With a couple of million shillings at stake, many astute minds would come up with a variety of ideas of how to best invest this kind of money. Chances are out of every ten ideas, one or two will carry some feasible sense worthy of investment. Not because the rest are bad but factors for success of the same could probably be misaligned such as market space and its characteristics, competition, time and the general environment.
However, true to any small and emerging economy such as Uganda's, the predominant industry
players are small scale producing things like confectionaries, sanitary products such as liquid soap, knitting sweaters, cleaning services, and agricultural substances like juice extraction and potato crisp making. Essentially, as per Kampala Capital City Authority, a certain income threshold especially of business on the peripherals of and within the central business district area determines the distinction of cottage business or otherwise.
The cottage industry is as diverse as it's unique. In the former, it covers both the service and goods sectors. In the latter, it's a phenomenon that starts out as a part time engagement for the owner. For each of its aspects, the nature of the business is tailored for that segment of the market only. Take the example of the Stitch Limited that caters only for embroidery services but does not sell embroidery materials like T shirts, sweaters and cloth rolls through money, space and time constraints.
An investor in this industry could be one with prior experience in the business or has identified a gap and is willing to fill it. Those with ambitions to step into the unknown, the risk takers and those that are dedicated to questioning the status quo of things stand to reap from investing in the cottage industry. All in all the kind of person willing to invest in this type of industry must dedicate a part of himself and his resources into achieving his/ her goals.
Before you invest
Investing in a cottage industry is not easy. Its issues arise regardless of your experience or lack of thereof. Hence it's imperative that the person opting to invest for instance in an embroidery business takes into account a variety of factors. The Stitch Limited is an embroidery business that has had its fair share of experiences in pursuing its objective to stay relevant in a business replicated by many others. Richard Ssaku, the general manager says they had to put in a lot of time to see themselves in the position they are today in. It requires patience and resilience he says in trying to keep the business afloat. In the beginning, one or two customers would come through the doors a week. The bills were piling up amid low income generation.
Richard confers with the same argument Ms. Kalema Trudy a manager with one of the venture capital firms in town .When an idea for a business is conceived, the next concern is finance. Ssaku says they had to dip deep into family savings and borrow from family and friends to pay for their first embroidery machine. It was a second hand machine purchased from the UK.
Ms Kalema says many people don’t have the luxury of substantial savings to draw from. However, she concurs that getting loans may not be good especially when business doesn’t pick up very soon. For a venture capital, one may give up a stake in their business in exchange for investment opportunities in case all feasibility studies turn out positive for the business.
In fact Richard and Ms Kalema do agree there is an overbearing need for research into the business space one intends to occupy. Ssaku says it took several visits to related businesses including a trip abroad. Justus, a dealer of spares for industrial machines in Nairobi with a dealership in Kampala notes the hardest thing for some of his clients is being told that the spare they are looking for is not available. It can only be gotten from the manufacturer at a higher cost. Therefore, he advises that one buys the right tools and machines that are serviceable within the region to avoid still stand due to breakdowns.
When to invest
A person intending to invest in a confectionery is probably looking at cutting a niche for himself in a crowded market space by offering a unique but desirable product. This could give one space to a more efficient service delivery. One needs to know the market, its availability and characteristics.
In Uganda, consumption of products is a guarded affair on account of individual interest. While one may want to impose a product onto the consumers, it is preferably advisable to establish whether the consumers can actually afford it. This is why China is taking the global market. They manufacture goods based on your expenditure, not their assumption.
The policies governing cottage industries are crucial in deciding which business to invest. The tax implications must be accounted for immediately through institution of good book keeping practices and filing of returns at appropriate times to avoid fines and penalties.
Ssaku is adamant when it comes to policies stated out by the Kampala Capital City Authority on cottage industries and the levies charged. He adds compliance is the best remedy.
Building the brand name is not an option but a requirement. The brand of your products should reach a pinnacle whereby as a leader in the business, yours is the yardstick and standard measure for performance. Building quality into the product translates into building the brand through best practices and quality assurance. Ssali Dona a producer of herbal skin care products says that his clients are looking for the impact the product has on their skin and that's what he strives for and hence his brand is enjoying success on account of goodwill and the testimonies of satisfied customers.
Cottage businesses are good investment if and when one is truly dedicated to them and before long with good practices, one is likely to reap big as the transition from part time to full time self- employment in the enterprise takes shape and ownership of a business can’t come any easier especially if one has spare cash to invest and the astuteness of mind to take the best moves forward.