Kenya is alive with many opportunities for entrepreneurs and individuals starting new businesses. A boom in high-speed internet connectivity, the high utilization of mobile phones, and an energetic youthful population has built a productive ground for starting a business.
Starting a business makes entrepreneurs generate new job opportunities which boost prosperity thus providing more options to customers. According to the 2016 Micro, Small and Medium Establishment (MSME) Survey by the Kenya National Bureau of Statistics, the country has around 7.5 million small businesses generating employment for 15 million people.
However, starting a business in Kenya is a challenging process which requires conducting good research of the business opportunity and planning accordingly to ensure your business becomes a success in the long term.
A research on your business will help you in implementing it in the market to receive acceptance of consumers. This will ensure your business flourishes in the competitive market and apply required strategies for its success.
This article gives you procedures needed to start and materialize your business opportunity for a good implementation of a successful business.
- Determine the kind of business to start
- Establish your legal business structure
- Select the location of your business
- Select a Business Name and Register your Business
- Get Licenses and Permits for Your Business
- Register and Report taxes
- Purchase a Business Insurance
- Open a Business Bank Account
- Write down your business plan
- Examine your finances
- Design your first service or product
- Promote your business
- Grow your business
1. Determine the kind of business to start
The next procedure of starting your business is to determine the type of business to start. If you have a niche passionate about it, it is the only way to succeed to ensure you don’t give up on the way.
You should know if you want to start your business alone or with a partner as well as a business to work actively or own it. You need to create a list of things you are passionate about to ensure after five years in the market; the business will excite you to continue working and creating new products for customers.
Clarify your business idea
Immediately you have your business idea and conduct a fast search for existing firms in your chosen industry. Learn what modern brand leaders are performing and figure out how you can perform better. If your business can provide a product or service other companies don’t offer, you have a solid business idea and are ready to design a business plan.
It is in order to understand why you are starting your business to differentiate if the business serves as a marketplace or a personal reason. A marketplace will have a larger scope of your business than a personal why designed business.
2. Establish your legal business structure
The kind of business structure that you have around your business can make or break your business. There are different business set-ups to select from based on how you desire to start your business which include:
a) Sole Proprietorship
This is the simplest business structure to start as it needs minimum requirements. You can start your business as a sole proprietor then with time upgrade to a company. It gives you more control of your business in decision making and running it. These are characteristics of sole proprietorship:
- Cheap and simple to start
- Little legal requirements
- Minimum legal protection
A partnership business structure is ideal for a group of individuals thinking of establishing a business. The reason is because the liabilities are limited to the business assets and you enjoy tax benefits that are not available for a sole proprietor.
3. Select a business location
A business location is a significant factor to consider when starting a business in Kenya for its success in the market. There are various aspects that influence your business location like the business style you are starting either formal or elegant business.
The option of location must complement the style and image of your business. Demographics should determine your business location to ensure customers are close to the business.
For a retail store, the population of the location should be the basis of selecting your business location. For instance, Nairobi Eastlands areas like Kayole, and Pipeline- Embakasi are densely populated thus suitable business location areas. You need to survey foot traffic in selecting your business location to ensure your business site does not push your business in a corner stone.
4. Select a Business Name and Register your Business
There are two methods of registering your business; registering your business name which is perfect if your budget is small and unable to register a company at that moment which is an easy process.
Supposing that you are in Nairobi, visit Huduma Centre and carry out a name search by giving a list of three choices at Ksh 100 each name and lasts for 3 days. Subsequently, you are able to register your business name of choice and it normally takes a minimum of five days costing around Ksh 1000. Finally you get your registration certificate for your business either as a sole proprietor or a partnership which nobody is able to use legally.
This process can also be done online through Business Registration Service portal
The other method is to register a business company if your budget ranges between Ksh 20,000 and 35,000. This method is carried out by a certified lawyer and it is advisable to select a reliable and good lawyer to deal with your matter effectively taking about two weeks. Afterwards, you get a certificate of incorporation and a company seal for an additional charge of around Ksh2500.
Companies must then procure registration with National Social Security(NSSF), National Health Insurance Fund(NHIF), and the Kenya Revenue Authority(KRA). All company and business registrations either sole proprietorship or partnerships are being done via the E-Citizen online platform but for Limited Liability Partnerships(LLPs) registrations that are yet manual are being done at the company registry.
5. Get Licenses and Permits for Your Business
A business permit should be obtained from the County Government depending on the business type. You need to obtain the necessary business permits and insurance to start your business in Kenya.
One of them is the City Council Business permit which depends on the industry of your business and size of your business site. Visit your City Council offices and enquire about the cost where the officers may pay a visit to your business area to determine location size and how much to pay, receive a receipt after payment and finally the certificate after around a week. For instance, a well-organized sized bakery permit for City Council goes for Ksh8, 000 annually.
There are Health/Food Related permits which are mandatory legal obligations for starting a business that needs health licenses like food, beverage, bakery and salon. According to the law, a health inspector visits your business place and after inspecting your area, you get certified and get a receipt after payment then a certificate after one week.
The other permit is a fire safety certificate which is a prerequisite for all businesses in Kenya. As an entrepreneur starting a business, you are required to have a fire extinguisher and some other fire safety specifications as advised by the Fire Safety Inspector depending on your business. Later, you will receive a Fire Safety Certificate after being inspected and certified.
6. Register and Report taxes
It is advisable when starting a business in Kenya to consult tax personnel to assist you with all necessities that you must comply with according to the Kenya Revenue Authority in running the business. There are various taxes like Pay As You Earn tax(PAYE), Value Added Tax(VAT) and Corporate tax among others.
