ruwad-april-12

FUNDING

New RO100mn SME Fund

VIEWPOINT

EMPLOYEE TO ENTREPRENEUR

RESEARCH

SQU STUDENTS’ REPORT

FOR THE NEXT GENERATION OF BUSINESS LEADERS

April - June 2012 Ruwad Founding Members:

Taking on the Challenge

7 Entrepreneurs share their experience of running a business against odds

Giving you the business support and finance you need to make your business a success.

Intilaaqah proragmme managed by GroFin “Al Ghadeer Mineral Water Bottling Factory is owned by Mr. Abdullah Al Sharji. The factory is located in Qurriyat 110 kilio meters far from Muscat. The project is funded by GroFin-Intilaaqah programme. The project is monitored by our business team who provide professional consultancy services to different SME entrepreneurs. It is one of the good projects that show the importance of developing industrial projects in Oman.�

www.intilaaqah.org Office No: 2469 7949 / 2469 7122 Fax No: 2469 7323

From The EditorIAL Desk

Learnings from Germany Recently a member of Ruwad’s team went for a familiarization trip to

Germany to study some of the key handmade manufacturing traditional businesses. Summing up his experience, he said: “It was amazing to see

how most of those businesses have evolved over not just years or decades but centuries by remaining connected to their business tradition and

constantly innovating to be in sync with changing market dynamics. Take the example of Faber-Castell. From a small time manufacturer of pencils in a small German town in the 19th century, it has grown to be a global

CONTENT Khalfan Al Rahbi Turki Al Balushi DESIGN Art Directors Sandesh S. Rangnekar Designers Khoula Rashid Al Wahaibi Aliya Saif Al Wahaibi Senior Photographer Rajesh Burman Basim Al Maharbi

Production Manager Govindaraj Ramesh Marketing Chandni Maniar CORPORATE Chief Executive Sandeep Sehgal Executive Vice President Alpana Roy Senior Business Support Executive Radha Kumar

leader with manufacturing facilities in over a dozen countries and sales in

practically every part of the planet. Their each generation has maintained the emphasis on product quality and expansion of product portfolio to keep the business growing. Take another example of Burmester Audiosysteme. This few decades old company known for very high quality audio systems has

embraced digital advancement with changing times without comprising on providing quality sound to the connoisseurs of music.”

He added, “After talking to more than half-a-dozen German entrepreneurs,

my learning is that whether you inherit a century old business or start your own enterprise from scratch, the basics of business management remains

the same. Keep the focus on quality services whether offering a product to a

customer or procuring from a supplier. Keep a tab on the consumer behavior and keep reviewing your product line to meet the changings needs of the market.”

Distribution United Media Services LLC Published by United Press & Publishing LLC PO Box 3305, Ruwi, Postal Code - 112 Muscat, Sultanate of Oman Tel: (968) 24700896, Fax: (968) 24707939 Email: akshay@umsoman.com All rights reserved. No part of this publication may be reproduced without the written permission of the publisher. The publisher does not accept responsibility for any loss occasioned to any person or organisation acting or refraining as a result of material in this publication. Alam al-Iktisaad Wal A’mal accepts no responsibility for advertising content.

Copyright © 2012 United Press & Publishing LLC Printed by Oman Printers Correspondence should be sent to: Ruwad, United Media Services PO Box 3305, Ruwi 112, Sultanate of Oman. Fax: (968)24707939

Perhaps that’s what makes German mark a seal of quality world over. How many products made in the GCC region could claim such high standards?

Time for an introspection! May be SMEs could take a lead in it.

An Alam al-Iktisaad Wal A’mal Presentation

CONTENTs FUNDING New RO100mn SME Fund. . . . . . 4 ColumnS BY Jonathan Cooper . . . . . . . . . 12 Hashim Al Hassani. . . . . . . . . . 13 YOUNG ENTREPRENEUR LOVE AT FIRST BITE. . . . . . . . . . . . 14

6

RESEARCH What’s hindering the growth of small grocery shops? . . . . . . . . . . . 16 Viewpoint EMPLOYEE TO ENTREPRENEUR A GIANT LEAP!. . . . . . . . . . . . . . . 18

Apr-jun 2012

1

COVER STORY Taking on the Challenge

The interactive workshop focusing on ‘Powerful leadership – The secret to achieve true business potential’ was conducted by PeopleSys lead trainer Gurunandan S. Savnal.

NEWS IN BRIEF

FATAL LEADERSHIP ERROR BankMuscat recently organised a workshop on entrepreneurship at the Bank’s head office. Khalid bin Mohammed Al Zubair, Chairman, SME Committee, Oman Chamber of Commerce & Industry, presided the workshop which evoked strong response from entrepreneurs. The interactive workshop focusing on ‘Powerful leadership – The secret to achieve true business potential’ was conducted by PeopleSys lead trainer Gurunandan S. Savnal. Savnal is the founder of PeopleSys, which specialises in consulting in strategic and risk management systems and management training.

Khalid bin Mohammed Al Zubair said: “The SME sector plays a key role in the country’s development, especially in terms of self-employment opportunities. Sound leadership is the foundation of success for any business establishment. Inspiring leadership can identify challenges ahead and draw up plans to face them. The OCCI has launched a study to identify challenges faced by entrepreneurs in small and medium enterprises.” The workshop focused on SME leadership and examined the reasons why these businesses are not achieving their full potential. The reasons for business failures include that entrepreneurs assume that if they understand the product and do a great job with their product, the business will take care of itself over time. It is a fatal leadership error. The workshop focused on the need to move from a “people dependent” business to a “strategy and system driven” business.

