Sunday, March 21, 2010

A real Rent-to-Own Update - March

Sometime back in October I started testing a business idea that I had, called Rent-to-Own. I started writing about it and promising updates, but have been terrible at that because I don’t know what to write. There is really too much to say.

Today, I figured that too much information is better than not enough information, keeping in mind that it is indeed the start of a business, so I can’t divulge everything (without jeopardizing the viability of it)


This week I have been travelling around the North-Western Province of Zambia to visit the 7 agents that are now working for Rent-to-Own. Two weeks ago I hired an assistant/accountant because I knew that I would be based in Lusaka, which is 1000km away. This assistant would be able to visit the agents on a regular basis so they don’t feel neglected. Six of the agents are new. I met them just 1 month ago and briefed them on the details of Rent-to-Own and asked them if they were interested. Some people deferred me to a better suited person in the community, others accepted right away. In total, I spent about 3 hours with each one, so this time I hoped to spend at least 24 hours with each one to ensure that they understand Rent-to-Own and all their responsibilities.

The following is a collection of notes and thoughts from the past week.

Here I am with one of the agents (this is actually from last month)


The first client we sat with was a very nice lady who was widowed 5 years ago and has thrived and grown her farm to about 5 hectares. I showed her the questionnaire which is designed to introduce herself and her business to me. She asked “what is your company name and where is it based – why don’t you haveit written on your questionnaire?” This took me a bit by surprise, and I quickly realized how amateur I was. We don’t have an official office address, or name, or even a logo, yet we expect people to share the ins-and-outs of their business activities with us. Oops. I guess every start-up has its amateur points.

Fork in the Road

The million dollar question on my mind lately has been – “do we become a distribution company with a catalogue?” So far, Rent-to-Own is a means for people who don’t have enough capital to obtain equipment that is much needed to grow their business. But what about all the people who do have cash and want the same equipment? Surprisingly (or not) in rural Zambia there aren’t any salesmen from the big equipment companies in the capital city. Without really trying to, I have set up a network of agents that are essentially salesmen for these companies, and they happen to have the option of doing Rent-to-Own. I imagine that each agent could sell about $20,000 worth of equipment each year – about half through rent-to-own and half through cash sales.

Back to the question – “do we become a distribution company with a catalogue?” – my best guess right now is YES. The primary goal is to get more equipment into the hands of rural entrepreneurs – and renting is expensive and risky, so better to sell whenever possible. The only possible ‘con’ to this would be people seeking to rent equipment who really aren’t able to pay it off, and they request equipment only because they see it in a catalogue. My thoughts are that the in-depth business plan and questionnaire, paired with trained agents, will filter out any of these scam artists.

Organizational Culture

It became obvious that some of the agents were more excited about the newly endowed popularity than they were about helping businesses or even about making a commission. (they earn 15% once all the money is paid) Quickly I remembered the reality in which these agents have lived in their whole lives. That is, in Zambia, there is a hierarchical culture within most organizations. This culture doesn’t allow for information to flow from the bottom to the top, so the boss seldom actually knows what’s really going on. The result is that there are very few role model managers in Zambia, and so when a person is promoted they automatically act the same way they saw their boss acting.

In Rent-to-Own I need to pay careful attention to the way I treat others, and also the way anyone within Rent-to-Own treats people involved in the business. My theory is that role modeling from the top will trickle down. This will ensure that problems are addressed quickly, otherwise, when a client (farmer or small business owner) is struggling, there is no chance for me or anyone else to assist them because we wont even know what we can do to improve our support.

Free Consultation

The best thing we do is force each client to do a business plan. Its amazing how many business owners here don’t even keep records, let alone plan their cash flows or strategy for the upcoming year. This week we completed 16 business plans with potential clients. I can imagine a bank asking for a business plan and getting nothing but blank stares…kinda like when we ask the business owner what their average sales are for the month of April. Everything is based on intuition. These owners know how to survive by cutting costs and trying to sell more, but most do it without really analyzing if they even made a profit at the end of the day.

For each Rent-to-Own client we sit for about 1 hour to analyze their business and then create a plan on how they can grow their business once they have the new equipment they desire. Its difficult to extract the information because there is a lack of clarity or records, and its even more difficult to get business owners to connect the plan to reality. Most see a lot of numbers – but don’t see the connection. In essence, we are providing them a service that would normally come from fairly high paid consultants.

The White Advantage

Although we chose people who were already respected in the community, its difficult for people to get excited when one person goes around saying he can get equipment to them for just 10% of the price, and that they can pay for it over 10 months. Some will think that the 10% will disappear and the equipment will never come, others believe that the agent is honest but that the program will take years to take off (which is unfortunately common amongst donor projects). Luckily, I am white, and when a white guy shows up twice in the same month, that means he’s serious, and everyone knows that the white guy has money…so chances are that the agent is trustworthy and the equipment will actually come.


