DUBAI: New businesses should pay less attention to their sales numbers and more attention to their bottom line and cash flow if they want to succeed.
That’s the view of Bilal Alibhai, president of the UAE chapter of the Entrepreneurs’ Organisation (EO).
“You’ve got to avoid getting carried away with heavy growth, et cetera,” Alibhai said in an interview at the Al Quoz offices of Bilal General Transport, one of his UAE firms. He also has businesses in Pakistan and Ghana.
“People say ‘sales is vanity, profit and cash flow is sanity’. It’s very important to look at your cash flow and your bottom line.”
Alibhai warned that the nature of business in the UAE could lead start-ups to expand too quickly.
“Sometimes you can get tempted in the UAE. It’s a fast-growing market. Sometimes you have the right business, you can expand at 100, 200, 300 per cent a year, but like any business, the more stretched you are the more chances you have of failing.
“I’ve been here long enough to see that most of the time it’s a management or company issue than just a pure cash flow issue. That’s what I’ve seen when we’ve analysed it.”
The ease of setting up a business in the UAE was a double-edged sword, he said, because it also brought more competition.
“A lot of the difficulties are also typically some of the benefits of being in the UAE,” he said. “What I mean by that is that the UAE is one of the most globalised economies; it’s a benefit because business in the UAE can access all markets from here — it’s very good at trade. But at the same time you have a lot of competition as well; it’s a two-way street. You’re welcome to come to the UAE and start a business, and so is everyone else.”
Comparing the business ecosystem of the UAE to that of developed Western economies was unfair, he said, since the UAE was a younger country. “Let’s be honest, the UAE’s probably not up to the UK/US market in terms of supporting small businesses, but it’s still the leader in the region by far — and by region I mean the Middle East and North Africa, not just the GCC. I think competition will always be high in the UAE because of the positive vibe that it generates in the region.”
He acknowledged the efforts of the UAE government, and the governments of individual emirates, to make setting up a business easier, but urged patience as policies would take time to come into force.
“The UAE is on the right track. What I feel is that people are very quick to judge things, but remember it takes time to make changes — they are on the right path and things are definitely on the positive side. The support will always be there, but we have to be patient. The UAE doesn’t want to do something and then roll it back; they’d rather do it correctly, do it in the right way, and that’s what we’ve seen.”
Some of the positive changes he pointed to were the growth in shared office spaces and free zones, which made it easier to obtain a business licence, and the growth in government-sponsored small business incubators, with early signs that private sector incubators were also developing. He also praised the new bankruptcy law.
Businesses were less keen on VAT, but depending on the way it was structured, it was likely to be the end users who paid, rather than businesses, “but we have to all understand that it’s for the longevity of business,”
Since Alibhai first came to the UAE to set up his first business in the country 16 years ago, he’s seen a shift in emphasis of small and medium businesses from traditional sectors such as steel or textiles to what he calls ‘new age’ businesses — high-growth tech-based firms.
“If you’re in steel or textiles your growth is limited. IN the new age businesses you can grow at 200,300, 400, 500 per cent a year, no problem. And that’s what’s going to spur the UAE economy in the future, and that’s the future globally as well. If you look around, in the US or UK growth is coming from the new age businesses, and I think the UAE understands that and they’re starting up different initiatives, such as the SME initiative and the different zones that we’re seeing.”
He added: “With Dubai winning the Expo, and the expansion of the airport, I think there’s a lot of growth to be seen and within the global environment, even though it’s challenging, I think Dubai is very well placed to take advantage of the lot of the growth coming to the region.”
Five keys to start-up success
With his experience both in running his own businesses and as chapter president of the Entrepreneurs’ Organisation, Bilal Alibhai has developed a series of key points for new entrepreneurs.
1) Write a business plan. Do your Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis. “I know it sounds basic, but it’s funny, you meet so many guys who have a great idea. ‘Have you put it down on paper?’ ‘No.’ The business plan is actually very important. I think you have to do a business plan for yourself, not just to pitch it anywhere — if you are doing your own business you are investing yourself.
2) Cash flow is king. “It’s more important tin this region to take more time to mature. If you’re starting up, keep your burn rate low, keep your cash rate high. If you’re in an existing business, keep an extra buffer. OK, you might not grow as quickly, but at least you can surmount any issues that come up.”
3) Do something you love. “Being a business owner is very challenging. You’re going to miss important family events, you’re going to miss so many things because last-minute meetings are going to come up. Challenges are definitely going to come. What drives you through is that passion, and if the passion isn’t there you’re definitely going to get stuck. Do something you love, don’t go for what makes the most money.”
3) Don’t expand too quickly. “Don’t focus on the sales, You have to say, ‘This doesn’t make sense, there’s not enough profit, there’s not enough cash flow in this, let’s let it go.’”
4) Keep your focus tight, don’t spread yourself too thin. “It’s better to concentrate on two or three niche products or markets. Don’t get distracted by too many items. We’ve seen established businesses that have diversified actually realise that their core is better. If these guys, with such large infrastructure, such large cash flow, can’t handle a wide spectrum, then if you’re s small business concentrate on the niche you have.”
5) Control your overheads. “In Dubai especially, before you know it, your costs can go up. Hiring people is quite expensive because apart from salary you have other benefits you have to pay. In my own company every month we’re checking overheads. It’s very easy to lose track of them.”
What is the Entrepreneurs’ Organisation?
EO is a worldwide non-profit network of entrepreneurs. It’s open to business owners and founders whose firms generate annual revenues of $1 million (Dh3.67 million) or more. Applicants must also pass an interview.
The organisation, which has more than 12,000 members in 50 countries, aims to help entrepreneurs grow their businesses through peer-to-peer networking, learning events, specialist forums and global support.
The UAE chapter, which currently has 85 members, has been active for 20 years. Globally, the organisation has been around for more than 30 years.
IN addition to services to its members, EO operates an accelerator programme for firms with revenues between $150,000 and $1 million, which aims through coaching and learning events to help them boost their sales to the minimum $1 million needed for full membership.
And it operates the Global Student Entrepreneurship Award, which encourages students to pitch their ideas to gain funding.
For more details visit www.eonetwork.org.