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.


Mike said...

I love the idea of doing 'Catalog-style' cash sales on the side. Even in Pemba, which was on the highway, it was super frustrating to get any sort of major equipment... whenever I went to larger towns I would invariably have people ask me to find out the prices of certain large goods for them.

I guess it may not be a profitable business model for individuals (I'm assuming this is why it is so hard to buy equipment in rural Zambia), but when you already have agents working in these areas why not get them to do a little cash sales distribution on the side. The agents probably have figured out all the transportation issues and challenges, which should make it easier to provide that service.

Elizabeth said...

Wow! This sounds fantastic. When you first mentioned Rent-to-own I didn't realize it was going to be so big. Congrats!

Jessica said...

Hey Mark,

It's great to see that your rent-to-own idea is still moving forward. Sweet to see how innovation can work in Zambia!

Mark Brown said...

Wow, it sounds like you have a great little business plan and things are going pretty smoothly so far. Awesome work man.

I was wondering, who is responsible for the maintenance of the equipment while it is in the rental phase, and if it breaks can the renter abandon or are they some how contractually (or otherwise) bound?

Keep up the good work!
Mark Brown