2.1 – Taking the Leap: How to Walk Muslims through Business Creation

2.1.0  Introduction

In this section, I leverage on the class discussion I had with the participants of the study for proper presentation of how individuals and Islamic organisations should walk Muslims through the nitty-gritty of creating a business.

2.1.1 Understanding Concept and Idea

A concept is a plan or an intention that is not specific, but arises as generalisation from the contact we had with living and non-living things. In the business world, we normally talk about business concept. I believe we all know the meaning of business. So, when we have a business concept, we are saying business intention that someone is yet to clarify through qualitative and quantitative methods. Our mindset, education, level of preparation and planning usually determine the extent to which we generate concepts. People who love reading and observing their environment often see business concepts and turned them into ideas. Someone may say he likes starting a food business. This is a concept, not a business idea. It becomes an idea when it has been further broken down into a manageable unit and associated with luck, dreams, hope and creativity which could lead to financial gain. In specific terms, a product or service needs to emanate from concept in order to make it a business idea.

Like we have in cross-over markets (non-Muslim markets), in Muslim markets, there are a lot of businesses. Concepts include both food and non-food items. We also have Islamic Banking, Securities and Bonds, Travels and Tourism, Supply Chain and Logistics, Education and Training as well as Food Services. My recent research reveals that this Ummah needs businesses that would serve them in the areas of Confectionery, Canned and Frozen Food, Dairy Produce, Bakery Products, Organic Food, Herbal Products, Beverages, among others. I also discovered that Cosmetics, Toiletries, Beauty products, Pharmaceuticals, Leather products, Perfumes, Fashion and so on are the most non-food products the Ummah needs daily.

In Sha Allah (By Allah’s grace), in our subsequent discussion, I will analyse some business opportunities in one or two concepts mentioned. I believe it is high time Muslim men, women and youths took the leap. Population and understanding of what we should consume or not are the key drivers of the Islamic market. By 2020, global Muslim consumer spending on food and lifestyle would reach $2.6 trillion, according to a recent study. Coming down to Nigeria, if we place every Muslim spending on $2 purchasing power parity per day in Oyo state and with the current projected population of 15 million and 90.6% Muslims, Islamic total addressable market is $27.1 million.

2.1.2 Idea Refinement

In our last discussion, I talked about concept and idea. In this module, I will discuss how an idea could be refined into a feasible and viable business. By idea refinement, we need to examine idea and make sure it has benefits, not attributes or features that would help people in running their life smoothly. Apart from the customer perspective of refining a business idea, you should also make sure such idea benefits you and stakeholders. In general terms, idea refinement is a process of opening up to new horizons and contents based on the resources available, including time, money and manpower.

Dressing is one of the lifestyles that Muslims prioritise everyday. This falls within the fashion concept I identified in the previous discussion. It is quite unfortunate that we have not seen the current legal breakthrough in some south-western states on the part of the Muslims that our females at high schools should wear Hijab. We have not also considered the exponential emergence of Muslim societies in the last two decades which require that followers should dress in one particular style aligned with Islamic principles as a business idea worth pursuing. Most of the Muslim women’s clothes are being produced by non-Muslims because they see our way of dressing and huge population as opportunities. A recent study by Pew Research Centre reveals that Muslim’s household size is higher than those who practise Christianity and other religions. Averagely, a Muslim’s household has four children whereas Christian’s household has 2 to 3 children.

Apart from the fashion concept, when we look at Islamic home décor, nothing is yet to be done by us. When I observed many Muslim’s households, I discovered that emphasis was not on the Islamic principles of setting up our rooms. I see this as an opportunity for those who have skills and passion for décor. By virtual of population growth with the tendency of many Muslim men having more than one wife, Islamic home décor’s market is huge, especially in northern states and some states such as Osun and Oyo in south-west region.

To discover business ideas inherent in other concepts, we need to identify and describe the needs or problems, know the category of Ummah who have the needs or problems and how they are currently solving the problems or getting the needs. Our proposed solutions and how they would solve the needs or problems differently should be described. The final stage in discovering business idea is to target consumer’s readiness to pay for the solutions. This is better determined through pricing research which should be incorporated into market research meant to develop a strategic business plan.

