Thursday, May 06, 2010

10 Life Lessons from Ghana - Lesson 5

Lesson 5 is

Don't Start A Business With Anyone Who Lives Abroad

My business partner will tell you, it is hard enough getting someone in Ghana to focus on a business when they're working. You don't want to complicate that further by doing business with someone who is not even here.

You cannot run a business from the other side of the world. It just doesn't work. As obvious as this advice may seem when you read it, it is actually one that did not occur to me a year ago. And getting into business with partners who live abroad is a mistake I see many many returnees making.

See, when you're abroad, you look at Ghana and see all that is not right. Then you come up with brilliant business ideas and plans to solve some of Ghana's problems. Usually, you do the idea generation and business planning with friends and enroll your best buddies who are also abroad into partnering with you. Then one fine day, you find a great job in Ghana and decide to move. And you decide to finally get your business started but your business partners are still abroad. That's scenario 1.

Don't do this.

Why shouldn't you?

Because in all likelihood, it won't work. As I said in my opening sentence, it is difficult to focus on your business when you and your partner have day jobs but when you do it with someone who not only has a job but it on the other side of the world, what contribution could they possibly make beyond the planning stage?

Scenario 2 is you move to Ghana without a business idea, but you get here, identify an opportunity and get all excited. Then you decide to put together a team to execute your business idea but for some reason, you ignore all the talented,willing and ready people in Ghana and instead, decide to recruit your high school or college buddies who still live abroad.What you end up with is a situation much like in scenario 1 where your partners, however smart and hardworking are going to be of very little use to you. That is, if they are able to find time to work on your business idea at all. You know how demanding abroad jobs can be.

Scenario 3 is when both (all) of the founders or people with the vision for the business continue to live abroad and think for some reason that they are capable of the impossible - namely starting and running a business in Ghana from across the world and convince themselves that all they really need is a "business manager". I've seen this happen twice. Both times,  fabulous people who are excited about their business idea. But their work and lives abroad get in the way and as long as they remain there, nothing gets done. The question I ask founders when I find them looking for business managers is: If you are so excited and passionate about this idea of yours, why aren't you moving here to do it? The response I get is....Oh I am. I'm planning my move back. And they make it seem like the move is going to happen in a month or two or even six. I haven't yet seen it happen even once. So my advice is : Don't agree to be the business manager unless you have actual reason to believe they're coming home in 6 months or whatever they say. Or well, you desperately need a job :)

Scenario 4 is when both business partners start off living in Ghana. They work well together to get the business started. Then in the very early stages, one of the partners moves abroad for school or work or some other reason and the remaining partner is left to single-handedly run the start-up. Don't agree to be the partner who is left on the ground to single-handedly run a start up. Especially not when you too have a day job and cannot be fully dedicated to building this venture.

Scenario 5 - And this will happen to you a lot when you move back home. Trust me. When you move back home, suddenly you're the one everyone abroad who has a business idea for Ghana will approach. So there are all these people who have business ideas. Call them friends or acquaintances, but until you move home, all they have is an idea. But because you moved, suddenly they'll try to get you to help get their idea off the ground. Initially, you'll feel special. You'll be excited all these people think you worthy to share their very nice ideas with you and thrilled that they're inviting you to be part of their team. So of course you'll say yes...until you realise one day, suddenly you're responsible for getting this idea off the ground. You need to register the business. You need to get a business permit. You need to open a bank account. Well, you're the one in Ghana. Why d'you think you're a business partner? haha

So, what's my advice? Don't start a business with people who are abroad. It is hard enough doing it with people who are in Ghana because day jobs get in the way.

Watch out for lesson 6


  1. Very true on all points!
    Day jobs do get in the way, both ways.

  2. You write beautifully and give even fantastic advice. I love your new look

  3. From Sijui:

    Sorry but I beg to differ with you on this post based on a diametrically different experience.

    My husband and I started our successful business in Ghana in partnership with friends living in Ghana. When we started, we lived in the U.S. Don't mean to be self aggrandizing but frankly the business would have floundered without our external capital (home equity loan in the U.S.); business line of credit established in the U.S. and technology infusion.

    Perhaps our situation was unique because our company is reliant on global operations i.e. hardware from U.S/Canadian manufacturers, software from Australian developers and tech support provided in Britain and it would be impossible to manage those relationships from Ghana alone.

    Nevertheless being in the U.S. gave the business the capital and technological flexibility that was required to take it off the ground.

    We now live in Ghana/Tanzania and still have a partner based in the U.K who is invaluable.

    The point is choose your partners carefully i.e. ability to prove their competence, committment and above all SACRIFICE. Frankly we had to kick out a non-performing local partner so clearly location of the partners is less important than calibre and committment of the partner.

