Managing software development as a non-technical person

My business is dependent on a technology platform. It connects retailers with consumers and I had signed on three retailers. I had to make sure that the digital platform was fully functional and could be used by the shop staff and consumers. I am not a software developer, so I hired a company to do the development.

Every time I checked I was told development was on schedule for on-time delivery. I didn’t now what to check for and took their word for it. Every time I asked for a demo something went wrong and they would tell me, “Don’t worry. We are ironing out the bugs. This is a normal part of the process.”

It was hard for me to determine if the bugs were hardware or software issues. When I tried to use it, it was difficult to use and not intuitive. My sense was this was designed for “power users,” people far more tech savvy than my target user.

On the day of the launch, things were not much better. I had to have my company’s staff at each retail outlet to help with the platform because it was too complicated for the consumers and there wasn’t enough time to train the retail partners’ staff. 

Business plan competitions vs Reality

We had a great business idea. It ticked all the boxes. There was a huge addressable market, it could scale, there was differentiation, there was unique and protectable IP, and it had social impact. We were encouraged to enter a $100K business plan competition. It took our team of four over 20 hours to prepare the business plan and practice for the event.

We did not win but our idea was well-received and we were told we should enter more competitions. We did this and invested another 40-50 hours. We did manage to win $5000. But we had invested over 100 hours!!!!

Suddenly it was graduation and we started asking ourselves the questions we had kept putting off: Were we really going to start a business? Who was ready to move to the low-income country where our business was located? 

It dawned on all of us that we had spent so many hours entering competitions that we had not really thought about the business itself and how to run it. We looked back over all the business plans that we had written and noticed that we had changed the strategy/objectives each time to meet the criteria for entering and winning that particular competition. We knew a lot about writing plans. We knew a lot less about actually starting our business and running it. We also discovered that only one of us was actually prepared to move to the low-income country where our business is located. 

The importance of inventory and cash management

After leaving business school I moved back to my home country and started a retail business with money from family and friends. I had taken classes in finance, operations, retail management, and two in entrepreneurship and had done very well. I felt well-prepared.

I opened a bank account in my home country and started importing stock from the US and China. Sales went really well for the first 6 months. Then the economy started to slow and my sales also slowed. Inventory started to build up and the store began to look bad with stock from different seasons and odd sizes and colors piled up.

I had 30-day credit with my suppliers but I had to place minimum order quantities. The rent had to be paid at the first of each month and the shop staff were paid every two weeks. I did not want to reduce the margins as this would affect my profits even though everyone else in the shopping area where offering 40-60% sale discounts.

I always planned to have 45 days of cash in the bank but with slow sales, suppliers’ payments, salaries and rent, I found myself caught short. I had piles of stock but less than a week’s worth of cash and I could not pay the next month’s rent. By the time I decided to cut my margins and liquidate my stock, it was too late. I had to borrow more money from my family just to stay afloat. It took me 10 weeks to recover and over 6 months to get my credit line back at the bank.  

The importance of knowing who you are hiring

I really liked John when we meet. He was smart, had an MBA, and had worked as a management consultant. He also told me that he was a qualified accountant. I hired him and we worked well together.

John gave me references but I did not contact them before I hired John. Then one day I was looking at LinkedIn and went to see John’s entry. The CV that was there was very different from the one he gave me. I was especially concerned that one of the references/employers he gave me was not on LinkedIn. I decided I needed to find out what was going on. 

I called the university where John said he got his MBA. They had no record of him being a student. The college where he said he got his accounting qualifications said he never completed the program. I realized the business and I could have gotten into severe legal trouble if I had trusted his accounting advice and it turned out to be wrong. 

Always know what's happening in your supply chain

I have an apparel company employing different local tailors. We were launching our next collection with a fashion show. The tailors said they would have all the clothes ready by the 1st of the month, in time for the fashion show. I was totally focused on the show and assumed all the suppliers would do what they promised.

A week before the show, I went to one of the tailors and learned that he had only completed 10% of his quota. I looked at the garments and there were serious quality issues. The zippers did not work. The sleeves were different lengths and there were not enough stitches per centimeter. I panicked.