WHAT THINKING ABOUT

“Ihram” (white cotton robe) worn by the Muslim faithful during the pilgrimage are provided mostly by Chinese companies and other non-Muslim outfits; they smile to the bank yearly.”

What are your thoughts?

2.1.3 Creating Value

 “Whosoever sells a defective product without disclosing its defect to the purchaser, shall earn the permanent anger of Almighty Allah and the angels continuously curse such a person.” [Hadith, Ibn-e-Majah]

With this hadith, I welcome you all to module three. As much as possible, our discussion will centre on this hadith. This becomes imperative because I found it as one of the appropriate teachings that enjoin us to be moderate in our dealings with others. Creating and capturing values are the main topics I will be discussing. These are within what Islam preaches- that we should add value to our life by engaging in lawful businesses as well as that of others. In other words, Islam wants all conducts to be value-oriented while all tendencies towards disvalue should be shunned and thwarted.

As a business owner, you are expected to create products or services that satisfy consumers’ needs in ways different from your competitors. This is creating value before you can actually capture it. In specific terms, value creation encompasses innovative features, benefits and patterns consumers are using to harness or access it {performance}. When a company is built on personal brand mechanism, passion, existing skills and abilities become handy in providing value in the form of unique products and services to others.

Your product or service must be designed in a way that buyers would have reasons not to buy from your competitors. This will give you the greatest advantage in the market. To create unique value, you need to take advantage of new materials, technologies, and processes. Uber is creating value using technologies and seamless processes. However, some consumers consider sensible products at affordable prices as value while it means paying more to get more to some.If we really want to capture value –make profits from our products or services, value must be created; when this does not happen dissatisfied customers will not return to use our service or product again. In our next module, I will discuss hints for capturing value you have created.

2.1.4 Capturing Value

Now that we have understood value creation, how do we make sense from the value we have created? Many entrepreneurs lack general and personalized knowledge of capturing value. This has made gaining substantial profit and revenue margins difficult in short- and long-term periods. In Sha Allah, when we get to business model creation, I will delve more on sources of value capturing also known as revenue sources.

Value capturing is better understood in qualitative and quantitative terms. The two go together in a sizeable value capturing. For instance, failure to resolve customer issues instantly has indirect impact in capturing value quantitatively. A lot of consumers would never patronise a business that treated them badly two or three times.  Quantitative value capturing focuses on price and volume of a product or service bought by a consumer or client. While using quantitative approach, efforts should be made towards realisation of market size, purchase frequency, among others. A typical example of capturing value quantitatively is to consider a buyer who repurchases your product often and in large quantity through price cut. So, you are expected to play the game of number –high volume, low margin. However, many businesses emphasise constant review of their price mechanism with a view to capturing more value despite that qualitative means usually have significant effect on profitability.

No matter what, your intent to capture value should be premised on the answers you have for these questions: what value does your product or service create for them? What does it cost them–in terms of price plus any ancillary costs of ownership or usage (e.g., how much of their time do they have to devote to buying or using your product or service)?

Selected Tactics for Capturing Value

• The selling price determines the amount of value that is “captured” by the firm—that contributes to the firm’s profits.  (Producer Surplus)
• You can’t capture value without creating it, but you can capture more value while creating less. When a monopolist lowers prices “too much,” it creates more value (since the benefits of the extra units is > the costs), but captures less (since the price has gone below the profit maximizing level).
• When markets are highly competitive, one must increase profits through value creation.  Trying to capture more value without creating more value will make many customers go to competitors.

THINKING ABOUT SESSION

With 7.5 million population (20% Muslim), Togo was ranked 10th as a performing country for Islamic Modest Fashion Sector of the World Islamic Economy while Nigeria with over 191 million people and 51% Muslims is absent from the ranking.

What are your thoughts?

