What quail farmers have taught start-ups about business cycles

In Startup, Success

I am told quail eggs are now at an all-time low. The price of an egg has fallen from Sh100 to as low as Sh10. Welcome to the harsh realities of business.

My hunch is this; the Kenyans who abandoned their jobs to get into the ‘million-dollar’ business did not know that all businesses will encounter slowdowns, growths and peaks in their lifetimes. This happens to all businesses, even the most aggressive sales organisations on the planet.

Business cycles

Cycles are everywhere and if you are aware of them you can make good profits. If you are not aware of this you need to open your eyes. The big thing to note, however, is that the cycle is just that, a cycle.

No time of prosperity or poverty ever lasts forever. What does this mean for you and I? It means there are continual opportunities to position yourself and your business to make a profit.

Excessive demand for products leads to an increase in the prices of products. This is especially true in a boom in which the demand often surpasses the supply of the products.

For instance, during a boom, the demand for a product usually goes up. The excessive demand for available products inevitably leads to an increase in the prices of such products.

The farmers who ventured in quails last year would sell as many as 200 eggs a day for Sh100 each, making Sh20,000 a day.

But the business cycle tells us that the boom always comes to an end. The prices of goods will usually drop sharply to reflect the sudden reduction in their demand. That is what happened to the “in-thing” and “the hot investment trend” of quails in Kenya.

Stay ahead of the curve

We tend to take on unnecessary expenses when times are good, but this can sink your business if a recession strikes.

As Warren Buffett puts it; “you should be fearful when others are greedy and be greedy when others are fearful.” This phrase speaks to the idea of setting yourself apart from the rest and cushioning yourself from the effects of group think.

You want to stay out of phase with what the majority of people are doing. Staying ahead of the curve often means not adopting what everyone else has adopted.

Find a unique angle and go with it. Don’t model your approach after the market. You will be lost in the masses.

The reason people make a purchase decision between two products is because one of them is cheaper, of better quality, or is readily available.

Understanding this dynamic can help you better serve your target market and allow you and your business to provide the greatest value possible. Unless you are the only player in an emerging market, you will not have an advantage in all three areas.

Most companies start off having an advantage in one area and work to compete in two.

If you are just starting your business, think long and hard about this because your pursuit to compete on too many factors could lead to your ultimate demise.

It is better to excel in one area than it is to compete moderately in two. Many small businesses don’t understand this and try to be all things to all people.

Finding a new market with no competition is quite difficult and is often found by accident. The people who first got into the quail business were lucky. They rode their luck in a new market in which they were the first competitors. Because it worked out, the monetary reward was huge.

However, being fortunate enough to be the first competitor in a market does not automatically mean that you will maintain your advantage in the future.

READ: The future belongs to learning startups

The triple advantage will be lost the second another competitor shows up on the scene. Chances are they will enter your newly formed market asking where they can provide value where your company falls short.

What’s my conclusion? Play your own game. Take the cycles of your industry into account but don’t allow them to shape your business.

There are many creative ways to meet the coming changes but you will need to step outside of what everyone is telling you and find a unique position that has not yet been exploited.

Meanwhile, enjoy the quail boom while it lasts.

Mr Waswa is the managing director of Outdoors Africa. E-mail Waswa@outdoorsafrica.co.ke

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