Author name: Dr Maxwell Ampong

A striking paradox exists in Ghana: despite our people’s abundant talent and wisdom, many capable individuals shy away from pursuing innovative ventures. The primary reason for this hesitation is a pervasive fear of financial inadequacy. This fear hinders the entrepreneurial spirit and stifles economic growth as potential business leaders opt for safer, less risky paths due to a persistent belief that there is or will be a lack of financial resources. On the surface, it makes sense. But at its core, this issue is not just about the absence of money but also about the psychological barriers and historical contexts that reinforce this fear. Financial constraints are a significant deterrent, creating an environment where brilliant ideas often remain unrealised. Understanding this phenomenon requires a multifaceted approach that considers practical, psychological, historical, and analytical perspectives. For many weeks, my close circle and I have discussed and dissected the complex web of factors contributing to the fear of financial inadequacy among Ghanaian entrepreneurs. In essence, this is their work too, particularly Mr Baddoo. By examining this issue through common sense, psychological theories, historical context, recent findings, numerical data, and statistical analysis, we aim to comprehensively understand why many are reluctant to take the leap into entrepreneurship. Our several hours of discussions were about more than just the problem. We also attempted to explore thoughtful suggestions and potential solutions to empower Ghanaian innovators to overcome these barriers and drive economic prosperity. This also gives some context to why Maxwell Investments Group (MIG) executes the initiatives and partnerships we currently have. Historical Context Historically, Ghana’s financial landscape has been challenging for small and medium-sized enterprises (SMEs). Post-independence economic policies and structural adjustment programs have often favoured large corporations and multinational companies, leaving local entrepreneurs struggling. For instance, the 1980s and 1990s saw significant financial liberalisation, but the benefits were unevenly distributed. Many local businesses could not compete with foreign entities that had better access to capital. This historical marginalisation has left a legacy of financial scarcity that continues to affect Ghanaian entrepreneurs today. Policies from the past, such as the Economic Recovery Programme (ERP) initiated in 1983, aimed to stabilise the economy and promote growth. However, these programs often prioritised foreign investment and giant corporations, inadvertently sidelining local SMEs. This focus on larger entities created an environment where local businesses needed help to secure the necessary capital to grow and thrive. The legacy of these policies is still evident. The financial infrastructure that supports large-scale enterprises is robust, yet the same cannot be said for smaller businesses. The limited access to capital and financial support for SMEs is a direct consequence of these historical economic strategies. Understanding this historical context is crucial for addressing the financial challenges that Ghanaian entrepreneurs face today. It provides a backdrop against which current financial inadequacies can be understood and addressed. Policy and Regulatory Environment Ghana’s policy and regulatory environment significantly impact access to finance for SMEs. While there have been efforts to support entrepreneurship through initiatives like the National Entrepreneurship and Innovation Plan (NEIP), more needs to be done. Simplifying the process for obtaining business licenses and reducing bureaucratic hurdles can make it easier for entrepreneurs to start and sustain their ventures. Additionally, policies that incentivise banks to lend to SMEs, such as tax breaks or guarantees, can improve access to finance. Regulatory challenges and bureaucratic red tape often deter potential entrepreneurs. The complex and time-consuming processes of registering a business, securing permits, and complying with regulations can be overwhelming, particularly for small businesses. Streamlining these processes and providing clear, accessible information can reduce the burden on entrepreneurs and encourage more people to start businesses. Exploratory Solution: One way to address these issues could be through digitalising government services related to business registration and compliance. Implementing online portals for these services can make the process more efficient and transparent, reducing delays and opportunities for corruption. It is also why I collaborate with GCB Bank PLC. As the biggest lender to Ghanaian small businesses, they are looking to allocate circa 40% of all GCB loans to SMEs. This makes them ready to ideate and work with me on how SME challenges can be curbed. About 2000 studentpreneurs are opening no-deposit Entrepreneurship Accounts with free Visa Cards through the’ Entrepreneur In You’ initiative. Sociocultural Factors Cultural norms and values in Ghana significantly influence attitudes towards