E&Y ANNOUNCES WINNERS OF ENTREPRENEUR AWARDS

Dr. Mohammed Al Barwani of MB Petroleum won Ernst & Young’s Entrepreneur of the Year Awards, Oman 2012. Dr Barwani will now have the privilege of representing Oman at the World Entrepreneur of The Year at Monte Carlo in June 2012. Dr Barwani said, “I am honoured to win such a prestigious award, and look forward to representing the Sultanate in the global competition. It will be fascinating to meet and interact with fellow entrepreneurs from all over the world.” In addition to the global competition, Ernst & Young had also conducted a local competition for the Emerging Entrepreneur of the Year. The winner in this category was Abdulla Ahmad Sulaiman Al Hadi of Gulf Mining Materials Co. The winners were selected by an independent panel of judges. The criteria on which the selection was based included entrepreneurial spirit, financial performance, service to the local community and international arena as well as personal integrity and influence.

UPCOMING EVENTS IN MUSCAT Oman Power & Water Summit 6-8 May 2012 Gulf Eco 15-17 May 2012 Weddex 2012 22-25 May 2012

Oman Transport Infrastructure Summit 10-12 September 2012 Oman Office Show 10-12 September 2012 Imtex Oman 17-19 September 2012

MedHealth & Wellness Exhibition 25-27 September 2012 Traffic Safety Expo 16-18 October 2012

Oman Healthcare Summit 16-18 October 2012 The Home Show 2012 18-20 December 2012

For the Next Generation of Business Leaders

2

The Minister announced that within the framework of the technical support for the SMEs, the Ministry will send 50 Omanis to various countries this year for training and qualification in the field of business, explaining that there is a form for the SMEs owners to be filled and sent to the ministry for assessment.

MOCI IN TOP GEAR

The minister announced the formation of a consultancy committee at the Directorate-General of SMEs affiliated to the Commerce and Industry Ministry.

The committee will listen to the SME owners and the challenges being faced by them and will find solutions. Sunaidy also touched on the importance of clear and sound definition for SMEs in co-operation with the respective departments to familiarise the owners of SMEs with the support and opportunities which could help them in upgrading their enterprises. He also highlighted the financial and technical support being offered by the government to the sector.

The minister also announced that within the framework of the technical support for the SMEs, the ministry will send 50 Omanis to various countries this year for training and qualification in the field of business, explaining that there is a form for the SMEs owners to be filled and sent to the ministry for assessment.

Salah bin Hilal al Maawali, DirectorGeneral of SMEs Development, said that the minister was keen to identify the proposals directly to come up with

positive solutions. Al Maawali added that 130 figures representing various enterprises attended the meeting during which they familiarised themselves with the programmes rendered by the ministry and the support provided for SMEs, affirming that this sector contributes remarkably to the national economy through their contribution to the GDP, employing Omanis and providing services to the society.

He said that the contribution of the SMEs to the GDP stands at 16 per cent. The meeting was attended by under-secretaries, directors-general and officials at the ministry, as well as members of Oman Chamber of Commerce and Industry (OCCI) concerned with SMEs sector. Other ‘special’ awards may be deliberated and awarded by the independent panel of judges. In this first event, an ‘Eminent Entrepreneur’ accolade is expected to be presented. Self-nominations are encouraged and there is no fee to enter. Application forms can be collected from Ernst & Young office in Muscat. Alternatively applicants may contact Ernst & Young office on 24559559 Extension 9506.

In a graduation ceremony, 48 women who were enrolled in a six-month tailoring programme, were feted and are now scheduled to receive requisite tools and machinery to begin their own businesses as professional dressmakers.

The newly groomed entrepreneurs join a growing body of small and medium enterprise (SME) ventures in the Sultanate that are projected to become a critical source of employment generation for the country’s largely

young population. The skills-training and tailoring paraphernalia were funded

by Oman LNG at the cost of RO63,300 as part of its focused social investment programme, and in this particular instance involved working with the ministries of Social Development and Manpower as overseers of the half-year apprenticeship, facilitated by Al Ebdaa Vocational Training Institute.

The women, all of whom were drawn from Sur, will be supplied with furniture,

tailoring machines and other staples used by garment-makers in the fashion industry. They will also be provided with regular transportation and shops with a year’s rent fully paid for by Oman LNG, which also has its operational base at Qalhat, Sur. Already, the four-dozen candidates are in line to receive further training in management and marketing, thus getting the full suite of skills-set and competencies for running a successful business.

The Small and Medium Enterprises (SMEs) are being given a top priority by the Ministry of Commerce & Industry if we go by the recent actions taken by the concerned minister. Addressing representatives of SMEs, Ali bin Masoud al Sunaidy, Minister of Commerce and Industry, said the Sultanate attaches great importance to this sector as all departments provide support for the sector which constitute 90 per cent of the trade institutions in the country.

Ali bin Masoud al Sunaidy

OMAN LNG FUNDS 48 DRESSMAKING ENTREPRENEURS

Apr-jun 2012

3

Despite the presence of mega corporations and large multinationals, SMEs contribute more than 50 per cent of the GDP in developed countries. In Oman, the share of the SME sector is a fairly satisfactory 23 per cent.

FUNDING

New RO100mn SME Fund The SME Development Fund would help existing SMEs to grow in scale and scope and also seek to ‘create’ new entrepreneurs and SMEs

W

ith the major building blocks in place, the Government is now focused on the SME sector, the growth of which is inextricably linked with the wealth distribution and employment generation objectives of Vision2020, Eighth Five-Year plan and Budget 2012 for the following reasons:

Employment generation

With a growing population of youth entering the work space, creation of employment is a key imperative. The SME sector has been found to create approximately 60 per cent of all employment in both high and middle income countries as the sector mainly uses labour rather than capital as the dominant factor of production.

