Isn’t the Balloon going to pop? Sustainability of the Balloon programme
One of the main motto’s of the Balloon Ventures programme is “helping local entrepreneurs by leading sustainable business development”. It sounds like a very ambitious, ideal goal — certainly has a nice ring to it — and in the sea of the countless volunteer programmes, which have been exceptionally popular amongst the adventurous youth, this motto clearly emphasises how Balloon differs from others, and how it should not be confused with programmes that are only focused on the short-term goals.
At the beginning of the programme, I did not think too much of this objective, it seemed to be too far-fetched, just one of those general marketing lines, which was written by someone in an office in London, as far from Kenya as it gets, solely to sell the programme. Soon I began to realise that I could not have been more wrong. My team — two other International Fellows and me — had two returning entrepreneurs who had taken part in the programme. They had returned for the second time to go through the more training and to pitch for a loan.
After getting to know our entrepreneurs, it was crystal clear what a profound difference Balloon can make on those participating in the programme. With each entrepreneur, we brainstormed about their shops, products and services; we mapped out their opportunities, created minimum viable products (which we tested later on), and vigorously went through their financial records.
What we saw was that the majority of the entrepreneurs did not keep any records, financial or sales-wise, or their records were too inconsistent to be of actual use. On the other hand, second timers have been keeping immaculate financial records since taking part in the programme for the first time! Furthermore, they are fully aware of their shops’ strengths and weaknesses, can draw a Business Model Canvas in a blink, and in general seem to be more focused and target-driven regarding their future goals. This was possibly the best and most reliable proof I could have received to reassure myself that what we are doing is significant to these people’s businesses in the long run, and that we are not building a house of cards that is prone to collapse as soon as we leave.
One of our second time entrepreneurs is called Samuel. His 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 a successful motorbike repair shop in an area called Ummoja 2, which is approximately 25 minutes from Nakuru town centre. It is a modest shop, where he employs two students and receives a substantial number of customers; motorbikes are the preferred mode of transport outside of town, as paved roads are a luxury in many of the rural areas. He works from 7am to 8pm, six days a week, and 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 six months ago. As of today, he supplies more than 50 small to medium sized motorbike repair shops and small retailers, and the demand for parts is so high that he cannot fulfil 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.
This was the main reason why he has now returned for a second round of the programme, to receive 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. The outcome of his pitch has not yet been decided, but we — as his business Fellows — are very hopeful.
Overall, working with Samuel has shown me the countless ways these entrepreneurs benefit from the programme. Yes, it is true that Samuel was awarded a loan in his first round, which significantly helped his business to develop, but I am more than certain that without the training that he has received during the programme he would not have been able to keep such clear financial records and manage his business so well. To me this is what sustainability is about: when the entrepreneurs secure funding, they know exactly how to allocate the funds — or in case their pitch was unsuccessful, they have still gained a solid foundation in business management and are more aware of their operations, which will help them succeed in the future
Written by Alfred Strabel, Balloon Fellow 2015