From the under-listed 50 Islamic-orientated Start-Up Business Ideas, choose two and explain how you would create and capture values from them.

1. Food Van/Truck Delivery
2. Personalised Holy Qur’aans and Islamic souvenirs
3. Catering services
4. Wedding planning
5. Digital self-publishing
6. Blogging
7. Bookshop
8. Halaal Life Coaching
9. Fitness Consulting
10. Nutrition consulting
11. Medical Laboratory
12. Private Religious Tutoring
13. Arabic Language Skills Teaching via online platform
14. Islamic Greeting Cards
15. Hijab Clothing Store
16. Sports Hijabs
17. Travel Agency
18. Fashion Designer
19. Healthy Snack
20. Handyman Services; painting, plumbing, electrification
21. Cooking Classes; Halaal dishes and foods
22. Mobile Hairdressing Service
23. Child Care Service
24. Virtual Assistant
25. Research and Development
26. Home decor
27. Cleaning Services; floor, carpet, furniture
28. Housing Development
29. Tissue Paper Production
30. Halaal Parks and Recreation Centre
31. Halaal Food Ingredients
32. Bio-Fertilizer Production
33. Fruit Packaging and Production
34. GPS Tracker and Survival Kit Production for Pilgrims
35. Social Development Support
36. Shari’ah-Compliant Pensions
37. Infrastructure Financing
38. Halaal Organic Food
39. Retail eCommerce
40. Fintech and Crowd funding
41. Fruit Juice Production
42. Online Meal Takeout and delivery
43. Nutrition Bar
44. Baby Food Production
45. Meat Snacks
46. Fashion Entrepreneurs Incubation
47. Fashion Design Schools
48. Animation
49. Shari’ah-compliant advertising
50. Educational Content Development, Design and Printing

2.1.5 Business Model

I welcome you all to a single module which would help everyone to understand how to progress from having a business idea to a framework or model. Business framework or model is a device that gives stories and figures behind how you would explore a market by gradually constructing a network of consumers and partners. By stories and figures, business model explains who your customers are and how you plan to make profit by providing them with value. To gain the two benefits –stories and figures-, your model must be simple, relevant and understandable and cover five core areas of your business: offer, customers, infrastructure, financial viability and financing details. Without business model, your thoughts and ideas would not be straight and focused. As a start-up, business model remains a key means to guide your business plan development. In Sha Allah, in week four, I will discuss techniques for writing a strategic business plan. Before then, here are the nine building blocks of a business model:

1. Customer Segments:In this block, you should be able to pinpoint which segment of the total addressable market (TAM) you intend to serve. Your segments could be one or all of mass market (e.g. Consumer products); niche market (e.g. Luxury items); diversified market (e.g. Amazon) and multi-sided markets (e.g. Credit cards). These classifications have been regarded by many business developers as generic types. A more simple and novel way is to divide your market based on geography, demographics and psychographics of the targeted users. By geography, city, village, town, urban or rural settlements, among others could be used. Age and gender are the most indicators for segmenting customers using demographic means. For the psychographics, we are referring to what consumers’ values are and what their lifestyles favour more. In fact, psychographics guides entrepreneurs to understand consumers’ buying behaviour before the business starts.
2. Value Propositions: This block should remind everyone about week two’s topic, where I discussed why you should create value and capture it qualitatively and quantitatively. This is where you need to specify the needs or problem(s) you intend to solve with value propositions. Your propositions must interact with customer segments. Your value propositions might be that you want to serve people’s needs with superior customer service coupled with low price and reducing risk associated with the way consumers are presently solving their needs. You could equally feel that consumers are being denied of effective performance from present products, convenience or usability and accessibility to the products and decide to have one or two of them as your value propositions. For the low-price proposition, Glo per seconds billing readily comes to mind. The network provider challenged MTN’s per minute billing. This is one of the values that attracted many to the Glo’s products and services.
3. Channels: Now that you have proposed values, how would you deliver it to the segments you first identified in the first block? This block gives the answer. Basically, your propositions are expected to be communicated through various communication channels and distributed physically (if necessary). When you are expected to explore physical channel, sales force, personalised outlets, partner stores and wholesaler are the possible channels.
4. Customer Relationships: This block should encompass how you wanted to behave towards your customers and maintain them. Available relationships include personal assistance, dedicated personal assistance, self-service, automated service, customer communities and co-creation. Dell Computer is making waves today because Michael Dell, the founder chose to sell directly to the end-users. Dell uses dedicated personal assistants.
5. Revenue Streams: This is one of the blocks that talk about calculative aspect of business model. A revenue stream is a section that requires that you itemise sources through which your business will help in capturing values quantitatively. This should emanate from value propositions successfully offered to consumers. Quantitatively, your values should be revenue minus costs equals earnings or profits. Let us assume that we want to proceed on the take previously discussed- Hijab Design Business. Our revenue streams or sources would be sales from the Hijab and fees charged for training new entrants (if we choose to have training services). The ideal thing is to have many sources in order to cover expenses that would be incurred in the cost structure’s block.
6. Key Resources: Creating values without necessary resources to deliver them to the people who need them is nothing in business. You need key resources such as physical assets and human resources to deliver your value propositions. In our Hijab Design Business, we need office or workshop, machines of various types, people that would work at different sections of the business to enable us to deliver what we promised in a novel way that benefits the users (Muslim girls and women).
7. Key Activities: Here, you need to state a number of key services, products or activities you intend to perform. These could fall within production, problem-solving and platform/network. For instance, Hijab Design Business is within production. That is, designing, making and delivering of different sizes and styles of Hijab to Muslim girls and women. If you aim at establishing a training or consulting business, you are within problem-solving key activity category. If you have passion for connecting sellers and buyers together using interface management system, your key activities should evolve from platform or network key activity category.
8. Key Partnerships: There are many reasons you must have partner(s). One of the reasons is that you cannot do everything alone. You have to collaborate with others –with the specific skill-sets and knowledge you don’t have. Having partner(s) do(es) not mean that the person or entity has strategic stake in your business. It only signifies that some activities that you cannot do internally would be outsourced. This becomes imperative when there are needs for optimization and economy of scale, risk reduction as well as uncertainty and acquisition of particular resources and activities. In our Hijab Design Business, we need to have Public and Private Schools, Islamic Organisations or Societies, Association of Professional Tailors, among others, as our collaborators/partners.
9. Cost Structure: This is the last block that shows where your start-up funds would be mostly expended. The expense should be able to indicate how you would minimise costs, also known as cost-driven category, and focus on value creation, also referred to as value-driven. The best means of getting the right items stated here is to go back to your key activities’ block. It gives clues to physical assets and human resources you need to spend on before delivering and capturing the created values. What makes the difference between block 7 and 9 is that you need to be specific in block 9 than 7. For instance, in our hypothetical business idea, we need to pay salaries and remunerate personnel, pay for office or workshop monthly or yearly. We must also consider cost of machines (of different sizes and model) in this block.

Business Model Validation: Why it matters?

From the outset of this module, my discussion has been on how to move from refined business idea to a business model that indicates frame through which consumers see your start-up. However, having a business model you developed does not point towards validity and acceptability of the business idea. You need to readjust and validate the model with the prospective consumers or users. In other words, all the assumptions we have been discussing should be tested by getting outside of our comfort zone (of thinking) to the users’ zone.

To validate our Hijab Design Business, we need to conduct interviews and Focus Group Discussions with the users –girls and women in order to understand categories of Hijab they are using and how their use affects them. After this stage, we have to develop prototypes and go back to them to find out how our propositions are different from the ones they have been using. This would be repeated until we nail the solution. The last stage of the validation is to get out again and understand Muslim women and girls’ buying process and the communication infrastructure they mostly use. Results from these stages would now be used to validate our business model. No matter what, we shouldn’t sweep facts from the stages under the carpet. They must be used to change our business course whenever we discover we are wrong. Facts from the process would be useful in validating our revenue streams –only means of capturing values.