Inclusive growth

The SME sector, typically, provides

employment avenues for workers with lower levels of education and skills compared to the large corporations that depend on sophisticated technology and automation. Similarly, large corporations are most often established and provide employment in concentrated pockets near large cities, ports, etc. SMEs on the other hand, can and do develop around local markets and thus create geographically distributed employment in more rural areas, where the need for employment is greater. Thus SMEs make growth more inclusive socially and geographically.

Distributed development

Geographically distributed SMEs, in addition to providing local employment, also tend to get involved and invest in the communities in which they develop and operate. Thus the benefits of development are more equitably and widely distributed, in terms of community development.

Economic Progress Despite the presence of mega corporations and large multinationals, SMEs contribute more than 50 per cent of the GDP in developed countries. In Oman, the share of the SME sector is a fairly satisfactory 23 per cent. However, there is a considerable potential for further development. With the creation of excellent infrastructure, the growth of tourism and industrial clusters and given the emergence of a large pool of educated youth, the conditions are ripe for the Sultanate to develop the SME sector to give a further fillip to GDP growth and employment generation.

Private sector SME Fund

To achieve this objective, the Government, with the help of PFD (Partnership for Development: an offset initiative) partners, is promoting ‘The SME Development Fund’, capitalised at RO100

For the Next Generation of Business Leaders

4

The Fund intends to ‘orient’ 500,000 students and

aspiring entrepreneurs, over the next 10 years. Of these, a significant majority will probably not progress to entrepreneurship; however, they would join the Omani workforce as better, more entrepreneurial employees.

million and set up in the private sector.

The SME Development Fund would help existing SMEs to grow in scale and scope and also seek to ‘create’ new entrepreneurs and SMEs. The capital for the Fund will be raised from pension funds and other investors in Oman and overseas; the PFD partners are arranging low interest loans of Euro 50 million and providing grants (first tranche of $30 million) to support the activities of the fund as described below:

The Four Point Plan

A survey carried, on behalf of the PFD partners confirmed the potential for developing the SME sector, identified key actions to be taken by the fund and revealed that such a fund would be viable.

Based on the findings of the survey and the prior experience of the CEO, a four point plan has been drawn up to address the needs of the SME sector. Accordingly, the Fund would seek to accomplish the following: Training: This will initially be provided to college and university students and later rolled out to schools and the community in general, to enhance the interest in and understanding of entrepreneurship. This will be in the form of a brief ‘Orientation’ seminar, to generate interest, offered to around 50,000 students annually.

A more detailed ‘Development of Entrepreneurship’ course, addressing the shortcomings identified among entrepreneurs, will be offered to candidates selected from the above.

The training will also focus on the soft aspects of management, like hard work, customer orientation and savings.

Entrepreneurship clubs would be

established and year round on-campus activities and contests are planned to support this initiative.

Nurturing: This will comprise accounting support, low cost software, monitoring and mentoring, to reinforce the training provided (point 1) and to support the post disbursal monitoring carried out by the lenders. The mentors will also assist the SMEs in accessing markets (see point 4 below).

Funding: It will be offered speedily and flexibly to address the biggest problem faced by SMEs, the non-availability of appropriate finance. Part of the grant finance is earmarked for subsidising interest charged to eligible SMEs Creating a conducive environment: Through interventions with the tender board, large companies, the Free Trade Zones and the Industrial Estates, it will ensure that registered SMEs are at least given favourable consideration when they quote. The Fund would consider empanelling SMEs in a transparent manner, to facilitate this exercise.

It is envisaged that activities number 1, 2 and 4 as well as the subsidy element of 3 be financed by the grant provided as a sinking fund by the PFD partners whereas, the lending (activity 3) would be carried out using the capital and debt raised by the Fund.

Structure

Accordingly, the SME Development Fund has been structured as two entities: a Fund registered with the Capital Markets Authority and a special purpose vehicle, registered as a company with the Ministry of Commerce. The latter,

Apr-jun 2012

5

called the National Company for Projects and Management (NCPM), will receive, manage and disburse the sinking-fund (Grant). The Fund, presently under formation, will raise the capital and debt and operate the elements of 4-point plan, using third party service providers as depicted below.

The fund will be managed by a Board, representing the interests of the investors, and NCPM will be governed by an Advisory Committee, constituted by the Ministry of Commerce & Industry (MOCI), to approve and oversee the utilisation of the sinking fund (Grant).

The Fund intends to ‘orient’ 500,000 students and aspiring entrepreneurs, over the next 10 years. Of these, a significant majority will probably not progress to entrepreneurship; however, they would join the Omani workforce as better, more entrepreneurial employees. The fund hopes to create 7,500 entrepreneurs (a mere 1.5 per cent) and to see some of them grow to be ‘large’ firms.

In doing so, it hopes to add over 50,000 new jobs, to bridge 10 per cent of the ‘missing middle’ and to create a ‘cluster’ of external capability in the form of ‘entrepreneurial’ educational institutions, training, accounting support, incubation, angel investing and a climate of SME development, which will in themselves become larger than the fund, for the achievement of the nation’s objectives.

The challenges are many and the help and cooperation of all stakeholders is being solicited.

Based on a press release issued by National Company for Projects and Management (NCPM).

We also lack the resources to provide

Omanis with the high salaries they expect. To meet my obligations towards the Omani manpower, I have obtained loans from my family members

COVER STORY

Taking on the

Challenge

Turki al Balushi spoke to a cross-section of entrepreneurs at the SME Exhibition & Conference held at Muscat recently to track their success journey, identify the challenges they have faced and their recommendations to drive the SME sector in Oman Building Trust

who required special designs that needs great attention and craftsmanship. Now we can also manufacture the products needed by our customers,” he said.

In 2000, Bader bin Nasser al Kalbani decided not to wait for too long for a job at one of the state administrative units.

