Building a business from scratch is not easy. It comes with frustrations, financial strains, and sleepless nights and in most cases this all pays up someday.
Paul Kinuthia, a billionaire, can attest to this. In 2013 he sold his company for K’shs 1.5Billion, which he had started with only K’shs 3000 in 1995. I am sure you are familiar with Nice ‘n Lovely hair products, Bouncy Baby diapers, and Golden Shine shoe polish. Paul is the entrepreneur behind the products.
But was it an easy journey?
He started out at the now dying Kenya Planters Cooperative Union (KPCU) as a coffee bag loader before becoming a perfume hawker. He made K’shs 600 on his first day hawking.
“I began to think, ‘I’m I doing the right thing?’ The following day I went back, made the same amount of money, then thought I was in good business. But I still thought I was doing the wrong thing,” he confesses.
Later on, some of his friends who were employed mistook him for a beggar in the streets while he was hawking his perfumes and offered to get him an office messenger job at Kenya Power. He thought hard about quitting his hustle so he decided to change tact.
He would hawk his perfumes directly to offices from Monday to Friday, then directly to salons on Saturday. During his salon sales, some women asked him to supply shampoos.
“That is the time I saw a big opportunity. I started thinking, how can I manufacture shampoos? By then, I had saved about K’shs 3,000,” he says. That was in 1994,” he says.
He did his research on shampoo making and began making his own shampoo in a small room on Kirinyaga Road, Nairobi, that a friend had allowed him to use. He distributed 40 jerry cans of the shampoo and got a K’shs 2400 profit.
He later introduced hair conditioners and hair gel to meet the increasing demand from his clients and moved to Gikomba then industrial area for larger production space.
But how did he facilitate financing when his business grew? At this time, he has not branded his products so banks could not give him a loan for an unknown product.
“I used my father’s land as collateral to borrow K’shs 130,000 to expand his business and buy machinery to enhance the production capacity,” he notes.
Business growth and expansion
By 2007, his business had grown so much that it had a turnover of Kshs 240 million a year but was making just about Kshs 40 million in profits.
Due to the complexity of the business, he decided to hire staff in production, marketing, finance, product development, human resource, information technology, and distribution. He came up with an employee motivation scheme that saw his profits jump from Kshs 40 million to Kshs 18 million in one year.
What challenges did he face even with the millions in profits?
Before he put in place strict management and accounting procedures, he used to operate in an unprofessional way, allowing many officials from the Kenya Revenue Authority and the police to take advantage to extort money from him.
For instance, he did not know that as an investor, he was entitled to corporate tax relief to enable him to recover the huge funds he invested in buying new machinery and constructing his factory.
“I was reporting losses and didn’t even know that when I buy machinery, I have a five-year window to recover that investment,” he recalls.
The other tough decision he made was recruiting highly skilled professionals and incorporating them in his firm’s share ownership plans. He also opened up to KRA officials and auditors to scrutinize his accounts.
Selling his company to L’Oreal, a French cosmetics giant
Interconsumer sold cosmetics worth K’shs 1.7 billion in 2012, earning Mr. Kinuthia more than K’shs 200 million in net profits.
That was barely two years after he graduated out of Business Daily’s TOP100 SMEs Club – having crossed the Sh1 billion annual revenue threshold joining the Club 101 of the competition that is run in collaboration with consultancy firm KPMG.
Interconsumer’s large market share and the growing popularity of its brands in the regional market is what caught the eye of L’Oreal. He sold the cosmetics part of his company and remained with the sanitary products line he had started in 2008.
Just before Interconsumer was split, it had a total of 500 permanent employees and another 6,000 employed in its sales and distribution chain.
Mr. Kinuthia faced challenges as every entrepreneur does but he did not give up. He looked for alternative ways to make his company grow. He saw an opportunity in a product he had never used his entire life and sort professional advice when things got tough and it all paid off with a Kshs 1.5 Billion cheque.