    I doubt our situation is unique from many others.

  4. From Sijui:

    Post script-we very much had day jobs as well.

  5. From Sijui:

    Post-post- post script:
    Based on my experience I am a strong advocate of local entrepreneurs reaching out to their Diasporan network. The key difference I stress is pitching to them as venture capitalist i.e. I bring X sweat equity and you bring Y cash equity and/or technical experitse. In our example, our local partners floated the idea to us based on their local market knowledge (we didn't approach them with a hair brained idea), it was a good sell and we decided to take the risk. IT WAS ALSO OUR TICKET BACK TO GHANA, and I am happy to report, it worked out.

    Will not beat a dead hore but quality of partnership surpasses need to be physically located in the same place after all in this global economy, great ideas can be executed irrespective of time, space and borders.

    There are many engaged and entrepreneurial Diasporans looking for viable opportunities to enter partnerships back home. After all getting a Diasporan investor/partner is not that different from getting an external Venture Capital/Private equity offer if you're a local firm on a successful trajectory-definitely high risk, but with the right planning, high reward.

  6. I am happy to hear about the success of sijui and anonymous business ventures in Ghana. My experience is tied together with "dont start a business with friends or family" living in Ghana. I have failed miserably trying to get something off the ground with partners in Ghana. Mostly, my dedication, hard work and efforts fall prey to dishonesty and schemes from partners in Ghana.

  7. Sujui is right on point. Even though it's risky,with effective due diligence/ risk analysis I don't see why it can't be done.

  8. Sijui,

    I think what you are talking about and what Esi is are two slightly different ball games.

    On the one hand, I think Esi is talking about 'Sweat equity' abroad matched by 'Sweat equity' at home, or a slight variant thereof, while I get what you are saying to mean “Traditional 'cash' equity” from abroad matched by ‘Sweat equity’ locally or some slight variant thereof.

    The risks both parties are taking in either case are different hence the things that can (and do) go wrong are also different.

    In the first case, both sides may be taking the same risk on paper, but the local partner has incurred the 'opportunity cost' if you will call it that, of having given up the ‘good/easy’ life abroad. It has a sobering 'get successful or die trying' tweak to it which keeps the local partner focused. Plus there is the drain of the day job on both partners. I fully agree with Esi. It's hard for both but it's much easier for the partner abroad to derail due to the weaker ‘get successful or die trying’ mentality. And my advice is Esi's advice, don't do it.

    @ and we have to deal with that every day. Luckily our model allows us to quickly unwind any relationship quickly once we decide it is not working, but it is difficult to tell your mate who you truly respect, that it’s time to go ‘to the left’. All said, it's difficult to keep partners focused on the dream when you are not seeing each other day in day out. And when they haven't taken a huge plunge, its all the more difficult to keep them focused. Don’t do it I say.

    In the second case, it's heartwarming to know experiences like yours exist. The reality though is it is more the exception than the rule. The risks both parties are taking are slightly different: you are taking equity risk as the partner from abroad; the local partner may be taking a salary cut, or not, and is supposed to take the ‘career’ risk and do the sweating. You however have to be lucky to get your 'equity' investment put to work in a way that overcomes the 'agency problem' of the manager thinking first about himself and only later about you the investor. It's all the more difficult in Ghana partly because we haven't evolved our incorporation laws to tackle the interests of the equity investor in a small gig.

    It's also partly so because the vast majority of people will find it difficult not to dig a bit into the capital with the honest intention of replacing it only to wake up to a huge hole they have dug which they can’t fill. You can get lucky, but I am very cautious to suggest it as the way to go.

    However, if you can make it work, it would be phenomenal because @ 37%, Ghana has the highest cost of capital in Africa and one simply cannot build sustainable businesses with that. The foreign capital would be a huge shot in the arm.

    That said, I can’t think of any better way than, saving up and coming down when the time is ripe and putting your money where your mouth is.


  10. Hi Kwadwo, since has Raphael has answered Sijui, let me try to answer you Kwadwo. You say you're into music. I've visited your blog and seen your lyrics. It seems to me that the target for your music is Ghanaians since they are in twi. You are lucky to have a long time friend in Kumasi who has kept the faith by finishing a degree related to your dream, and has gone ahead to get a license and set up a place and the equipment. This suggests to me that your friend means business. He's gonna do it with or without you. If you feel there's an opportunity there, why are you anywhere else but Ghana? What is stopping you from jumping in with your friend and giving it a proper shot? How do you think things will work out with you being abroad. Being in it together feeli feeli and for real will also eliminate Nana's problem...where he's trying to set up businesses and his partners are chopping his money. I don't think anyone can convince me that he's really into a business if he can afford to be so far away from it. What's your excuse, Kwadwo?