He chose the other way i.e. to have his own venture. To turn his dream into a reality, he first started with establishing a company called Ibn al Aridh. His company is specialized in preparing promotional and stationary items for the different public and private sector organizations as well as individuals and sports teams. Over the years, his products have received a very positive response from the market and his customer data base as well as products have witnessed a great expansion.

“We have managed to meet the need of the market and introduced a number of products that were not supplied by any other company. The market has improved and it is much better than what it was when I started my venture.

We now have more capabilities that enables us to meet the growing needs of the market. To ensure controlling all the aspects of the services we render to our customers, we have established a workshop for the production of souvenirs and gifts. The aim of establishing this workshop was to overcome the challenges we were facing in meeting the needs of some clients

He added, “At the beginning, we faced many challenges on the administrative, financial and marketing fronts. In the beginning of our venture, we were much concerned with the viability of our project. We struggled in the early years and didn’t manage to make much profit.

We started making profits only after five years from starting the operations.

The biggest challenge we faced was the lack of resources to import the products from different countries. One of the other major issues we faced was the lack of trust by customers as many of them questioned our ability to procure the required products and services in a record time. We did our best to gain our customers’ confidence by providing them with high quality services.

Bader bin Nasser al Kalbani

“After establishing our presence in the market, our focus shifted to have a unique identity for our company. We did our best to make Ibn Al Aridh company the first choice for all customers dealing with us. To achieve this, we have launched many advertisement campaigns and participated in a number of exhibitions. We also promoted our

For the Next Generation of Business Leaders

6

After a year of running with hardly any profit, the project started making limited profits which were less than expected.

Over a period of time, the project has proved to be feasible

products and services through the Internet,” he said.

He further said, “Despite the success we have achieved, we are still facing great challenges in terms of manpower instability. We also lack the resources to provide Omanis with the high salaries they expect. To meet my obligations towards the Omani manpower, I have obtained loans from my family members and thanks to Allah I’ve managed to use these loans appropriately and now we are making profits.

“We don’t focus on profit generation alone as we are making efforts to help many Omani job seekers have stable source of income. Out of ten staff members in the company, four are Omanis. We have plans to increase this number as we are seriously considering introducing new and creative products and services. We will market these products in a different way after classifying them into different categories.”

Innovative Approach

Thuraya Abdullah al Jabri started a small venture called ‘Date Palm and Sweets’.

She provides her customers with Omani sweets that are made of high quality dates. What makes her products unique is the fact that they have flavours that meet the different tastes. She could not afford to lease a shop or a place for manufacture of her products therefore she used her house as her factory.

She purchased a small laboratory and provided it with the required equipment to prepare sweet products made of dates.

“Before starting my own venture, I made a simple study with the assistance of my sister who is a partner in this venture.

Thuraya Abdullah al Jabri

What makes our products unique despite the presence of so many products in the market is the fact that we prepare them with flavours that meet the different tastes. We also use the local dates from the al Dakhiliyah Governorate.

We select the high quality dates from the different date palm farms. In some cases, we have no other option but to increase the price of our products to maintain the quality level and meet the rising costs of quality dates. Despite the challenges we may face in procuring high quality local products, we don’t depend on the imported dates,” she said.

In response to a question about the capital of the project, she said that she started with only RO30. “After a year of running with hardly any profit, the project started making limited profits which were less than expected. Over a period of time, the project has proved to be feasible.”

Apr-jun 2012

7

Thuraya uses different means to market her products either though the Internet or publishing promotional materials or distributing business cards. She has plans to further diversify the wide range of products she offers to her customers.

Thuraya’s project is beneficial not only for her but for other small projects also such as the small projects that provide her with the required packing materials made of items such as paper and fronds. The choice of the packing material depends on the preference of the customer himself, she added.

As for the challenges facing her, Thuraya said that the lack of governmental support and financial resources are among the main problems facing her.

“Our small venture may not become viable during a short span of time therefore we need support to last for a long period. It is not necessary to limit the

We also managed to venture into the foreign markets

through participation in a number of exhibitions outside the Sultanate. The cost of participation in prominent exhibitions in places say in Germany may be high but the contracts we made there have been worthwhile.

COVER STORY

government subsidy to financial aspects because the government may provide non financial subsidy in different ways which may be in the form of giving preference to our projects when purchasing similar items from the market.

“We hope that we can have a foothold in places such as the Duty Free Shop at Muscat International Airport especially as they can get us visitors who would be interested in buying products made of high quality Omani dates. These products may be the ideal gifts from Oman. We have approached the airport management to provide us with an outlet there but unfortunately we were required to fulfill many tough requirements such as getting a certificate that our products are free from any additives.

“When we approached the Ministry of Commerce and Industry to get this certificate, they told us that you should meet this standard without explaining to us how we can do this. We therefore need proper guidance and some more facilities. In the past I had approached the Public Authority for Craft Industries to benefit from the frond products but they could not meet our needs due to time limitations,” she informed.

From Failure to Success

Bin Ahmed Projects, one of Bin Umair Group of Companies, is another interesting enterprise which has done quite well. The company was founded

by Hamoud al Hinai in the early 90s to manufacture pens. Though Hamoud was not a first generation businessman but he has taken the company to greater heights like a true entrepreneur without getting daunted by the risks. We spoke to his son Azhar bin Hamoud al Hinai who

Azhar bin Hamoud al Hinai

is the general manager of the company.

“We started with a capital of RO150,000 which was mostly raised through bank loans. We incurred losses in the beginning. The factory started operations using plastic materials in 1996. The new products helped us to offset the losses we had incurred in the beginning. From three products only initially, we now have more than 200 products that meet the different needs of the factories and homes as well. We also established United Plastic Industries, the producer of products known in the market as ‘Apter’. These polypropylene products are known for their ability to tolerate high temperature (up to 90 degrees) and pressure. The products are also durable and may be used for 15 years very efficiently,” he said.

