SMALL OFFICE HOME OFFICE (SOHO) AT POST COVID19

With the COVID19 gone and business is back up and running in the streets of major towns in Uganda, a lot of changes will take place and one of them is working from home or limitation in movement.
Many Ugandans during the quarantine and lockdown tasted the home office and they think that is one method of work they can explore since the one or so months has yielded the same results and at a reduced cost.

SOHO is an acronym for Small Office Home Office, a term used to distinguish small businesses from mid-sized and large businesses. Technically, SOHO businesses have zero to ten employees, although many of them are one-person shops.
Information technology is a typical SOHO example that includes writers, web/graphic designers, software developers, systems analysts, etc. who can work remotely via the internet
Construction people who work on a contract basis in the construction industry such as plumbers, electricians, carpenters, tilers, masons, etc. who can carry most of the tools of the trade-in trucks or vans and don't need an office
Professional, Scientific, and Technical Services are SOHO examples and include consultants/specialists in various industries including accountants, lawyers, engineers, and everyone who works in a small office, whether as employer or employee.
SOHO businesses have increased the world over with the advent of technologies such as cloud computing and mobile devices that allow home workers to access business information over the internet from home.

Many professionals, including lawyers, travel agents, accountants, and financial advisors, may start operating as a SOHO business. New types of businesses based entirely on the Small Office Home Office model, such as Virtual Assistants, will also be created.
SOHO businesses will increase steadily as the increasing number of corporate businesses embrace telecommuting.

The Need to Operate SOHOs
The main reason why people may want to work from home or in small offices after the COVID19 Pandemic is the freedom they get from:

Reduced commuting: - People who operate SOHO businesses generally don't have to spend hours commuting to work every day. In addition to not spending time in traffic, there are savings in a vehicle or public transportation costs as well as reduced expenses on dry cleaning, child care, etc. There is also a reduced effect on the environment from vehicle emissions.

More family time: - Working from home or in a small office allows people to spend more time with their families, and friends. A home office arrangement is particularly advantageous for stay-at-home moms, given the flexibility in the hours of work.

Less distraction and reduced stress: - Working in a busy office can be very stressful, especially since most large companies have long since abandoned the concept of individual offices for employees and have embraced the cubicle concept, which due to the small workspace, and lack of privacy many people find confining and depressing. Noisy offices can be very distracting for people who need to focus on tasks with minimal interruption.

Comfort: - Working from home is much more comfortable than working in a corporate office. If you decide you want to get up and work in your housecoat or pajamas all morning you can. In your own home or private office, you have the freedom to set up your office environment exactly the way you want.

Being your own boss: - Working from home gives you a certain level of independence, even if you are an employee. If you want to catch up on social media during the business day you can do so without feeling like someone is looking over your shoulder.

Improved health and well-being: - Those who work in a small office/home office have a better work/life balance and are often happier and more productive than those who toil in a corporate office all day. Reduced stress, increased flexibility, and more time for family, friends, and exercise contribute to a healthier lifestyle.

Cost-saving: - However, running your business as a SOHO can also involve considerable cost savings as well from office space rent, stationery, transport, office logistics, furniture, non-essential staff, etc.

BUSINESS OPPORTUNITIES AFTER THE COVID19 PANDEMIC

A lot of business opportunities are expected to come up after the COVID19 Pandemic has been controlled and these are expected globally. In Africa, we have always not been prepared for any opportunities after calamities just because we mourn longer and forget that in every problem there is a hidden opportunity.
Opportunities we have envisaged to grow are more in the service and production sectors as highlighted below:

1. Online shopping and delivery of goods from those in supermarkets to those in food markets
2. Transport and logistics of procured merchandise to the consumers
   