These are some basic tax compliance obligations related to businesses in Kenya which you need to understand:
- Keeping of up to date account books by business people
- Determining tax liability accurately
- File of returns on income
- Paying tax dues by required date and allowing tax collectors to carry audit
Some of the taxes applied to many business enterprises include income tax, corporate tax, withholding tax, advance tax, capital gains tax and turnover tax.
There are other statutory monthly payments required to be made that include:
- PAYE to be paid by the 9th of each month
- NHIF to be paid by the 15th of each month
- NSSF to be paid by 15th of each month
- VAT to be paid by 20th of each month
However, if the payment date occurs on a weekend, the payment requires to be made before or on the last working day prior to that specified date.
7. Purchase a Business Insurance
Business insurance is vital for any business and you should consider buying one when starting your business. There are different insurance companies in Kenya that offer good business insurance covers which guarantees safety of your business in case of any losses.
Some of the business insurance covers include:
- (WIBA),Work injury benefit act – This covers employees who are accidentally injured and damages brought by floods, fire, earthquakes, typhoons, riots & strikes and terrorism acts.
- Fire and peril insurance sometimes called property insurance and covers physical assets of your business such as premises of business like warehouse and office, vehicle, furniture, equipment and fittings
- Consequential loss insurance that covers your business from profit or loss caused by business interruption due to causes under fire and peril policy
- Burglary insurance – This policy compensates your business for losses or damage to property due caused by attempt of robbery or burglary
- All risk insurance – This covers high valued movable tools like laptops and mobile phones from accidental damage, loss or theft and occurrences of natural risks like fire, floods or earthquakes
- Product liability – This cover helps you protect your business against claims of damage personal injury brought by your products
- Professional indemnity – This cover protects your professional business employees who encounter risk of error and omission that make your customer sustain financial loss like doctors, engineers and accountants. This policy will cover compensation legal fees and in case the customer wins the case against you and your business.
These insurance covers are available in different insurance companies like Old Mutual Insurance and Standard Chartered insurance business plans.
8. Open a Business Bank Account
Kenya has an accepted and diverse banking industry which is an advantage in starting your business. You are capable of opening a business account with any favorable bank where the requirements and process of opening a business account vary slightly.
Some of the questions required to be researched widely to ensure the bank covers your business needs include:
- What is the Bank’s specialty?
- What extra services/products does the Bank provide for businesses?
- Does the Bank provide mobile banking/internet banking?
- What are the costs related to your business account?
- What is the fixed transaction turnaround time?
- Does the bank provide branchless banking?
There are several documents needed to open a business bank account depending on your business company.
For an unlimited company, documents required include business name certificate or deed of partnership, an original utility bill (water or electricity), (PIN), personal identification number and cash payment for opening balance with a minimum of Ksh 10,000 that changes from one bank to another.
For a limited company you require documents such as certificate of registration, original or certified copy of ID document for each signatory to the account, documentation showing authority to open the bank account, Personal Identification Number(PIN), original or certified copy of a utility bill like water or electricity and cash payment of opening balance of at least Ksh. 10,000 that changes from one bank to another.
9. Write down your business plan
A business plan will stipulate how your business is going to work and how to make it a success. It answers questions such as:
- What is your business about?
- How will your business be funded?
- Who are your target consumers and how do you reach them?
- How will your business be managed?
- Who are your business competitors?
A business plan helps you assess where your business or company is going, how it will solve any possible difficulties and what you require to support it.
You can write a business plan from scratch or use a pre-existing business plan template.
10. Examine your finances
Starting your business requires you to pay for different services which need funds. Planning to quit your present job and focus on starting your business requires you to be ready and have the finances to support you till you start making profit.
Experts generally admit that startup businesses frequently fail due to lack of finances to run before the business turns a profit. It is a good idea to even overestimate the starting capital so as to ensure your business continues running before making sustainable revenue. Also, do not overspend when starting your business. This is achieved by understanding the kind of purchases necessary in achieving your business goals.
If you require financial assistance, a loan from the bank is a good starting point although it may be difficult to secure. Similarly, you can obtain assistance from relatives and friends as they are easier to tell them about your business. If you are employed and saved some funds to start your business, you should not leave your job till:
- You have enough finances flowing from your business to cover double your average monthly costs
- You believe that you will put in the work to make your dreams materialize and anticipate no get rich quick outcomes
- You have an emergency fund to shelter your business more than 12 months of your expenses
- You understand when you quit, you will be working 14 hours per day instead of 8
11. Design your first service or product
There are many products and services you can produce to sell to your targeted audience when beginning your business. The products you generate for your business will heavily depend on your business type and skillset. Nevertheless, there are innumerable products and services that can be created or ordered to sell to your audience.
12. Promote your business
You need to build up your business brand to get an audience before starting to sell your service or product. You can generate a business logo which helps people identify your brand easily and be consistent in applying it across all your platforms.
There are two major ways of promoting your business; either online or offline business promotion. Some of the offline business promotion strategies you can use include business cards, networking, flyers, press releases, seminars/speaking and trade shows. Online business promotion strategies you can apply for your business include Facebook, Instagram, LinkedIn, SEO, Pinterest and Quora.
All these business promotion strategies will help you reach out to a bigger audience for your product or service thus increasing your sales.
13. Grow your business
Your start and first sales are only the onset of your big task as an entrepreneur. You always require growing your business in order to stay afloat in the market and make profit. This is going to take effort and time, but you will get out of your business what you invest into it.
Cooperating with more established business brands in your industry is a significant way to accomplish growth. You need to reach out to other firms or influential bloggers and ask for some promotion in exchange for a free service or product sample. Additionally, you can associate with a charity institution and volunteer some of your products or time to get your name out there and create a good reputation.
While these steps assist you to start your business and get set to grow, there is no perfect plan to go about it but thorough preparations are vital in launching your business. You have to adjust to changing conditions to ensure your business is successful.