Friday, July 19, 2024

Kenyan who started his business with Sh. 3,000, sold it for Sh. 3 billion

In 2013, Billionaire Paul Kinuthia put pen to paper pocketing Sh. 3 billion from the sale of the beauty and health products arm of his manufacturing firm, InterConsumer Products, to French multinational, L’Oreal.

The transaction marked a high for a man who only 20 years ago was loading coffee bags at the now moribund Kenya Planters Cooperative Union (KPCU) before becoming a hawker.

“That was my first self-employed job,” says Mr Kinuthia.

Co-Op post

Later, he graduated to selling perfumes. The first day he started hawking perfumes, he made Sh. 600, which was quite a tidy sum then.

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“I began to think, ‘am 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.”

NCBA

After a while, some of his friends who had gone on to do their A level studies and university courses and who were now employed mistook him for a beggar when they found him hawking perfumes in the streets. They offered to find him a job as an office messenger at Kenya Power.

He thought hard about continuing his hawking business in the streets as he felt uncomfortable whenever he made old “successful” friends.

So he changed tack and began selling perfumes directly in salons and offices. He would go to offices from Monday to Friday, then take his merchandise to salons on Saturday. He had never been to a salon before. But when he started, some women asked him to supply shampoos too, creating another business opportunity for him.

NCBA

“That is the time I saw a big opportunity. I started thinking, how can I manufacture shampoos? By then, I had saved about Sh. 3,000,” he says. That was in 1994.

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After doing some research, he realised that he only needed a jiko, a sufuria, a blending stick, and a drum to make shampoo. He would mix the ingredients in a drum full of water and make shampoo in a small room on Kirinyaga Road, Nairobi, that a friend had allowed him to use.

He would hire a mkokoteni (handcart) to distribute about 40 jerry cans of the product. They sold out, he says, bringing in a profit of Sh. 2,400.

He bought a handcart and hired a man to pull it. For three years, he used the conveyance to distribute perfume and shampoo to the salons he had earmarked in the city. Then he introduced hair conditioners to his range of products and later started supplying hair gels to meet the demand of his growing list of clients.

He soon moved to bigger premises at Gikomba. Police officers frequently visited his premises on suspicion that he was engaging in contraband.

“How are you producing these things? Are you sure you are doing the right thing? They kept arresting me and I kept bribing them until I eventually moved to Industrial Area,” Nairobi, he says.

His products were not branded then, but the saloonists would buy them and put them in the containers of more popular products.

Mr Kinuthia ploughed back the profit into his business and built a good relationship with his suppliers, who offered him products on credit.

“Eventually, the business grew to a point where I had to buy machinery to enhance production capacity,” he notes. He also had challenges acquiring a bank loan, so he used his father’s land as collateral to borrow Sh. 130,000 to expand his business.

By 2007, Billionaire Paul Kinuthia had grown his business so much that it had a turnover of Sh. 240 million a year, but was making just about Sh. 40 million in profits.

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“The business was becoming complex and I had to enhance systems and controls,” he says.

He employed a finance officer to help manage the accounts. He also began to scout for skilled personnel to help him steer his company to another level. Friends advised him to use employee share ownership plans to attract talented personnel.

What was initially a one-man job had created job opportunities for many people in production, marketing, finance, product development, human resource, information technology, and distribution.

“I told them, ‘if you help me move this business from level A to level B, whatever profit we make, I am going to give you 10 per cent of it’,” he remarks.

The employee motivation scheme worked magic for him as profits jumped from about Sh. 40 million to Sh. 180 million a year.

“That is what transformed the business for good. From there, I came up with performance bonuses, not only for the top managers but for everyone in the company,” he said.

He also put in place a board of directors, recruiting experienced managers to help him manage the company.

Before he put in place strict management and accounting procedures, he used to operate in a 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.

But one of the hardest decisions that Billionaire Paul Kinuthia made was to sell the Nice & Lovely brand to L’Oreal, a firm that had hauled him to court, claiming he had infringed on their trademark, Dark and Lovely.

This feature was first published in the Daily Nation. The Daily nation is a publication of the Nation Media Group.

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