“We have a full team in the factory as well as sales teams in Oman and

international market. We are very keen to develop the skills and capacities of our employees. At the moment, about 100 people work for the factory. We have plans to set up a new factory for the production of PVC products.

We also managed to venture into the foreign markets through participation in a number of exhibitions outside the Sultanate. The cost of participation in prominent exhibitions in places say in Germany may be high but the contracts we made there have been worthwhile.

We currently have contracts and customers in more than 30 countries now. We now produce the plastic packages of many products in and outside the Sultanate,” he added.

“The main challenge we face now is that the cost of our products are affected by the oil price in the international market.

The Omani workers also find some difficulty in acclimatizing with the nature

For the Next Generation of Business Leaders

8

ًWhile an expatriate worker may produce 2,000 pieces a day, the Omani worker may produce only 900 pieces a day despite getting probably a higher salary.

of work. They also lack punctuality. We also suffer from the low productivity of the Omani workforce. For example, while an expatriate worker may produce 2,000 pieces a day, the Omani worker may produce only 900 pieces a day despite getting probably a higher salary.

“Despite these challenges, I have the willingness to provide Omani youths with more job opportunities provided they show more enthusiasm to work.

I believe that there is a good scope for success in future if we ensure proper planning and keep adding to our products,” he concluded.

Expanding the Horizon

Khalid bin Said al Hinai, is the founder of the Arabian Mills which produces spices

under the name ‘Um Ali’. The company started operations in 2005 through a small shop. After a while, the shop was closed due to tough competition from malls and hypermarkets.

“After closing the shop due to the losses incurred by us, I decided to establish a mill for grinding spices. Together with an old friend of mine, I started the venture -- a mill with RO5,000 capital.

At a later stage, I managed to raise the capital to RO18,000. Currently, we have 8 workers; most of them work on a part time basis,” he said.

“Despite the progress made by us with an expanded product portfolio which now includes coffee and nuts also besides spices, still we have not reached the level

Khalid bin Said al Hinai

Apr-jun 2012

9

of making profits from our operations.

We try to utilize the revenue generated in expanding it. After the grinded items are packed, we send and distribute them to shops in different wilayats. The response to our products in the market is very encouraging and our products are now known for their high quality.

“We are now preparing brochures and promotional materials on our products.

This move will add momentum to our marketing efforts. We also have plans to take part in some exhibitions that will help us to promote our products through direct contact with suppliers and customers. I believe that participation in exhibitions provide great benefits to customers and companies as well,” he added.

“I believe that good packaging plays an important role in attracting customers and enhancing your brand image especially in light of the cutthroat competition in the foodstuff market. While competition is the main challenge for us, we take this competition as a driving force to ensure providing customers with better, high quality services at affordable rates.

Unfortunately, some mills produce products that are low in price but they also offer lower quality.

“We also find difficulty in accessing the big markets. For example, the shopping malls require us to pay high amount to offer our products there. We have approached a number of agencies and requested them to support us in having a foothold at malls and hypermarkets as this presence will have a great impact in enhancing our sales and brand image in the market,” he informed.

Public and major private sector

companies should extend their full support to ensure the growth of this sector which has the potential to provide large number of job opportunities.

COVER STORY

developing their talents,” he added.

As for the revenues, he said, “Though the IT services are very costly in Oman, we are making good revenues that covers our operational costs atleast. We need to do more efforts to do more than just achieving breakeven and this will be achieved mainly through diversifying our products and ensuring sound management of our operations.”

Ghalib bin Ali bin Helal Al Ibri

IT Challenger Ghalib bin Ali bin Helal Al Ibri is the founder of Rafed Communication Tech located in Knowledge Oasis Muscat (KOM). The company, one of the ventures hosted by the Knowledge Mine, provides different IT services, computer programme developments, SMS services, web design, graphics design etc.

“The ideation on the project started while studying at the university as we were designing many IT & Communication programmes before the spread of social networking sites. We promoted these ideas in the exhibitions we used to take part. After university, we started thinking seriously of converting such dreams and ideas into reality. We tried to obtain a good source of finance,” Ghalib said.

In addition, we were exempted from paying rent for six months and were also provided with internet and phone services at marginal rates. We have tried to make the most of this opportunity by venturing into website design. To this end , we have signed an agreement with a Saudi company also,” he said.

“The company provides IT & Communication students with valuable training opportunities that help them in

“Filled with great hopes and enthusiasm, we took part in the ‘Best Business Idea’ competition organized by KOM – The Knowledge Mine. We presented a project based on rendering services through SMS. The project won the second place in the competition and we also got RO5,000.

“SMEs play an important role in the growth of our national economy, therefore public and major private sector companies should extend their full support to ensure the growth of this sector which has the potential to provide large number of job opportunities. Many developed countries offer support to this vital sector by providing training, counseling and funding,” he said.

Betting Big on IT

“We participated in the Big Business Idea Competition in 2010 and managed to get the support of KOM for our business idea. After completing simple procedures related to the registration

Abdul Rahman al Abri For the Next Generation of Business Leaders

10

Public organizations focuses only on

pricing. We have some difficulty in taking part in the public tenders because we have to pay high fees for the tender documents

of our company with the Ministry of Commerce and Industry and OCCI, we started our operations. Our main focus in the beginning was on how to build the brand image of the company. We did this through the internet, field visits and social networking. The number of staff in the company is currently 10; four of them are full time and six are part time only,” said Abdul Rahman al Abri, founder of Graphics LLC.

“The company provides a wide range of services including 2D & 3D graphics, publications, prints, different designs, advertisements and book design. The company has generated good revenues in the past and now we are making considerable net profit. In the beginning, we spent a lot of money in establishing the project. The small and short-period projects may not generate profits for us but we are using such projects as mediums to attract big projects such as preparing the designs for festivals including Muscat Festival,” he further said.