entrepreneurship and risk-taking. Traditionally, many Ghanaians prefer stable, secure jobs over the uncertainties of starting a business. This aversion to risk is often rooted in the fear of social stigma associated with business failure. In a society where family and community reputations hold substantial weight, the potential shame of a failed venture can be a powerful deterrent. Encouraging a cultural shift towards viewing failure as a learning opportunity rather than a disgrace could foster a more entrepreneurial spirit. Family and community networks play a crucial role in providing both financial and moral support to entrepreneurs. In Ghana, extended families often pool resources to support one member’s business venture. This communal approach can alleviate some financial constraints. However, reliance on personal networks also has limitations, as it may not provide sufficient capital for larger-scale enterprises. Strengthening community-based savings and credit associations can provide a more structured support system for budding entrepreneurs. Exploratory Solution: Community-based financial literacy programs can help shift cultural perceptions and equip individuals with the skills to manage and invest resources effectively. By promoting a culture of saving and investment, these programs can foster a more supportive environment for entrepreneurship. Development Bank Ghana (DBG) is offering certified financial literacy programs that could lead SMEs to collateral-free, reduced-interest loans, which is fantastic news. I learned only this week that DBG intends to have their literacy courses in Twi and Ga as well. The need for financial literacy is also why MIG organised the MIG Business Forum in April. The forum’s theme was ‘The Impact of Financial Literacy on Post-Retirement Financial Security’. Common Sense Perspective The reluctance to start new ventures due to financial limitations is

I. IMPORTANCE OF DIGITAL TRANSFORMATION FOR SMES In today’s fast-paced and highly competitive business environment, digital transformation is no longer a luxury but a necessity, especially for SMEs. That is why if you’re reading this in the newspaper on Monday or my LinkedIn over the weekend, know that the place to be next Tuesday, July 23rd, is the Wesley House, opposite Cedi House.  Ghana’s largest indigenous bank, GCB Bank PLC, is holding a Commercial Banking Capacity-Building Seminar themed “Empowering Growth: Optimizing People and Resources for the Digital Era.” The aim is to impart the knowledge and confidence to drive digital transformation in your and my businesses.  So, why is this seminar important? Why should you tune in? Embracing digital technologies can lead to significant benefits: – Increased Efficiency: Automating routine tasks and optimising business processes can save time and reduce operational costs. – Enhanced Customer Experience: Leveraging digital tools can help you better understand and serve your customers, improving satisfaction and loyalty. – Greater Reach: Digital marketing and online sales platforms can help you reach a wider audience, both locally and globally. – Data-Driven Decision Making: Digital tools provide valuable insights and analytics to inform your strategic decisions. – Improved Security: Advanced cybersecurity measures can protect your business from threats and ensure the safety of your data. However, digital transformation is a journey that requires careful planning, sometimes some investment, and ongoing commitment. As a resource person for this Seminar, I will explore how we can navigate this journey successfully and tap into the vast potential of the digital era. But then I thought I would share my findings with the “Entrepreneur In You” community as I have learned some new things in preparation for this seminar. I know I’ll learn even more on the day with the other resource persons. GCB Bank will also give us an inside track on leveraging their products and service offerings to support our digital transformation efforts.  As a witness, GCB Bank PLC is a trusted partner in this regard. With them, you can access a range of services and products designed to support your digitalisation efforts. From digital banking solutions to financial advisory services, GCB Bank is dedicated to empowering SMEs to thrive in the digital age. How? And why? Let’s dive in. II. NEW TRENDS IN GLOBAL SME BUSINESS Overview of Current Global SME Landscape The global SME landscape is dynamic and ever-evolving. SMEs are the backbone of many economies, driving innovation, employment, and economic growth. However, they also face numerous challenges, such as limited access to finance, intense competition, and rapidly changing market conditions.In this context, digital transformation offers SMEs a lifeline to enhance their competitiveness and resilience. According to recent studies, SMEs that embrace digital technologies are more likely to experience growth and expansion. Successfully combine a Makola businesswoman with the wonders of social media marketplace, and your imagination is your only limit to what could happen. This happened in China with the embrace of Alibaba. It’s not