I went to seem some other tailors and the situation was no better. They had let me down. They all said “but I didn’t hear from you or see you, so I didn’t think it was urgent,” or “someone else came in with an emergency job, so I stopped working on your order.

The Dice are loaded in favour of the investors.

   When you think about the way we do entrepreneurship in the West ( and around the world)  you begin to realise that this a game where the dice are loaded in favour of the  investors. This is not the  simplistic ' the house always wins  " you see at gambling casinos. It is far for sophisticated and the consequences are profound .

 The business model is relatively simple. There is a market where are  many more entrepreneurs seeking investment than there are   funds or investors. So it is the many chasing the few. The objective of the few is make the maximum return on their investment. This reflects the risk and the nature of the market.  The many , therefore, write business plans, do pitches and spend endless hours networking to get the introductions they need to the investors 

Investors read ten of thousands of business plans each year.  There are now sophisticated screening techniques and battalions of analysts who review them. " Only the best  get real attention " said one investor.  For these  lucky people the  game is to get the maximum  amount of investment whilst giving away as little of the company equity as possible . For the investor it s just the opposite - get as much of the equity as possible for the least amount of investment . Once the game is played the hard work of building and running the business  begins. The investors provide  varying levels of support and oversight  . The entrepreneurs believe they need to work 100 hours a week and do nothing else but work on the business .

Over time the results begin to come in . There  are many studies which show the success  rates of this process, Suffice it to say around 30-40% fail completely, another 20 % ( or so )  fail to provide returns which cover the cost of money and risk. Then there are the big successes. These are the jackpots whose payouts cover all the costs of the investors, gives high risk adjusted rates of return and create billionaires . Those who do not get over all the hurdles are told to start over again 

The model is to  start with as many entrepreneurs as possible, narrow it down at the intake stage, let the majority of those who are   funded fail and live off the fruits and benefits of the rest .  The model works extremely well from the investor's  perspective , It is  a model which is taking hold all over the globe. But  is it the right model?

Lets us assume that this is the right model for the West/developed markets, It has certainly produced a great deal of wealth and produced new industries products, services and organisations . But is it right for low income countries. At Demeter we believe that it is not the right model. Rather than seeing a few successful we want the 'many to be successful " Rather than producing one business worth  $ 100m  we would like to see 100 business worth $1m each,  This model will have a greater impact on prosperity and economic development. It will not only employ more people, provide a greater  diversity of businesses but it will inspire others to become entrepreneurs  and create wealth in their local communities/regions/countries.  How do we ensure that more people are successful? 

At Demeter we believe the answer is to by provide continuous support , tools  platforms and networks which help to ensure that 60-70% are successful . We try to  adopt metrics and investment benchmarks which are consistent  with the  challenges and developmental stages of low income countries  . We need to   define and celebrate  success as building businesses in the $ 400- 700K range which employ, educate and  train people . Wealth creation, in this model, comes from the many  ( yes there will be few big successes but this is a bonus not a goal )  The examples these people offer will inspire others to become entrepreneurs and this will lead to the development of knowledge based skills- the  seeds of future prosperity

 Countries,, markets , entrepreneurs , industries  are all different .  We need to adapt the way to do entrepreneurship  to reflect these differences.  We need to make sure the dice are not loaded against those people who take the bold steps necessary  to create businesses in low income countries .  

   


I need to ask the finance person !

  I  NEED TO ASK THE FINANCE PERSON !

   When we first meet an entrepreneur  who has been recommended  to join Demeter, whether it is in person or on Skype ,  we want to find out all we can about them and their journey. We are focused on the individual . We believe that the development path of the entrepreneur and the business are inextricably linked  . This is why the first part of the application is about their journey, ambitions and passions . We know we can teach people about all aspects of business  and management but we also know that we cannot teach them passion and commitment .

 Once we have determined  that the entrepreneur  has the passion and shares Demeter's values and objectives we move on the business they want to create. If there is no business plan we explore their  thinking and try to understand the business concept. Where there is a Plan we review it and ask all the traditional and sometimes non -traditional questions. We are trying to learn how well the entrepreneur understands his or her business.  Do they understand the cost structure ? how value is created? what is the addressable market? who are the competitors? When we hear " I do not know the finances /numbers - you need to ask the finance person "   the warning lights go off.  If someone does not understand the numbers how can they create and grow a business? How do they know  the ' finance person' is telling them the truth. ? How do they price their product or service ? How do they determine the fixed and variable cost relationships? 