“Initially, the marketing efforts were focused on direct contact with customers through friends and relatives as well as through social networks. We have also organized some courses on photography which were free of charge or at marginal cost,” he added.

capabilities to gain the confidence of our customers,” he concluded.

Creative Thinking

Yousef Thani, the founder of Inter Design, a company located at KOM spoke on his venture which started from scratch. He had to borrow money from family members to do the commercial registration of the company. “I was sitting with a number of friends who decided to be entrepreneurs and not to wait for public jobs. In the beginning, we faced lot of difficulties but managed with determination and strong will to turn our dreams into reality,” he said.

Yousef calls upon the public and private organizations to double their efforts to promote entrepreneurship culture among various sectors of society especially at an early stage. He believes that instilling entrepreneurship culture should start at school and should be supported by family members. He believes that if the process starts at school, the results would be great and the entrepreneurship culture would

“At the moment, SMEs don’t receive direct financial support. The private sector plays an important role in the growth of SMEs as they appreciate the high quality products. This is not the case with public organizations which focuses only on pricing. We have some difficulty in taking part in the public tenders because we have to pay high fees for the tender documents. We are making efforts to develop our

be integrated in the society. He also believes that growth depends mainly on constant learning, making use of the available opportunities, enhancing skills and developing services and products constantly to meet the changing demands of the customers.

“I call upon the youth to establish their own ventures and find ways to enter into business partnerships with the private and public sector organizations.

I also believe that promoting the entrepreneurship culture will play an important role in changing many misconceptions and work culture.

It is very important to start this entrepreneurship culture at different stages of the education.

“We should also bear in mind that teaching entrepreneurship culture depends not only on training on how to conduct feasibility studies and manage projects but also include how to turn challenges into real opportunities through creative thinking and innovation,” he concluded.

Yousef Thani

Apr-jun 2012

11

Jonathan Cooper,

General Manager- GroFin, Oman

Column

EQUITY INVESTMENT –

A NEW OPPORTUNITY FOR OMANI ENTREPRENEURS Equity capital allows a company to reinvest its cash flow to grow the company, as opposed to using it to repay debt

T

here are several different financing methods available to small businesses. These include bank loans, leases, overdrafts, and lines of credit. A less common method in Oman is the use of external equity financing, ie. having a third party invest capital into your company, in exchange for a share of the ownership of the company.

There are several advantages and disadvantages to equity financing, and it is certainly not an option that will be appealing to everyone. But, for the right type of company and the right type of entrepreneur, it may be the type of financing that allows the company to achieve its full potential.

Equity capital has many advantages. It is much more patient then debt, as it does not need to be repaid based upon a rigid schedule. This allows a company to reinvest its cash flow to grow the company, as opposed to using it to repay debt.

Equity is a risk sharing investment, whereby all of the company owners share proportionately in the gains, or losses, of the company. This makes it compliant with the principles of Islamic Finance. Â An equity investment does not require collateral coverage, assets

pledges, or personal guarantees. This can be very appropriate for companies with very little assets like IT firms, internet companies, media companies, and other forms of asset-light businesses.

The new partner in the company should be able to add value beyond finance, by assisting the owners or managers with business planning, strategic planning, business development, and in some cases, operational management.

By increasing a company’s equity base, the company will gain additional credibility with other finance institutions such as banks and leasing firms, thereby making it easier to obtain debt financing if the company wishes to do so in the future.

If working with a professional investment company as an equity partner, these value added principles should be standard; at GroFin, we work extensively with our portfolio companies and equity partners to ensure their success, and thereby ensuring our own.

At the same time, there are other considerations regarding equity investment. By allowing a new partner into the company, the previous owners

must be willing to share some decision making authority (especially at the shareholder level), as well as present information about the company in a timely and transparent manner.

The new partner may at some point wish to sell their shares in the company (this is especially true for professional investment companies). This may create issues at the time of the share sale as to what will be the valuation of the company, who will purchase the shares, and how will this affect the on-going operations of the company.

The valuation of the firm at the time of investment must be calculated and agreed to by the parties, which may require a prolonged analysis of the company.

At GroFin, in addition to the debt financing that we provide to our clients, we have spent the past several months creating specific equity products for our clients, and expect to complete our first equity investment in the coming months. Please feel free to contact us for a meeting to discuss equity or debt financing in more detail, and how we can work together to help your company achieve its full potential.

For the Next Generation of Business Leaders

12

Hashim Al Hassani,

Deputy General Manager, Shell Intilaaqah

Importance of

Business Plan If you intend to seek financing for your business, you must have a business plan

A

business plan is prepared to illustrate the idea of your business. No matter how small your business is, creating a business plan is always a good idea. A business plan that includes thorough market research and analysis about your industry will help you identify your vision, costs, goals and obstacles. If you intend to seek financing for your business, you must have a business plan.

Determine Profits

There isn’t much point in starting a business that won’t be profitable. A business plan that lays out details about your liabilities, assets and cost of goods sold can help you determine if your business can actually turn into a profit.

Lenders or venture capitalists may not consider taking a risk on a business that cannot make a profit. Nor you should do.

Estimate Start-Up Costs

A business plan should include a good, if not exact, estimate of what you expect your start-up or expansion costs to be.

This will help you determine how much money you will need from a lender/ venture capitalists.

Marketing

Lenders/venture capitalists want to

know exactly how their money will be used. Your business plan must include a detailed marketing campaign that shows how you intend to spend each riyal on marketing your business and identify a strong management team. They may provide a business consultancy in this regard, if you wish so.

Investors want to know if your management team can handle the day-to-day challenges of the business.

A business plan that includes brief biographies of your team, as well as their skills and what they intend to bring to the business is an important detail for investors.