far-fetched to see how it can happen for you, me, and that Makola businesswoman. Key Digital Trends Shaping SMEs E-commerce E-commerce has revolutionised how businesses operate, breaking down geographical barriers and enabling SMEs to reach a global audience. Online marketplaces and e-commerce platforms provide SMEs with the tools to set up virtual storefronts, manage inventory, and process payments seamlessly. Example: I take you back to the Makola businesswoman. She might have a small shop in Accra, but with e-commerce, she can now sell her products to customers in Europe and North America through platforms like Etsy and Amazon. This not only increases sales but also broadens the market reach. Cloud Computing Cloud computing allows SMEs to access advanced computing resources without significant upfront investment. By leveraging cloud services, businesses can store data, run applications, and manage operations remotely and securely. Example: Using cloud-based accounting software like QuickBooks, an SME can manage its finances from anywhere, collaborate with accountants in real time, and ensure data is backed up and protected. Artificial Intelligence (AI) and Machine Learning AI and machine learning are transforming how SMEs operate by automating processes, enhancing customer experiences, and providing valuable insights. From chatbots to predictive analytics, AI solutions are becoming increasingly accessible to smaller businesses. Example: An SME in the retail sector can use AI-driven chatbots to provide 24/7 customer support, handle common queries, and personalise shopping experiences, leading to increased customer satisfaction and loyalty. Internet of Things (IoT) The Internet of Things (IoT) refers to the network of physical objects like devices, vehicles, appliances, and more that are embedded with sensors, software, and other technologies. The goal is to connect and exchange data with other devices and systems over the Internet. IoT can improve operational efficiency, reduce costs, and enable predictive maintenance in various industries. Example: If delivery is a component of your service offering, you can use IoT sensors (or apps) to monitor the position and condition of goods in transit, ensuring timely delivery and maintaining product quality. Blockchain Technology Blockchain technology is a secure, decentralised digital ledger that records transactions across multiple computers. This ensures that the recorded transactions cannot be altered retroactively, providing transparency and security. For SMEs, blockchain can enhance trust and efficiency in various operations, ensuring data integrity and reducing the risk of fraud. Example: An SME involved in international trade can use blockchain to track the origin and movement of goods, ensuring transparency and trust in the supply chain. Check out Myneral Labs as an example. We use their services at Maxwell Investments Group in our Agro-Commodities trading. III. BEST PRACTICES IN DIGITAL TRANSFORMATION Steps to Begin Digital Transformation Assess Current Business Processes Conduct a thorough assessment of your current business processes to identify areas that can benefit from digital transformation. Evaluate your strengths, weaknesses, opportunities, and threats (SWOT analysis) to understand where digital technologies can make the most impact. Develop a Digital Transformation Strategy Define clear goals and objectives for your digital transformation journey. These should align with your overall business strategy and vision. Create a roadmap with specific milestones and

The break-even point (BEP) and break-even analysis are related financial concepts used to assess a business’s financial health. The break-even point is the specific level of sales at which total revenues equal total costs, meaning there is no profit or loss. It is calculated by dividing fixed costs by the difference between the unit selling price and variable cost per unit. On the other hand, break-even analysis is a broader financial assessment that examines the relationship between costs, volume, and profits at various levels of production and sales. It helps businesses determine how changes in costs, prices, and sales volumes impact profitability, providing valuable insights for strategic planning and decision-making. We delve into the core components of break-even analysis, explore its applications, acknowledge its limitations, and highlight its importance in business planning, drawing insights from academic research. A LITTLE HISTORY ALWAYS HELPS Concepts like break-even point (BEP) can be found in the writings of 18th-century economist Antoine Cournot. Cournot’s idea of the “point of indifference” referred to the production level where a firm neither gains nor loses profit. German economist Karl Bücher is often credited as the pioneer of BEP. His work, “Betriebsmittel und Betriebs organisation in Deutschen Handwerk und Manufakturbetrieb des 16. Jahrhunderts” (Operating Resources and Business Organisation in German Handicraft and Manufacturing Businesses of the 16th Century), published in 1893, discussed the importance of understanding cost behaviour and the