I believe everyone has learned one or two things from this module. In Sha Allah by next    week, the course will end with strategic business plan development. This is a document that would serve as a roadmap for you to manage human, material and capital resources of your business successfully or otherwise.

THINKING ABOUT

From consumables to non-consumables, an average Nigerian is aware that he could be tricked into spending his hard-earned money on fake products. In this context, how different is Muslim entrepreneurs from nn-Muslim entrepreneurs?

What are your thoughts?

2.1.6 Business Plan Development

This is the module that captures everything we have been discussing since in practical terms. I believe that each one of us can pinpoint what we discussed in the first three weeks of the business model you have created. We should also realise that creating a business requires design, and not using ‘fire-brigade’ approach. In simple terms, business establishments should be both design and opportunity driven. It is opportunity-driven when you have identified a need either created by you or sought from business information providers such as Infoprations.

From business model to strategic business plan

So far, I have established that concept, idea, value creation and capturing lead to business model. Now, we need to move from the model to business plan. As I stated in the last discussion, business model helps in writing strategic business plan within short period of time, saving you from spending recommended time of 200hrs to 400hrs. In fact, established businesses use model alone to narrate their business to customers and investors. However, as a start-up you need to have a strategic business plan. What do I mean by strategic business plan?  It is a business plan embedded with tactics and techniques that would help you in managing the business for a particular period of time and sell professionally and convincingly to prospective investors or partners. It is a planning instrument that forces you to systematically break down your entrepreneurial idea. In other words, having it enables you to think and act in a structural and strategic manner. The maximum length of a business plan is 30 pages (plus-minus 5 pages).We should not forget that the word strategy is associated with military profession, which means ability to combine various techniques and tactics to win war. Here are the essential components of a strategic business plan for a start-up:

1. Executive summary:This is the first section of the plan, but it is usually written after other parts have been developed. It is a section which summarises your entrepreneurial idea in a jiffy to potential readers. In this section, you are expected to give specific insights about the whole idea by stating purpose of the plan, pointing out significant details of the market you intend to explore, a brief description of your company, product/service, organisation alongside personnel and financial data. If you want to solicit start-up funds from investors or venture capitalists, financial data must specifically reveal cash-flow. Cash-flow is an account statement that indicates how the money will be coming into your business and going out of it. The portion should also entail profit, loss and balance sheet estimates for the first three or five years.
2. Market Analysis:Industry description and analysis, target market analysis, market test results and competition analysis are the core elements of this section. This is a section that you are most likely to report the findings of secondary and primary research you conducted to gain deeper insights about your entrepreneurial idea. For those who do not understand the nitty-gritty of conducting market research, it is advisable to contract it to market research professionals. Having the abilities and competencies to do a thorough market research will go in a long way of saving the money that would be paid to experts. Market research, from secondary approach, will enable you to access existing data from various sources relevant to your industry, prospective users or buyers and competitors. Primary approach, on the other hand, becomes useful when the information you need is not available through secondary sources. For instance, we might not get demographics and psychographics of Muslim women and girls using Hijab in Nigeria. For us to have these, we must conduct primary research using qualitative or quantitative methods. Competition analysis is another invaluable element in this section. Competitors are basically divided into two –Close and distant. Close competitors are those businesses that offer same goods or services you also want to provide. Distant competitors are the businesses that sell substitute goods or offer substitute services. To ensure a robust analysis of the competitors, at least five leading players should be selected. Emphasis should be laid on the close competitors! Doing the analysis requires that you place your own company among and finding out differences in terms of products/services, technology, people and communication strategies. A lot of information about competitors could be sourced from their websites, brochure, promotional materials and news media that reported them. What one needs is to pinpoint relevant information for the analysis.
3. Company description:In this section, you have to tell your readers what makes your company stands out from the competitors. This is one of the sections where your understanding of close competitors’ offerings and how they are delivering them become handy. In specific terms, describe your company’s nature, core competencies and capabilities. Core competencies are things you intend to do in a unique way, using the best global practices. These could be superior customer services and professionalism. Capabilities set in when you solve customers’ needs or problems with a specialised skills-sets that your competitors lack.
4. Marketing and sales activities:In our discussion on business model creation, I discussed channels. Now, when you are writing strategic business plan, you are expected to flesh up what you have stated in the block. Using our Hijab Design Business, we need to reach out to Muslim women and girls through various channels. We can decide to have Hijab’s Outlet at the headquarters of varied Islamic societies. We can equally use Central Mosques of cities and towns. Considering the fact that Internet has revolutionised buying behaviour, we can decide to have Hijab’s eCommerce and many more. In all, we have a personalised (Hijab’s Outlet), dedicated (Central Mosque) and e-general (eCommerce). All these are exclusively within marketing activities cum strategies. Sales activities occur when we start recording the purchase and analysing them quantitatively. To gain appreciable sales, we can decide to play on low margin and high volume price mechanism. This would constitute part of our sales strategies.
5. Products and services: Here, consumers and investors want specifics of your entrepreneurial idea. Your proposed solutions to the consumers’ needs or problems should be explained very well here. For instance, in our Hijab business, we need to create product’s and service’s headings. We want to produce Hijab and at same time offer training to people. So, Hijab is our product while training is our service. Failure to explain them in details would create confusion and better still make us lose investors’ credibility.
6. Management and ownership:Different categories of employees and management team that would help in bringing the entrepreneurial idea into fruition are expected to be highlighted in this section. Key staff’s roles and responsibilities in form of organisational structure should be spelt out. The section should also entail specific techniques and tactics that would be used in recruiting the needed staff. The current thinking is the use of strategic human resource model. Being strategic requires that you employ people that would assist in actualising your business’s goals and objectives in the short and long-term periods. In other words, people who have relevant skill-sets and capabilities to carry out specific tasks associated with your proposed solutions or values should be engaged. Structurally, you can choose from line and functional organisational formats to indicate interrelationship and independence of employees’ roles and duties. For ownership part of the section, you need to state the ownership type of the business. Is it a sole proprietorship or partnership in form of co-creation? Your readers need to know!
7. Funds required and their uses: Let us take our mind back to business model. Block 9 tells us about human and material resources we need to spend on. This section affords you the opportunity of specifying cost structure in quantitative terms. Here you are expected to make some assumptions or identifying cost of each resource. This should produce four financial models –income statement, cash-flow statement, balance sheet, profit and loss account estimates. Investors mostly look at your cash-flow to determine the future financial strength of your entrepreneurial idea. What this is telling us is that it must be done carefully. It is highly recommended that one seeks financial experts’ inputs in this section. If we use our Hijab Business, we need to get the amount needed to purchase machines, office and workshop rent together with remuneration for employees, among others. Operating expenses also need to be factored into our key financial assumptions.

Sourcing funds using business plan

Apart from using your business plan as a guide for directing human resources and managing the business, for entrepreneur who does not have required start-up funds, strategic business plan is useful in seeking funds from investors, venture capitalists or crowd sourcing (relatives). Before handing over your business plan to the potential investors or evaluators, you should present it to the qualified test group of readers and take into account their uncertainties and suggestions. This becomes imperative because investors are interested in the final business plan and not its creation. What do venture capital funds, business angels and evaluators from other financial institutions expect from a good business plan?

1. The entrepreneurial idea must bring value added to the consumers
2. The company’s products or services should have a large potential market and high growth potential.
3. The product or service should be new.
4. The market penetration plan must be prepared logically and in detail.

SBP: Why rewriting matters?

Now your SBP has helped you in getting the needed start-up funds and the business has started. But, one question still needs an answer from you. Should SBP be a one-off activity? From professional perspective, SBP should constantly be rewritten. You need to review your plan between 4 and 6 months after its completion. The main reason is that business environment usually changes quickly. There are trends that cannot be ignored, thereby requiring amendments and supplements of the business plan. In specific terms, your SBP should be re-evaluated frequently in line with the changing market circumstances.

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