Mergers

Business plan is also for non-start-up companies. For instance, if you consider a merger with other company, a business plan that details exactly how you intend to merge both businesses is a necessity; especially, at the time you intend to get debt/equity financing. The fact is that your profitable business is not a guarantee alone that the merger will be taking place.

Considerations

While a business plan is extremely important when seeking financing, the most important factor is you.

Apr-jun 2012

13

Your confidence in your business and your ability to plan, combined with a thorough business plan, will significantly boost your chances/opportunities of acquiring the funds.

In conclusion

Most potential funders wish to see a business plan as a first step in deciding whether or not to invest. However, much of the literature on how to write a business plan fails to emphasize that different types of funders look at business plans from different angles.

Business plan should highlight different investment criteria of bankers, venture capital fund managers and business angels.

For example, bankers look and stress on the financial aspects of the proposal; equity investors, venture capital fund managers and business angels emphasize on stock market and finance issues. Business angels (informal investor) give more emphasis on the entrepreneurs and ‘investor fit’ considerations.

The implication for entrepreneurs is that they must customize their business plan according to whether they are seeking funding from a bank, venture capital fund or business angel.

Khalid has carefully designed the 220+ squared meter space and has steered the engineering of the detailed and

innovative menu after months of detailed evaluation, thus offering a fusion of different dishes and cuisines all under one roof.

YOUNG ENTREPRENEUR

LOVE AT FIRST BITE A young Omani entrepreneur has recently launched Oman’s first themed lounge

at First Bite, where the food is to dine for.

And as always, we promise you a delicious experience,” said Khalid addressing the guests at the opening ceremony.

“Love at First Bite”, Oman’s first themed Lounge, was inaugurated recently in an event held at the Lounge under the patronage of HE Salim Bin Ismail Al Suwaid, Member of the State Council.

Love at First Bite aims at providing a dining experience that brings together three different themed settings: A Sicilian walkway with street lights and a wishing well, a brightly coloured 1001 Arabian night’s tale dining area as well as a French palace lounge and bedroom.

Love at First Bite is owned by Khalid Al Suwaid, a young 22-year old Omani entrepreneur, who has studied in Australia and decided to bring a new experience to the restaurant, entertainment and hospitality industry in Oman. Khalid has carefully designed

the 220+ squared meter space and has steered the engineering of the detailed and innovative menu after months of detailed evaluation, thus offering a fusion of different dishes and cuisines all under one roof. The project is one of many other businesses supported by Sharakah.

“Over the past 20 months, we have paid careful attention to detail in every step to ensure that Love at First Bite redefines the concept of dining. As love knows no boundaries, our food comes from all over the world. Dining at Love at First Bite is an experience from the moment you walk into those doors, you are invited to unwind and relax at the area of your choice. Amidst, luxurious seating arrangements and a vibrant atmosphere, we look forward to meeting you at Love

HE Salim Bin Ismail Al Suwaid said, “I have seen this project from its initiation stage to its inauguration; it is truly remarkable to be part of such a beautiful project that once again proves the innovation and capabilities that Oman’s youth has to offer with the support and wisdom of His Majesty.”

Complimenting Khalid, Abdullah Al Jufaili, Sharakah’s General Manager said, “We are in the lookout for businesses in the service industry that are innovative and unique. Our analyses of the market indicate that there is a growing trend towards dining and experimenting different cuisine, thus Love at first Bite has a growing market to serve.”

Love at First Bite is located in Shatti Al Qurum (in the same Building of Bank of Beirut), opened every day for those who want to experience Love at First Bite!

For more information, visit www. bitelounge.com.

For the Next Generation of Business Leaders

14

REGISTER NOW KINGDOM OF BAHRAIN

Book your place today at the inaugural GCC Future Entrepreneurs Forum - a unique forum for Policy-makers, Ministries, Economic Development groups and Entrepreneurs

Meet GCC & International Experts presenting on : • Promoting Trade Initiatives • Developing SME’s and Entrepreneurs • Export Business promotion • Business Opportunities • SME Financing

• Support mechanisims for future entrepreneurs • Specific training programme on Business Incubation Management • GCC models for SME growth • Future Women Entrepreneurs

To book a seat, visit: www.gccfutureentrepreneurs.com For any inquiries, email: info@gccfutureentrepreneurs.com

The internal environment refers to the factors related to the shop owner and management, while the external refers to customers and suppliers.

RESEARCH

What’s hindering the growth of small grocery shops?

A research survey done by Sultan Qaboos University (SQU) students looks at the major factors affecting the growth of neighbourhood grocery shops

Ahmed Hamed Ali Al Ambouri, Yahya Salim Sulaiman Al Fahdi, Waleed Ali Khatem Al Julandani

A

research paper prepared by the students of Sultan Qaboos University earned the second place in a small and medium enterprises (SME) research competition.

It discusses the grocery shops’ business and challenges and the development mechanisms for them. The study reviews the reasons hindering the progress

(Left to right), the authors of the report

of grocery shops; hence, it is divided in two parts -- internal and external environment. According to the study, the internal environment refers to the factors related to the shop owner and management, while the external refers to customers and suppliers.

The internal factors include lack of

funding, difficulty in running shops, lack of products’ diversity and organization, which turns the customer away from those shops. As for the external factors, they include unattractive project location, price variance, and difficulty in finding suppliers. The paper proposes a set of recommendations to overcome this problem, including diversity of products For the Next Generation of Business Leaders

16

Select a proper location to ensure it is at a safe

distance from floods etc. and the location should be commercially viable to support the business. Thus, the shop owners should conduct a long-term study on the location.

to be in line with customer needs. The shop owners should maintain a small amount of cash reserve to meet the challenge during economic downturn and conclude contracts or agreements with suppliers. In addition, the shop owners should prepare an effective cost-benefit plan and a written crisis management plan after consulting relevant specialists.

