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"Wixii qoran baa quruumo hadhee, muxuu hadal qiimo leeyahay." Somali
"Words fly, but scripts stay - for centuries." English

Cash is king

On a visit to a local Somali business in London, an owner friend Ali (not his real name) confided in me that he was having financial trouble. His business was not doing so well and the bank was at the gate knocking ever harder. He, at that point, felt cornered and out of options. He even joked that his desperation was so acute at the time that he was considering asking me, a permanently broke bloke, for a loan. The business which is a light snack focused restaurant targeting anyone who wanted to have a seat, a cup of tea and snacks is well placed in a busy high street somewhere in West London.
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The investment climate is not yet right for foreign investors to gamble on Somalia

Investing in a conflict zone like Somalia can be suicidal for global businesses even if the rate of return for their faith is higher. There is the need to worry about Corporate Social Responsibility, staff security, eruption of spontaneous violence, poor infrastructure and no legal recourse if things go wrong. Moreover, in the absence of widely available opportunities and political voice, together with corrupted leaders that embezzled seven out of every ten dollars they received according to a UN report published in July and strong presence of Al-Shabaab, people have come to rely on their tribes for security, protection and welfare. As a result, it would be very hard for both local and foreign investors to just set up a business in a certain region, bring their chosen staff and get on with their business without employing local tribes men in key posts even if they lack the qualifications and experience. Where they do decide to employ locals, investors may have to make enormous investment in the education and training which can deter even those with the deepest pockets. Continue reading

Poor staff retention is driving away customers

Many businesses are making workers redundant in response to the global financial crisis. The argument has been that because of poor sales brought about by weak consumer spending and confidence, the high cost of employing and retaining staff is no longer financially justifiable. While this argument is credible given the difficult trading conditions internationally, most ethnic lead businesses in the UK have always been poor at retaining qualified staff. Many business leaders that have been approached for this article have argued that many of their former employees were unreliable, lazy and difficult to get along with. They went on to argue that many of them lacked customer service skills and had at times been dishonest and as a result were not employable. Continue reading

Somali businesses must respond to the recession effectively or close

Walking through my favourite street in East Bristol, I came across a shop that is boarded up its windows. Only a few months a go it was a booming clothes shop which specialised in traditional Somali female clothing and toiletries, but today, along with the restaurant next door and three other shops on the other side of the road, they are all vacant. Without doubt they all are victims of the deepest and longest recession the developed world has seen since the global depression of the early 20th century, but to what extent did these former business owners play a part in their own downfall?

The above appears to be a very cruel question but it is one that is extremely necessary when it comes to assessing Somali business failures in Europe and North America. Most business owners on the verge of collapse or those that have already been unfortunate say exactly the same thing: we are victims of circumstances and we did all we could to survive before the collapse. They support this argument by pointing to the existing low consumer confidence and resulting poor spending in the shops as well as high unemployment figures and the present and future job losses in both the private and public sector. It would seem from this that as a result of unforeseen circumstances their business prospects were doomed and there was absolutely nothing they could have done about it. This is totally untrue for most of them.

Recessions spare no one and only the cash rich who like to sit on their money survive generally but very few Somalis or ethnic small business owners fall in to this category. Somali business leaders are notoriously brilliant at negotiating with customers and other Somali business owners, but they are absolutely poor at negotiating with their landlords and suppliers who are not of the same nationality. In a time of recession, especially one as deep as this, it is important to retain your customers by cutting the cost of your service or products and the easiest way to do this is to negotiate the two most costly things in business: the rent and the cost of supplies.

Most landlords and suppliers are reasonable and if they are approached by a business in difficulty most would consider revising their costs, but most Somali business owners either do not negotiate or if they do are unreasonable in their offers. Because they also run and manage a business, both suppliers and landlords would prefer to keep their customers happy and on board but if they are not approached by struggling businesses owners how will they know what they need to survive? Equally, if Somali business owners negotiate aggressively and with no consideration for the losses the supplier or landlord will incur as a result, how will they expect both of these groups to be sympathetic towards them?

Too many Somali business owners are either too afraid or proud to admit that they are in trouble and re-negotiate important things like rent and their purchasing costs which could potentially save them and their livelihood from totally collapsing. If they take the initiative, summon the courage to admit they are in trouble and be reasonable in and during negotiations, they may just survive the recession. Their survival is almost guaranteed if they negotiate well as they will be able to retain their customers and secure their loyalty for the future as well as lower the cost of running their businesses.

Most successful businesses have an excellent relationship and continuous dialogue with their bank managers who now provide them with business advice, coaching as well as lend them money when needed. Most Somali business leaders have extremely poor relationships with their banks and some do not even have a business account as they use their own private accounts to store their businesses money. This is not only a very costly childish mistake, but it also dents the credibility of the business owners in the eyes of the banks they need support from. With a simple business account and on going relationship between them and their bankers, Somali businesses will not only get the advice they need but they can build a credit history which would further free capital for them to spend on their businesses in the future. This could also help to lower the cost of borrowing and accessing credit in times of business difficulty. Most banks today have Shariah compliant lending and there is no excuse for Somali businesses to be failing because of a lack of capital if they simply use the services of their banks properly and utilise the free support and advice they offer.

Many Somali businesses have shareholders because of the alternative means through which they raise the initial capital to start the businesses and although consisting mostly of family and friends, they can be useful. Many shareholders have experience of business and further capital they can inject into the business if and when needed. However, it is crucial that there is communication between them and the business manager as if there is not trust will break down and the resulting disputes will be the nail in the coffin, and usually it is, for the concerned business.

All businesses are suffering as a result of the recession, but Somali businesses seem to be failing like sandcastles in heavy rain and winds. For some they fail having tried everything to survive, but for the vast majority they let themselves down by ignoring or forgetting business basics such as negotiation and honesty. The fact is all businesses at some point face great hardship, but what differentiates those that survive from those that collapse is simply the ability to negotiate and communicate with key stakeholders who also have an interest in the businesses survival.


Liban Obsiye

Boom and bust: the only Somali business cycle

More Somali businesses fail than succeed in the UK because of poor business planning, lack of finance, poor management and poor choice of business location, among many other things. 

By Liban Obsiye (BSMG) — In Britain startup businesses have a very high failure rate as at least 1 in 3 of them fails in their first three years. However, despite this grim prospect, many others go on to succeed, expand and prosper and it is this that inspires many entrepreneurs in the UK to venture out on their own. The UK has some of the longest working hours in Europe and the majority of workers are poorly paid. Despite all the attention given by the press to bankers’ bonuses and the obscene amounts been paid to those that work in the financial district of London, the Office for National Statistics’ highly reliable Annual Survey of Hours and Earnings has found that the median salary for the majority of the full time workforce in the UK stands at £25,123. This may seem much for some readers outside the western world but the fact is that it is not as the average house price in the UK is above £100,000 and the price of everyday goods continually rises yearly if not monthly. Continue reading