A week in the bush wouldn’t be complete without a little witchcraft story. I decided to buy a tent for my travels because I like camping, and because I wanted to be closer to the agents (camping on their property) and because it’s cheaper than staying at a guest house (motel). The first few nights were great, no mosquitoes and the tent was holding up very well with the heavy rains. But last night we got in and turned on our wonderful LED light as we prepared our sleeping bags, and as if from nowhere, literally thousands of moths came to the top of our tent between the screen and the top rain-fly. My new employee, who is from the area, said the powder from the moths can cause a rash, and its likely bad to breath it in. I asked him where the moths came from – he said “there is a lot of witchcraft in this area”. Witchcraft is a really interesting aspect of Zambian culture. People believe that magic can happen against you if another person wishes it upon you. Jealousy is a common reason for one person to dislike another, and its always a freak thing. How do you explain why someone’s house was hit by lightening? Or why one person in a family got sick and died 2 days later, but no one else did? Same, how can you explain where thousands of moths came from? Of course they were attracted by the light – but still, it’s a bit freaky and when information is so limited, and science isn’t down to a science, then the default explanation is magic.

We closed off the light so the moths would leave. I guess tents have their weaknesses after all.

That’s my Rent-to-Own update. I’ll keep taking notes while in the field and write down the ones that I feel don’t jeopardize the business.

Thursday, March 11, 2010

Jesus has become tough.

Tough Love
Things have changed a lot in the past 2 months. Everything I know about Zambia continues to change, and luckily, its for the better.

My first two years here were largely about me discovering a new culture, and attempting to help out an amazing visionary who's life's work will have dramatically improved the lives of some 50,000 people. I lived and worked in a relatively well defined space, at home it was with a family, and at work it was with a well established business. This was a safe space, where my mistakes were never too big.

Today I was driving around Lusaka buying this and that for Rent-to-Own, and one of my stops was at a bearing store which I've been to at least 20 times. Like a handful of other shops, the workers get a kick out of calling me Jesus. There are definitely worse names to be called, so I play off their fun a bit.

Zambians seem to have an amazing ability to read into peoples lives. Whenever I'm feeling a bit down, they notice right away, whenever my mind is somewhere else, they recognize it. So today at the bearing shop, one of the guys says "Jesus has become tough". And I think he's right, I've changed and probably don't take the time to be soft and joke as much as I use to.

Ironically, I bought some $3 glasses today for when I'm riding my bicycle. I got it a week ago and have been using it a ton to get around town, some friends and I even created our own bike-gang. Finally today I got the shades to go with it. (and no, I wasn't wearing them in the store)

I did wear a Black t-shirt today.

The point is actually fairly serious. I've said "tough love is needed" a million times before, but is this really the way I'm heading?

I'll have to hear it a few more times before putting too much weight into it, the love side is still much bigger than the tough side. (in my mind at least)

To switch gears - here is a quick rent-to-own update.
EWB has given me a 6 month pilot period to test the viability, profitability and scalability of the idea. I set a target of 35 businesses for end of April. I also identified that the model, which is essentially EWB-me-agent-entrepreneur, had its weakest point at the agent level. I also set a target of 100 businesses by October (if the pilot continues). Quickly I realized that an agent can only handle about 20 or 30 businesses at one time, so I decided to aim for bringing on 5 new agents, rather than just 1 or 2.

Chiko and I set off on a tour of the province. We visited 7 of the 8 districts and hired on 6 new agents. I also quickly realized how much work it was going to be to visit each one and get them up to speed, and of course, keep them up to speed. They're going to be collecting money and trying to choose the most viable business ideas. So I decided to hire someone to help me out. On Saturday we're setting off together to visit each agent for two full days to go through the entire process of selecting businesses and explaining to entrepreneurs how the rent-to-own system works.

There are a thousand photos to post from the last trip, but I'll do that later. Lets just say that it was raining almost the entire time, but that every stop was worth it. We'd try to find a person who is running a business, is well trusted and really knows about all the activities in the area. Almost like clock work, we'd find someone and before we left town there were people coming up to us asking about rent-to-own.

Hope thats a good enough update. There are too many things to talk about. For now, its time to print some catalogues, go and do a few dozen business plans with the agents, train my new assistant, collect starting fees, buy the equipment, ship it up to the various places and then wait for the rest of the money to start rolling in.

There are a few ideas around making rent-to-own more profitable and potentially into a proper business. The ideas are testing my balance between wanting to connect Canada to Africa, and trying to just make something work. To be honest, I'm leaning towards just making it work, and leaving the lofty connecting to Canada part behind. Possibly more on that subject another time.