Vimal Shah: Trust is crucial for growing your startup

Bidco Chairman Vimal Shah. [File, Standard]

The key ingredients of success in the business world vary depending on whom you ask.

For many, it is a host of factors, some too complex or unrealistic, to say the least. But for prominent businessman and industrialist, Vimal Shah, it all boils down to one thing - trust, especially when you are starting out.

The businessman, known for being the chairman of Bidco, a company in the consumer goods sector building trust with customers as an entrepreneur is the single most important aspect of growth, especially for startups.

He says the operating environment in Kenya and Africa, in general, makes it extra hard for startups to thrive due to the lack of proper regulations.

Speaking at the recent 10th-anniversary celebrations of local tech startup Solutech, Mr Shah said businesses also need to innovate as consumers become frugal continually.

The Bidco chairman hailed Solutech’s resilience, saying it is proof that startups can thrive with innovation.

“The most important thing is that you have been able to bring trust, and trust takes time. You also need integrity, intent, competencies and results,” he said, noting that these are critical aspects for business growth.

Mr Shah said with the entire economy facing challenges, many businesses are barely surviving, with consumers cutting back on spending or turning to cheaper brands.  

As such, he noted, manufacturers need to innovate to ensure they still give their customers value for money.

“The pockets are becoming smaller, and disposable income is shrinking. Therefore, people are looking for cheaper and more value-added products,” said Mr Shah.

“The government is making it difficult in terms of administration, hence companies need to be very innovative.”

He urged companies to keep reinventing themselves to keep up with changing times.

While acknowledging that Kenya has enough human capital, Mr Shah lauded Kenyans for being tech-savvy.

The Bidco chairman reiterated the importance of understanding customer needs.

“I would advise that you innovate fearlessly, with the digital space becoming much bigger. Think globally and act locally. There is a huge opportunity as the digital space has no borders, you can scale beyond the border,” Mr Shah advised startups.

Further, he said it is important for startups to comply with regulations and build partnerships and collaborations to scale up while ensuring they also empower their teams.

“To meet the needs of the customers, we have got to be more agile and cut all non-value-adding activities,” he said.

“If you look at the state of Kenya and Africa today, we are not making it easier for startups to come up and prosper,” he added, noting that governments are quick to reap from businesses through punitive taxation before they even mature.

Mr Shah said authorities do not offer startups enough incentives to scale up, such as tax holidays.

This is because the startup phase is often characterised by unpredictability, where market conditions, customer preferences, and even internal dynamics can shift rapidly.

Poor capital investment among micro small and medium enterprises (MSMEs) and their reluctance to do business with the government are among the reasons that stunt their growth.

The latest Kenya Economic Report (KER) published by a State-backed think tank also revealed that MSMEs do not trade with larger corporations whose scale is larger hence more profits.

Additionally, these businesses operate largely informally without any contractual arrangement which has been noted to cause instability in their operations.

The report by the Kenya Institute for Public Policy Research and Analysis (Kippra) notes that these small businesses are key to the economy, especially in the wholesale and retail sectors, and their role in facilitating operations in larger corporations.

The study underscores the importance of these enterprises in President William Ruto’s Bottom-up Economic Transformational Agenda (BETA).

Kippra executive director Dr Rose Ngugi said at the report's launch in September the failure of MSMEs trading with the government denies them a ready market.

“If you look at MSEs and who they are trading with, it is individuals or among themselves. Very little goes on with the government and medium and large enterprises,” she said during the report’s launch.

According to the report, MSMEs are integral to the wholesale and retail trade sector, facilitating the distribution and exchange of goods within local communities and across regions.

They also serve as key drivers of economic activity, leveraging their proximity to consumers to meet diverse market demands.

“MSMEs largely engage in trade with each other, with 13 per cent trading with each other and fostering a network of intra-MSME transactions that support local economies and promote entrepreneurship,” the report says.

The study also links contractual arrangements to productivity listing as well as cost management, predictability, optimisation of supply chain, resource allocation and enhancement of quality and consistency as the other advantages.

“These benefits collectively contribute to improved productivity within the firm,” the report says.

Solutech CEO Alexander Odhiambo during the company's 10th anniversary celebrations on Nov 15, 2024. [David Gichuru, Standard]

It is also documented that non-MSMEs, including larger businesses, are also involved in contractual arrangements with MSMEs but this relationship is largely dominated by

“Middlemen play a role in facilitating contractual arrangements for MSMEs. About 4.3 per cent of micro-enterprises, 5.9 per cent of small enterprises, and 12.5 per cent of medium enterprises receive inputs or orders through formal contracts with middlemen,” the report says.

The report says the presence of input contracts has a significant impact on productivity levels, stating that firms with input contracts have higher productivity.

“This suggests that the use of input contracts plays a crucial role in enhancing productivity within firms. Structured agreements are important in enhancing operational efficiency and output levels within businesses,” the report says.

Kippra says that firms with contractual arrangements with government entities have the highest productivity at 74,732.34 while firms with no contractual arrangements have lower productivity levels of 19,083.84.

“These findings highlight the importance of contractual arrangements in enhancing productivity across different types of entities, emphasizing the role of structured agreements in driving efficiency and output levels within various sectors,” the report says.

According to Solutech Chief Executive, Alexander Odhiambo African startups have the capacity to develop solutions to solve the continent's problems.   

Mr Odhiambo said building trust as a startup is a journey. “Companies value partnerships, and they want a solution provider that can partner with them in the journey,” he said.

“Customers need a partner who is going to be dynamic and agile with them. As the business environment changes, they need a partner who will be able to adapt to the changes with them.”  

As Kenya’s digital economy continues to gain ground, a World Bank report has shown that more needs to be done to prepare citizens and businesses for the economy, society and jobs of the future.

The report said for Kenya to keep pace with technological innovation and the growth of the global digital economy, it requires stronger digital foundations, such as new regulations and policy guidelines designed to support the digital transformation.