

Programmes

Many tertiary institutions in the US offer programmes in entrepreneurship and some of the more successful entrepreneurs in that country hold MBA's. Not only are such programmes not available in Guyana but many of our entrepreneurs treat formal training as a waste of their time and money. Regrettably, only a few of the entrants in the recent EOY Programme found it possible to attend the E&Y sponsored conference in Trinidad & Tobago which would have exposed them to some of the region's top consultants and businesspersons.

Entrepreneurs are often seen as loners but the truly successful one builds a team of talented individuals and provides them with leadership and inspiration. Entrepreneurs usually have very strong personalities and sometimes too much confidence in their own ability. They have to allow each member of the team room to exercise their talent, initiative and skills to the fullest.

Conclusion

While the world reads with amazement of the mind-boggling wealth of some of America's top entrepreneurs, money is not the sole focus of this breed. Indeed, they recognise the importance of giving something back to the community. That endears the community to them and comes in useful when the business faces difficulties, as it inevitably will. Entrepreneurs are necessarily hard workers, some say they work too hard but then that is the price of success. With few staff, inadequate finances and no brand to rely on, the entrepreneur inevitably finds that he has to combine several roles which consume the better part of twenty-four hours. In the early stages of the business, he has no choice but as the business expands he has to balance his commitments to work with those to his family, the community and to himself. Life is clearly not only about money and work - what is the value of success if you do not have time to stop and smell the roses or at least enjoy the rewards of your efforts?

Whilst there is no manual on entrepreneurship, next week Business Page will look at some of the practices that can improve the entrepreneur's chances of being successful.

Introduction

Today's piece concludes this three-part article on entrepreneurship to honour the success of five Guyanese businesspersons in the Ernst & Young Caribbean Entrepreneur of the Year 2001. While the myth that one is born an entrepreneur has been exploded it is equally true that there is no single manual of entrepreneurship applicable to all persons, businesses or places. However, there is much that the examples and practices of the more successful entrepreneurs can teach.

The economies of the world are enduring such dramatic changes necessitating the re-writing of all the so-called best-sellers on management that no business can rely on any fixed formula to achieve and maintain leadership positions in their industry. Maintaining that leadership position requires that one simultaneously looks internally to achieve efficiency and thereby increase profitability, and externally to benchmark one's business practices against the highly successful, fast growth firms.

In this article we have shown that Guyana has not been short of entrepreneurs - indeed we have made the point that we survived the seventies and eighties because many ordinary women and men were prepared to take extraordinary risks which ensured that Guyanese were provided with the basic necessities for survival. We have noted however that many of these persons did what they did not because they set out to save Guyana but rather in response to the fact that they were unemployed and that their and their families' survival was at risk. Fitting the description of lifestyle entrepreneur, they were content to earning a living for themselves and their families.

On the other hand, the high-growth entrepreneurs, the ones that pursue growth and in the process generate jobs, investments and the development of human and financial capital, set themselves ambitious goals which they pursue with focus and passion. The outstanding ones want to become the best in their field, sacrificing current income and returns for long-term growth. They recognise that the extra effort - ignoring the pain, the sacrifice and the fatigue - is what sets them apart from and ahead of the competition.

As a country, we need to recognise the role which both groups can contribute to the development of our country. We have to consider whether a common economic policy will support the simultaneous development of both groups or whether in addition to a stable macro-economic framework we should be pursuing specific policies to promote and support the development and growth of the two groups. After all, it is the success of these two groups that attract the pool of aspiring entrepreneurs - university, high school and community and technical colleges students about to enter the real world.

The importance of growth

The mortality of start-ups is notoriously high and the starry-eyed, inadequately prepared person soon recognises that it takes more than just a smart idea to make a successful business. Research has shown however that a firm's chances of survival double if it can grow by just ten per cent annually. But more than survival, growth increases market share, reduces unit cost of production whether in products or services, increases efficiency and profitability and increases the net worth of the owners. Fast-growth firms aggressively pursue market share although they may choose different strategies such as penetration i.e. the sale of existing products to existing customers and diversification i.e. new products and services into new markets. Other businesses pursue the even riskier path of mergers and acquisitions.

Growth however does not come from increased revenues only, and successful entrepreneurs pursue various growth goals, the principal ones being market share, turnover, profits, cash flows and net worth maximisation. Studies in the USA have shown that market penetration is by far the most successful growth strategy, followed by product development, market development and diversification. It is however not a zero sum game and it is not impossible to pursue several strategies simultaneously.

Survival and growth are therefore critical to success but there is far more to entrepreneurial excellence than just these. Once growth, supported by the entrepreneur and the top management team is properly planned, carefully executed and constantly reinforced, there is nothing truly unique or secret about their success but more to do with recognition and commitment to business fundamentals. Accordingly, the entrepreneur along with his team must focus on 1) Human Resources, 2) Planning, 3) Product and Marketing, 4) Financial and 5) Management Practices.

Human resource practices

The successful entrepreneur seeks to expand her/his capabilities by building a team of motivated people who share the goals and objectives of the entrepreneur leading the firm. The entrepreneur must help these people to become successful, create clarity in the organisation, determine and communicate the values and philosophies for which the firm stands, provide appropriate reward systems for all levels within the organisation and create a continuous experimental and learning attitude within the organisation.

Incentive pay, or pay tied to performance for any and all employees consistently translates into substantial gains in sales. Research has shown that a firm would be better off to offer no equity compensation whatsoever than to offer it to the CEO only. Sharing rewards with those who produce them via equity participation is not a matter of losing control of the company, but rather doing what is necessary to sustain growth over time and the success of the entity long after the original entrepreneur has passed on.

Planning practices

Clear mission statements embodying the values of the entity, long-range plans including clear and measurable long-term goals and carefully prepared action plans enable the entrepreneur to compete aggressively. An entrepreneur seeking to position the firm in a leadership role must conduct detailed environmental and competitor analyses and identify the entities with which to benchmark their operations.

Systems must exist for measuring and comparing actual performance not only to adjust plans but management compensation as well. Information of actual and planned performance should be shared with employees at all levels in the organisation. Periodic strategic reviews should be undertaken preferably done by independent experts who can offer objective criticisms and value-added recommendations to the entity.

Product and marketing practices

The successful firm will seek to deliver to the market products and services that are perceived to be the best value for money, and which are offered with service benefits that can command premium price. There must be a good mix whereby the bulk of revenue comes from existing products and customers while flows from new customers/products account for between 20 per cent to 30 per cent.

Continuous market and research and development expenditure must be designed to ensure the product and services offered are useful, attractive and are periodically upgraded and modernised. The sales force must be well trained, know the product and appropriately remunerated. Ideally, the sales force should account for approximately 60% of marketing expenditure.

Financial practices

While there are huge sums available to the successful business, the unsophisticated capital market and legal system are notoriously unforgiving of businesses in distress. The entrepreneur must therefore anticipate multiple sources and rounds of financing that reduce borrowing cost, allow the entrepreneur to retain voting control while encouraging and rewarding managers and employees with equity in the firm.

The entrepreneur must establish a sound system of accounting and reporting ensuring that adequate, reliable and relevant information is available.

Management practices

While the early stages of the firm are characterised by strong individual leadership, moving the firm to the next stage requires a balanced board of executive and non-executive directors who meet regularly and are directly involved in critical, strategic decisions. Entrepreneurial firms do not have too many layers of management, and managers are allowed to make decisions as well as mistakes.

All managers in the firm must themselves be entrepreneurial and the firm must establish entrepreneurial competency in all functional areas of management. The really successful entrepreneur is a developer and leader of entrepreneurs who will ensure that the legacy endures.