relationship between costs and revenue. Another German economist, Johann Friedrich Schär, is recognised for his contributions to BEP. His book, “Grundzüge der Kalkulation” (Fundamentals of Costing), published in 1910, elaborated on the concept of the “dead point,” which referred to the production volume where total costs equal total revenue. Since then, BEP has undergone further refinement. Accounting practices have evolved to better categorise fixed and variable costs, and technological advancements have facilitated more sophisticated cost analysis and modelling. KEY COMPONENTS OF FORMULAS Fixed Costs (FC) Fixed costs are expenses that remain constant regardless of the level of production or sales. These expenses do not vary with changes in output. Examples of fixed costs include rent for facilities, salaries of permanent staff, insurance premiums, property taxes, loan payments, and asset depreciation. Even if production is halted or sales decline, fixed costs persist. In break-even analysis, it is essential to identify and quantify fixed costs accurately because they represent the baseline expenses that must be covered before a business can start making a profit. These expenses remain constant regardless of the production volume. Variable Costs (VC) Variable costs are expenses that fluctuate in direct proportion to changes in production or sales volume. Unlike fixed costs, variable costs increase as production levels rise and decrease when production levels decrease. Examples of variable costs include raw materials, direct labour, packaging materials, and utilities such as electricity and water. Variable costs are directly tied to the level of output and are typically expressed on a per-unit basis. Identifying and calculating variable costs accurately is crucial in break-even analysis as they directly impact the profitability of each unit produced or sold. These expenses vary directly with the production volume. Examples include raw materials, direct labour costs associated with production, and utilities used in the manufacturing process. Total Cost (TC) Total costs represent the sum of fixed costs and variable costs incurred by a business. They reflect the overall expenses incurred to produce a given level of output. Total costs provide a comprehensive view of your business’s financial health and represent the minimum revenue required to cover all expenses and achieve break-even. By understanding total costs, businesses can assess their pricing strategies, production levels, and overall cost structure to optimise profitability. Total costs represent the sum of fixed costs and variable costs (TC = FC + VC). Selling Price (SP) The Selling Price (SP) is the amount of money at which a good or service is sold to customers. It represents the revenue generated from each unit of product sold. The selling price is determined by several factors, including production costs, market demand, competition, and desired profit margins. In break-even analysis, the selling price is a crucial variable as it directly influences the revenue generated by a business. By analysing the relationship between the selling price and the cost structure of the business, companies can determine the level of sales required to cover expenses and achieve profitability. Setting an appropriate selling price is essential for maximising revenue while remaining competitive in the market. Contribution Margin (CM) Contribution Margin (CM) is a key financial metric that represents the amount of money earned per unit of product sold, which contributes to covering fixed costs and generating profit. It is calculated by subtracting the variable costs per unit (VC) from the selling price per unit (SP). The contribution margin reflects the portion of revenue available to cover fixed costs and contribute to profit after accounting for variable costs. It represents the excess revenue available to the business beyond variable costs. In break-even analysis, the contribution margin is a critical factor for determining the profitability of each unit sold and assessing the overall financial health of the business. By calculating the contribution margin, companies can evaluate the impact of pricing decisions, cost structure changes, and sales volume fluctuations on their profitability. Maximising the contribution margin allows businesses to cover fixed costs more efficiently and increase profitability. The contribution margin represents the amount of money earned per unit of product sold that contributes to covering fixed costs and generating profit (CM = SP – VC). Break-Even Point (BEP) Formulas Two primary formulas are used to calculate the break-even point. Units: BEP (Units) = Fixed Costs (FC) / Contribution Margin (CM) Revenue: BEP (Revenue) = Fixed Costs (FC) / (Selling Price (SP) – Variable Cost per Unit) Because both denominators speak to the same metric, both formulas give you the same measure of your Break-Even Point (BEP). APPLICATIONS OF BREAK-EVEN ANALYSIS Pricing Strategies Break-even analysis provides businesses with valuable insights into the relationship between pricing decisions and profitability. By analysing the impact of