People power

Good relationships are the basis for successful businesses, explains msafiri’s Business Columnist Nkem Ifejika

PeoplePowerWhen my first proper side hustle failed a few years ago, there was one simple reason – a breakdown in relationships. Superficially, it was about cashflow, but what had really emerged was a lack of trust between me and my customers, and me and my suppliers. Above so many other things in business, relationships are a matter of life and death.

Many Silicon Valley venture capitalists talk about how they invest in people rather than ideas per se. This could simply be them wanting to appear more benign than just people who only look at the bottom line. However, investing in people makes a lot of sense. There’s no point putting money into a good idea if you don’t believe the people you’re investing in can deliver that idea. There’s no point investing in people who’ll be difficult to work with, as there are easier ways to make money.

Business is about relationships. If you’re buying, you trust that the person you’re buying from will deliver at the price that has been agreed. And if you’re selling, you’re committed to delivering goods or services on the understanding that your customers pay a certain amount. If you’re a middle man, like my business was, and there is a breakdown in the relationship with those you’re buying from and selling to, the only way is down.

My customers did not believe I would give them a product they’d paid for, so they began requesting refunds. At the same time, my suppliers didn’t know me well enough to trust me with credit. Ostensibly, it was about an imbalance in the amount of money coming in and going out – cashflow problems, but it was about understandings and agreements not quite working out. In fact, an old meaning of trust is to ‘allow credit.’

In emerging economies, such as many in Africa, contracts are hard to enforce. This only happens as the rule of law gets strengthened, and this is a gradual process. It’s why many businesses are family-owned – people are quicker to trust a brother, sister, or cousin, before extending that trust to a stranger. It isn’t a bad thing, it’s just human nature and the way of the world.

The South Korean economy is one anchored by so called chaebols, big family conglomerates that include the global brands Samsung, LG and Hyundai. The trouble is one’s immediate family is much too small a pool from which to choose talent, and this could be a hindrance in the future. There’s no doubt South Korea’s economy will diversify even further.

In the absence of enforceable contracts, Africa’s own chaebols could be important for economic growth. But the continent could and should also go beyond families and build businesses that rely on trust. A businessman’s word could be his bond, a handshake could be as solid as a cast iron contract drawn up by a multitude of lawyers. Developing strong relationships and trust between businesses and customers will keep you flying.