3. Psychosocial Support due to the many changes that are coming with this new situation like people who are losing jobs, the stress of home working, etc.
4. Internet Service Provision for Home Office and Education since these are going to be the new trends to enable cut costs
5. Sanitizer and Face masks Production are objects that we are going to live with to avoid any other similar attacks
6. Health Beverage Production seemed to control and increase the immune systems of Africans
7. Spirits and Gin Production will increase as an additive to the sanitizers gel, solutions, and the wipes
8. Computers and Communication Equipment Trading and production is going to increase to cater to the demand of the home and education use
9. Organic food Production will increase since many of the developed countries have high demand and yet it here in Africa that we can abundantly produce it
10. Health and Medical Services
11. Pharmaceuticals Production
12. Office and Home Cleaning
13. Occupational Health and Safety at home and workplaces will be needed due to the change in our work methods and environment
14. Power and Energy Production is crucial because of the increased usage of E-commerce

With any opportunities that come there are also threats that come along which must be dealt with to avoid economic distortions. Threats we envisage to encounter in the post-COVID19 Pandemic are:

1. The collapse of the infant real estate sector especially middle-income residential
   
2. Reduced usage of Public Transport because of home office and layoffs of support staff
3. Reduced renting of office space and shop space for those that have opted for internet use
4. Reduced social and nightlife in bars and clubs with government restrictions
5. Reduction in production and sell of building materials due to the collapse of the real estate
6. Reduction in the tourism and hospitality sector because of reduced travel since many organizations are opting for E-commerce
   

This, therefore, calls for orienting your entrepreneurial mindset from businesses that work in the Pre COVID19 to businesses that will work in the times ahead.

HOUSING PROVISION HAS STAGNATED THE ECONOMY

HOUSING a responsibility of government has over the last 30years been provided by the citizens of Uganda. This has affected the cash flows in the economy because of the high currency drain from circulation into housing and yet it has low returns on investment(ROI).

Housing being an infrastructure is the government's responsibility and I think it is high time the government took over from the citizens. The government can borrow money for the housing sector as it has always done for other infrastructure sectors and let the citizens use their savings for other social priorities.

When the citizens use their savings for housing the cost of investment is equivalent to the bank loan rate he or she borrows from a commercial bank which is about 23%. Now, this is so high in the housing sector. This applies to whether you are borrowing, personal savings or money stashed under your bed.

What has this done to the national economy? In the process of citizens providing houses, Ugandans have all collected their money and given it to the following few individuals; building materials manufacturers, stockists, builders, property developers, and land dealers. That's why we see many building materials manufacturers and stockists, property brokers, and developers in all towns and suburbs of Uganda.

If the houses you have built are rental units for the middle and high-class tenants the return on investment is 3.2% per annum. If you have business premises like a mall in the Kampala CBD the ROI is at 8% per annum.   

In the last 30years Ugandans have built 2m housing units countrywide with their personal savings. Assuming the average cost of each unit is 35m/= then the total investment in housing is 70t/=. This means we have collected 70t/= and passed it to the above-mentioned persons. If the government was providing the housing units like it is in other countries with say a revolving mortgage facility then the personal savings would be circulating in the economy in trade, manufacturing, services, tourism, agribusiness, etc.

If the 70t/= was left to multiply in the economy through a business that has a higher ROI then Uganda would be a middle-income country as The President has wanted. We cannot develop this country with more residential houses than businesses whose ROI is 3.2% thinking our children will get the returns in their lifetime.

The government should change its strategy and provide housing so citizens can invest in better businesses. These will create jobs, pay taxes and provide goods and services.

WHO IS RESPONSIBLE FOR OUR HOUSING PROVISION?

Housing or Shelter is a basic human need as enshrined in the constitution of the Republic of Uganda in the Social and Economic objectives XIV (b). 

Government has a constitutional responsibility of providing infrastructure like transport, schools, hospitals, clean and safe water, electricity and shelter for its citizens. Government has been able to provide all the other infrastructure apart from housing or shelter. Previously the government used to provide housing for its citizens but with the coming of liberalizing and privatisation all houses that it owned were sold and others given away.
Infrastructure being a massive investment cannot be done by individuals as we are currently carrying the housing load a responsibility government has left to its citizens. When the government found that Ugandans loved to build houses it excused itself of its responsibility and now the citizens are paying a high price to meet their other needs. The citizens wouldn't mind if the government provided affordable mortgage facilities to finance housing development since they are trying to carry out government responsibility.

