The Emerging Role (Future) Of Accounting

1. INTRODUCTION

Accounting has evolved as human beings have evolved and as the concepts of the accounting subject are directly coined out from its most fundamental principle of conservatism, it is not difficult to see why the style of accounting at every point in time has a direct link with the age. As man has developed from a primitive age to a modern interdependence age, living has advanced from being subsistent as a hunter-gatherer to a knowledge driven globalised world concept of ‘effectiveness turning to greatness’ and all along with this evolution, self accounting with the abacus has developed through stewardship accounting to financial accounting and now managerial accounting; which has a focus on decision making.

The Financial Accounting Standards Board (FASB) of the US which generally standardised and strengthened the globally adopted Generally Accepted Accounting Principles (GAAP) took significant strides in the year 2012 to come together with the International Accounting Standards Board (IASB) in a manner termed as ‘International Convergence’. Such a convergence is expected to gradually harmonise the GAAPs and the IFRS until they become one and the same in a bid to stream line corporate/company reports into a uniform process globally.

1.1 Statement of the Problem

There is no absolute certainty as to what the future holds for the Accounting Profession. It thus seems however, that the future age which definitely would be one of scientific advancement, would move man from greatness to something worthier for the time. Spiritualism, Environmentalism and Developmentalism could be key factors in the future age. This paper is to find out if Accounting itself would be more of a reality providing accurate solutions to financial problems where man’s ability to value natural capital fairly would give rise to a significant asset on the balance sheet in contrast to the industrial age when even man himself was regarded as labour and not being considered as important as the machines he operated.

2. LITERATURE REVIEW

This paper was approached from a content analysis view point – both conceptual and relational. A content analysis is “a research technique for the objective, systematic, and quantitative description of manifest content of communications” – (Berelson, 52). The conceptual analysis was simply to examine the presence of the problem, i.e. whether there is a stronger presence of positive or negative words used with respect to the specific argument while the relational analysis built on the conceptual analysis by examining the relationships among concepts. As with other sorts of inquiry, initial choices with regard to what is being studied determined the possibility of this particular paper.

2.1 Evolution of Accounting Theory

According to investopedia.com, Accounting Theory in the light of its evolution can be defined as the review of both historical foundations of accounting practice as well as the way in which accounting practices are verified and added to the study and application of financial principles. Accounting as a discipline is believed to have existed since the 15th Century. From that time to now businesses and economies have continued to evolve greatly. Accounting theory must adapt to new ways of doing business, new technological standards and gaps that are discovered in reporting mechanisms hence, it is a continuously evolving subject. As professional accounting organisations help companies interpret and use accounting standards, so do the Accounting Standards Board help continually create more efficient practical applications of accounting theory. Accounting is the foundation of efficient and effective business management and intelligent managerial decision making, without which businesses and trade world-wide would operate blindly and fatally. It is therefore necessary to link how it has evolved to its future role.

2.2 The Origin of Accounting

Luca Pacioli wrote a Maths book in 1494 (ehow) that consisted of a chapter on the mathematics of business. As this book is thought to be first official book on accounting, Luca Pacioli has severally been regarded as ‘the father of accounting’. In his Maths book, Pacioli explained that the successful merchant needed 3 things: sufficient cash or credit; an accounting system that can tell him how he is doing; and a good book keeper to operate it. Pacioli’s theory still holds today, it included both journals and ledgers and it is believed to have popularised the use of the double entry accounting that had been in place since the late 1300s.

2.2.1 The First Change in Accounting

During the depression of 1772, the Accounting profession went beyond book keeping to cost accounting. The theory and the idea were transformed into a method determining whether a business is operating efficiently or using an excess of labour and resources. The new theory of cost accounting allowed a trained book-keeper or an accountant to use the book kept to extract financial reports to show the efficiency represented by such data. This new idea led to the survival of businesses during the depression; business that would otherwise have failed without an intelligent management decision making informed by a cost accounting breakthrough.

2.2.2 The American Revolution/ British Courts Influence

The end of the American Revolution saw the first United States (US) governmental accounting system being created in 1789 and it was established to account for and manage the treasury of the US. The double entry practice and theory were adopted. The British courts ruled that they needed professional accountants to make financial information in relation to court cases. Chartered accounting bodies/ concepts were introduced in Britain (and in the US in particular, the Certified Public Accountant – CPA). In 1887, the first standardised exam emerged with Frank Broaker becoming US’s first CPA.

2.3 Modern Cost Accounting

This was first established by General Motors (GM) Company in 1923 and it developed methods that helped cut its costs and streamlined operations and this remained relevant for over 50 years. The new accounting techniques developed included return on investment, return on equity and GM’s flexible/adjustable budget concept.

2.4 Accounting Concepts and Conventions

This was established in US between 1936 and 1938 by the Committee on Accounting Procedure (CAP) thereby standardising Accounting practices for all companies throughout the US. In 1953, the Generally Accepted Accounting Principles (GAAP) was updated to new standards, CAP became Accounting Principles Board (APB) in 1959 and later in 1973, APB (having suffered from poor management) was replaced by Financial Accounting Standards Board (FASB) with greater powers and opinion for its professional stance.

2.5 International Financial Reporting Standards

FASB issued almost 200 pronouncements between 1973 and 2009 thereby establishing the foundation of Accounting Standards in use presently and is now making current moves to harmonise all accounting principles of GAAP with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB). It is widely believed that development of accounting profession in any nation and around the globe is a mixed effort of both accounting theoreticians and practicing accountants. Thus, the framework of accounting is a harmony of efforts whereby professional accounting bodies are usually in the lead of a path to regulation and standardisation of issues relating to accounting.