 Whist the finance person is part of team they should not be allowed to supply numbers, do forecasts  or create plans that are not fully understood by the CEO/founder(s)  Finance is not a black box, It is not magic . Numbers tell you a story- how well the business is doing, have we made he right decisions , is there  a strategic fit between our business and the market place. Put simply: If you do not understand the numbers you do do understand the business .

 When faced with this situation we have two options. One, we can insist that the entrepreneur learn the finances and that this is the number one priority in their Inventory of Needs We can work with and educate the entrepreneur so the fear evaporates  and  insight emerges . Two, we can decide that this is not the quality of entrepreneur we want to support. You should not be afraid of ' the numbers"  Mastery of the numbers is part of  gaining mastery over your business . It gives you that deep and intuitive understanding of what  is going on and why it is happening

 This lesson is even more important when you are seeking investment.  If an investors asks you a finance question ( how many units do you need to seek to break-even ?)  and you constantly defer to the finance person any sophisticated  investor  will have doubts about whether you can successfully launch a business  You need to have facts and figures like this  internalised. You need to be able to see patterns and stories in the numbers. 

 We do not expect our entrepreneurs  to be accountants and bookkeepers , But we do expect them to be well rounded and fully informed about  all aspects of their business.. We expected them to be  constantly learning  about themselves and their business- this is one of the keys to building  successful and enduring business . 

 

Welcome to Demeter

 Three years ago when I was a Distinguished Scholar at the Legatum Centre  for Entrepreneurship and  Development   at MIT  I had the honour of mentoring and supporting 18 remarkable graduate students at MIT and Harvard, Each had embarked on a journey that would eventually lead them back to their ' home ' to start a business. Each had made enormous  sacrifices to get to where they were and were prepared to overcome more obstacles  to make their businesses successful . Listening  to them and learning from them literally changed my life , I knew that I have to find ways to support them in their journey and provide them with the  resources they needed to build a successful business  in a  low income country .All my business efforts are now focused on this goal .

Demeter was born out of their needs and voices. It a response to their  requests for support when they returned  home. Listening to them we were able to identify a range of programmes , tools and platforms to assist their journey . But what we also heard was a the need to be treated as "individuals"  complex needs and emotions . They were not a business, some anonymous  name   or a financial investment, They were passionate , committed and talented individuals who had the insight, honesty and courage to ask for help on their journey, Together we designed the Inventory of Needs where we  identify areas where they needed to acquire mastery and business  objectives that needed to be met, We decided that it was critical to provide hands on individualised  advocacy for at least  three years - the Personal Advocate We decided that everyone needs to give as well as receive - peer mentorship. We decided we needed case studies that were relevant to the low income entrepreneurs- the case outside the box./ content library/forums  Everyone wanted to continue their education and grow as individuals- the self development programmes  were born and we committed ourselves to providing educational programmes for the entrepreneur  and their senior management. Everyone one needed accounting,logistic , software  etc and the Demeter Card was created.  Everyone also wanted access to  Experts to answer technical questions and provide support- the Expert Network and Ask and Expert was created 

We all agreed our mission was to increase the success rates of entrepreneurs in low income countries. We realised this would  inspire others to become  entrepreneurs  and this is how change happens . We also realised that it is better  to create 50  robust  businesses with a turnover of $1m  than one business of $50m. We all agreed we wanted to leave a legacy. Everyone agreed to supply narratives , stories, blogs  and videos  about their journey, emotions , feelings and experiences so  that future entrepreneurs  would know that what they were experiencing  was  ' normal ' and there were people they could talk to Each experience we realised was a teaching moment . Finally we all realised we want to create the financial resources to provide seed capital for the next generation of entrepreneurs. We therefore decided to use the surpluses from Demeter to  support the next generation .

We chose Demeter as our name because she is nurturing, supportive and forgiving .  She embodied the way we want ' to do entrepreneurship' - supporting  resilient , committed  and passionate people  to take the bold steps necessary to create prosperity  in low income countries one business at a time 

Welcome to Demeter    Jim Maxmin  Chairman and Co Founder