HOUSING FINANCING

Housing financing like other infrastructure financing is managed by long term low-interest funds. In Uganda, we are using commercial banks to finance housing with high-interest rates and yet return on investment in housing never exceeds 4% per annum. So if you got a mortgage from a commercial bank it is impossible to pay the mortgage from the proceeds of the house.The government always borrows money to develop infrastructure from development partners at about 0.4% per annum for a period of about 50years. It comfortably repays the loan and we also enjoy the facility. The government can borrow money to develop the housing sector and lend it to commercial banks at say 2% and the banks can get us mortgages at 4%. The citizens will then use their savings to pay the mortgage and the balance for the improvement of their livelihoods. This will keep money in circulation and the economy will grow since the money used for the housing is cheap.

CONCLUSION
The housing development is one sector that can stimulate the economy given that its massive with a lot of direct and indirect beneficiaries. The building materials manufacturers, stockists and contractors are some of the direct beneficiaries and also they create jobs and pay government taxes. The loan repayment is by the homeowner's mortgage repayment and so the other citizens not in need of houses are not affected.

RESIDENTIAL HOUSES OUT NUMBER BUSINESSES IN UGANDA

Uganda housing backlog in the low-income bracket is alarming and needs government intervention since the numbers are big and the repayment can become tricky based on the earning of the occupants.
On the other hand, there is a housing surplus demand in the middle and high-income earners bracket and this has caused an investment imbalance in the economy. Many people have invested heavily in the real estate sector with the hope of either selling or renting out the houses and returns have failed to come out. The monthly rent is stagnant and house prices are dropping every year if you compare it on the dollar. One other serious problem we have to solve is the building technology we are using here in Uganda. We are using the permanent construction for residential houses meant to last a maximum of 30years. Wh
y this short a time is your active, adult lifetime and house design. Permanent construction is meant for institutional construction like schools, churches, hospitals, government offices etc which in many times the design is simple without any fancy appearance. So we need to get a construction technology for residential houses that makes house affordable. We shall discuss this in another blog.
But today I want us to discuss the issue of having more luxurious residential houses than businesses yet the houses have very little return on investment.
This morning as I was moving through Ntinda and Naguru I saw a number of magnificent residential houses valued in hundreds of millions but can only earn the owner about 5m/= per month. Am on a number of real estate brokers social media platforms advertising houses for sale. I see a building being sold at about 2bn/= and earning only 17m/= per month and wonder how and when the owner will be able to recover the investment given that he may have to repay the mortgage, maintain the building, pay rental tax etc. These are all costs on the investment before making any net earning. I've come to see why some property owners abandon their properties in banks after getting a loan.

INVESTMENT SUBSTITUTION
Instead of the construction of more luxurious residential houses, I suggest we invest more in businesses and industries. Residential houses will not develop our country without industrialization and business development.
A residential house costing about 400m/= in say, Kira, Naalya, Kiwatule, Ntinda, Kisasi etc will at most earn 2m/= per month. A business valued at 400m/= weather trading or manufacturing will earn not less than 30m/= net after making all deductions. This is why all Indians, Chinese, Kenyans, South Africans are not in the real estate. They don't see how money can come out of the real estate to build their capital.
This real estate development has managed to make some financial improvement to the following;
1. Building materials manufacturers
2. Building materials stockist
3. Land dealers and condominium developers and
4. Building contractors

CONCLUSION
Real estate in Uganda is not regulated and it's not an area for everyone to go in especially development.

It is done by investors with cheap money and low or tax holidays. Let National Housing, Ruparelia Group, Amalgamated Properties, Property Services Ltd etc venture in it not any Tom Dick and Harry. Real estate is an investment and not a business which can multiply your capital.
We need to increase the number of businesses to surpass the luxurious residential houses we are acquiring. This will create more jobs, increase taxes and reduce unemployment in Uganda.

For God and my Country

BUSINESS SELLING VS BUSINESS WINDING UP

Business selling literally is the monitory exchange of the business with a buyer. A business is valued by professional business valuers in many times these are Chartered Accountants who value both the tangibles and intangible items in the business. The business is then put up for sale to a willing buyer.