“The paper is divided into several subjectrelated aspects. In addition, it discusses several important points, including reasons behind shops failure. As well, we have conducted a study on reasons limiting the success of grocery shops, and finally, we have a set of recommendations and solutions to overcome the challenges,” stated the authors.

They added, “We have reviewed all related reference information while preparing the paper to support us in achieving the research target. It helps in understanding the whole picture and directs our study towards the set targets, through setting proper assumptions and queries.”

In the beginning, the paper discusses the SME definition and its variance from one country to the other. It states that the definition is easy to be described yet difficult to define properly on the regional and international level. That is due to different social and economic structures, in addition to different standards used to identify project basis, for example the statistical data used in defining SME. However, the shortage of such data caused discrepancies in SME definition, yet specialists rely on two methods for definition -- the first depends on the quality features

that show the main differences among projects’ scope, such as governance, ownership, and production methods.

The second relies on quantitative indicators such as staff and capital. In Oman, the monitoring and supervisory committee for SME Development, headed by the Ministry of Commerce and Industry undersecretary, defines Small Enterprises as the projects where the workforce doesn’t exceed 10 workers and Medium Enterprises as the projects where the workforce varies from 10-99 workers.

The authors stated, “Through our interviews with shop owners, we realized that some factors go back to the internal structure. First is the impatience. Rushing for profit is one of the reasons that contributes to the failure of many grocery shops as many owners made it clear that they are after profit only. Through our interaction with them, we concluded that those owners seeking profit would shut down their shop if they failed to achieve their goal.

“The second factor is bad customer relationship. Some workers at these shops treat customers improperly.

We also found that some shops don’t provide the required merchandise which causes dissatisfaction to the customer.

Eventually, customers refrain from buying from such shops.

“The third factor is difficulty in running projects. One of the aspects pertaining to such difficulty is lack of selfaccountability. In other words, ensuring implementation of tasks and making sure that workers understand their roles properly. There was a lack of financial records say making notes of the cash

Apr-jun 2012

17

flow of the shop, especially if selling on credit. As a result, the risk of financial fraud is very high. There was lack of sales records, and current and future customers’ records. The shops lack efficiency as they may purchase products that are no longer desired by customers.”

The research paper has made several recommendations. According to the authors, they include:

Diversify and expand product portfolio to meet all customer requirements. The shop owners should be careful not to over diversify to avoid high project costs.

Hence, such expansion should factor in key customer related parameters such as age, lifestyle and income, etc. to arrive at the composition of the product portfolio.

Shop owners should promote their shops in and out of their area. Such promotions should be done with in a cost efficient manner say posting advertisements in free magazines. Conclude contracts/ agreements with suppliers to ensure that the latter delivers the required products on time.

An effective pricing policy in line with applied laws and market inflation rate, should be set.

Select a proper location to ensure it is at a safe distance from floods etc. and the location should be commercially viable to support the business. Thus, the shop owners should conduct a long-term study on the location.

Conduct short/long-term feasibility study for the project. Develop a crisis management plan after consulting the specialists.

Kakul Agha is an Assistant Head, Department of Postgraduate Studies & Research, Middle East College of Information Technology (MECIT)

Viewpoint

EMPLOYEE TO ENTREPRENEUR -

A GIANT LEAP!

The change of an individual’s thought process from aspiring to become an employee to thinking and planning to become an entrepreneur is something worth debating on Recently, the world has started talking about the concept and practice of entrepreneurship. Why suddenly now?

Of course, we all know that the world is moving towards loss of jobs and ever increasing degradation of the economic scenario throughout the world. In the given situation, the future of not only organisations but individual employees is a question mark.

In the given circumstances, all the top leaders are instigating the idea of entrepreneurship. Leading economies are motivating people to set up their own ventures hence reducing dependence on public or private sector jobs. Even the Ministry of Higher Education in the Sultanate of Oman is talking about the importance of engraving components of entrepreneurship in the higher education curriculum within the country. They even conducted a three day conference inviting international guests and speakers to emphasize on this very crucial and inevitably important topic.

The change of an individual’s thought process from aspiring to become an employee to thinking and planning to become an entrepreneur is something

worth mentioning in this article. All of us are brought up or bring up our children to become a great employee or motivate them to seek high profile, well salaried jobs in reputed firms. Not even one in a hundred would tell his child to aspire for a career as an entrepreneur.

This leads us to behave and think as workers and never as innovators and leaders. An entrepreneur is all about thinking differently and reaching to new heights after taking risks. Hence we are talking of change here!

Entrepreneurship can bring a lot of change in our world. It helps benefit not only our own selves but also our immediate society and the country at large. It helps generate job for self and enables employment of many others as well. It has been an important tool in the past and owing to entrepreneurship, we see huge multi-billion dollar organisations of today, namely Google, Apple, Facebook, Amazon, Bahwan and Khimji which stand evidence to how an entrepreneur can grow and bloom his venture into a great institution.

Oman is burdened by the heavy dependence of individuals on the public sector. Even though there are private organisations within the sultanate,

individuals look forward to getting jobs and settling down in life with salaries coming to their accounts from the government. However in the current scenario, we need individuals who are innovative and come up to start a venture, set up their business, expand it to a considerable size and show the ability to employ other individuals seeking jobs. Institutions like Sanad, Intilaaqah, and Sharakah are playing a crucial role in developing new entrepreneurs by providing training as well as financial support. Hence, Oman is witnessing a change - a new level playing field is in the making – for the “to be entrepreneurs”!

In the given circumstances, all the top leaders are instigating the idea of entrepreneurship.

Leading economies are motivating people to set up their own ventures hence reducing dependence on public or private sector jobs For the Next Generation of Business Leaders

18