Business winding up or liquidation is ending the business by selling its physical or tangible assets to pay off creditors, with remaining proceeds distributed to the business owners, and with no compensation received for the value of non-tangible assets such as business goodwill. This is always the worst-case scenario since this only attracts less than 15% of the business value for a goods business and about 10% for a service business.

Market your business at the point of sale to get maximum returns

Your Business can be Sold

The first issue anyone considers at business exit is if your business a good sale prospect.

In other words, will someone pay money to acquire my business or am I better off selling its physical assets and walking away? Too many owners assume they won’t find a buyer. Therefore, they automatically default to ending their businesses through a liquidation. But while liquidating allows you to recapture the value of the physical or tangible assets of your business – often at a giveaway – it gives you nothing for the value of your business as a going concern.

When you sell rather than liquidate your business, a buyer pays to acquire not only the physical assets of your business – the assets listed on your balance sheet, but also to acquire the goodwill of your business, including the worth of such intangible assets as your business name, reputation, clientele, systems, and marketplace advantage.

The only way to harvest the value of business goodwill is through a business sale. So, the decision to sell rather than to liquidate rests on a determination of whether the goodwill of your business – the value of your business beyond its physical assets – is of high enough value to attract the interest and prompt the purchase decision of a buyer.

A handshake is appropriate at the conclusion of a sale

Advantages of Business Selling

When the sale is made there is a win-win situation with the seller having 100% of the business value and the buyer having gotten an asset ready to start earning him returns on the investment and mainly:

1. Buying a going concern business with all physical assets of a business, as reflected on the balance sheet, plus the worth of the business as an ongoing entity, based on its recent past performance attracting and retaining customers and experiencing financial success.
2. Goodwill value of a business, reflecting the amount a buyer is willing to pay for the intangible assets of a business including the business name and reputation, clientele, operations and systems, and marketplace advantage.

CORPORATE MERGER AND ACQUISITION

Grocery and Supermarket Business

In Uganda, corporate takeover or acquisition has not taken root but it is one of the sure avenues for business sustenance and development. Many entrepreneurs start-up businesses and hold onto them for far too long with the hope of passing them over to their offsprings. This never happens and the business start to decline in production, sales and revenues and its then that they think of exiting through liquidation. The best alternative for such a scenario is to either merge if say you want corporate growth or sell if you are looking at exiting.

If a company decides to take over another one, it’s referred to as an acquisition. The acquiring company will do this by buying either the major shares or the entire ownership stake of the company being taken over. An acquisition is a situation where a larger company acquires another one outright. There are two types of acquisition: hostile and friendly.

A merger refers to a situation where two companies join forces. They can do this for a number of reasons, say a construction company in Uganda can merge with another one in Kenya. By so doing, the companies will be at a position to reach more customers.

Salon and Skin Parlour Business

Why Companies do M&A

Companies merge and acquire for a number of reasons but mainly for the following; they buy companies with the goal of acquiring a competitor and this is common with the technology companies, companies do M&A to create synergies if say one company has 20 clients and another has 30 client, this will give a combined volume of clients, workers and suppliers. The reason companies do M&A is to accelerate growth. Facebook realized that it's legacy platform will start seeing reduced growth. To accelerate its growth, it acquired Instagram and WhatsApp. It also sought to acquire Snapchat before it became a public company.

Other reasons for acquisition are for purely trading purpose. A company may be acquired at a premium price and just needs a little fixing in the HR, marketing and finance and then sold for a hefty margin. This is business trading. Like you can buy a property or car, make some repairs and modifications and sell it at a profit.

Start Acquiring Now

Bar and Restaurant Business

I know many of you are saying why do I have to acquire more businesses yet am failing on this one. My suggestion to you is that; you as an entrepreneur you have made yourself so busy running a business that is meant to be run by the professionals. Your job as an entrepreneur is to move your capital around your businesses. Look at Dr Sudhir Rupaleria he has more than 30 businesses in Uganda and he is just moving his capital never in the nitty-gritty of the businesses.

START ACQUIRING BUSINESSES