2.6 The Nigerian Scenario

In Nigeria, the case is not different from what has already been discussed. Most of the country’s accounting standards (concepts and conventions) were inherited from the British colonial masters. And because the world has indeed become a large global village with globalised accounting bodies supervising and making sure that all member countries are abreast with current Generally Accepted Accounting Principles, Nigeria has also tagged along making several public sector and private sector reforms the most recent and famous of which include the approval by the Federal Government in July 2010 to adopt International Public Sector Accounting Standards (IPSAS) for the public sector and the International Financial Reporting Standards (IFRS) for the private sector as a conscious effort to ensure a uniform chart of reporting system throughout the country by both the public sector and private sector.

2.7 International Convergence of Accounting Standards

This concept is both a goal and a path taken to reach such a goal. The FASB believed that the ultimate goal of convergence is a single set of high-quality, international accounting standards that, companies world-wide would use for both domestic and cross-border financial reporting. To this end, conscious efforts are being made by the FASB and the IASB to jointly eliminate the differences between the ‘GAAP’ and the ‘IFRS’. One such conscious effort was made on the April 5th 2012 when an update report was submitted to the Financial Stability Board Plenary on Accounting Convergence. The ever increasing demand by global capital markets driven by investors’ desire for high-quality internationally comparable financial information is as a result of the usefulness it is expected to immediately provide for decision making and thereafter accurate solutions to problem solving. The IASB was established 1st April 2001 as successor to International Accounting Standards Committee (IASC) and on March 1st 2001 the IASB, which is an independent accounting standard-setter based in London, England assumed the responsibilities for Accounting Standardisation. The IASB is responsible for issuing many accounting standards and pronouncements known as the International Financial Reporting Standards (IFRS).

3. PRESENTATION OF FINDINGS

To give a pictorial view to this paper, two (2) illustrations are used to make presentations (interpretations) of the findings. Illustration.1 traces the Evolution of Accounting; its principles, roles, concepts, professionalism, standardisation and internationalisation. Illustration.2 on the one hand relates Accounting evolution with Human evolution and on the other hand it broadens the understanding of the reader with regards to the subject matter. The reader (user) of this paper easily discovers a past-present-future view of the Role of Accounting and it purports to postulate finally what the future of Accounting could (or should) be. Self Accounting is not a terminology found in the literature of Accounting but is used here to depict any primitive Accounting system which was maintained by traders long before double-entry. Self Accounting, thus, was the past of Accounting when the role of Accounting was merely to have records of Incomes and Expenses, show Liabilities and not necessarily showing Assets and profits as distinguished from the personal or private earnings/estates of a trader. Assets at times might have been recorded as expenses. These are assumable because most businesses operated (and still operate) as sole-ownerships. The Present role of Accounting encompasses; stewardship, financial reporting and managerial decision making. These three provide the nexus of what Accounting is today. The stewardship aspect is so referred to because rich merchants in Europe and the Americas at that time trained their slaves to render book-keeping services. So the merchants themselves did not have to do the tasks. Financial Accounting was developed to give standard to financial reporting especially for the users of such reports who are largely to the businesses concerned. Managerial Accounting evolved to provide records that would aid the decision making process of the managers and owners of businesses. Generally all three roles of accounting as at present assist stakeholders to make good judgments regarding their dealings with businesses. These stakeholders may or ‘may not’ have rights to receive the reports so discussed. The stakeholders include; creditors and government (having rights to receive only financial reports); the shareholders, investors and management (who make use of both the financial reports and the managerial reports); the employee and the management team (who are the users of all the reports: book-keeping, financial reports and managerial reports); and the competitors, resident community and customers – who do not have rights to receive such reports but are able to retrieve financial reports (annual reports) to aid their decisions with regards any business of interest to them.

Having accurate records (reports) support good decision making but sometimes bad interpretation and judgment of the reports and their recorded results may lead to bad decisions taken. The three roles of accounting presently have been the bed-rock with which accounting standardisation of principles and procedures have evolved to date. The Emerging Role (Future) of Accounting then must be anticipated with keen readiness with regards to what should be probable. Illustration.2 would do justice to this concept.

Illustration.1- The Evolution of Accounting in the US (1300 – 2014)

Stewardship (prior 1300)

-Slaves trained to render basic book-keeping

Double Entry (1300)

-Introduction of Double Entry principles

Book-keeping improved (1494)

-Financial Reporting begins

Cost Accounting (1772)

-Managerial Accounting for Decision Making begins

Double Entry (1789)

-Principle of Conservatism fully adopted

Professionalism (1850)

-Concepts/Chartered bodies introduced

AICPA formed in US (1887)

-Providing standards and operational guidelines

-Certification process begins

Qualifying Exams (1897)

-First standardised exams introduced

Cost Accounting Revamped (1923)

-Modern cost accounting methods developed by General Motors Company and remained relevant beyond 1973

Concepts and Conventions (1936)

-Conservatism expanded into other concepts and conventions

-US Committee on Accounting Procedure (CAP) establishes standard accounting practices

CAP Evolves (1953)

-New standards of GAAP fully established

CAP further evolves (1959)

-CAP becomes APB (Accounting Principles Board)

APB evolves (1973)

-Due to poor management and inability to Accounting theory as desired, APB is replaced by FASB

FASB established (1973)

-Financial Accounting Standards Board replaces APB and makes over 200 pronouncements up to 2009

-The foundation of accounting Standards all over the world further strengthened

Influence from the England (2001)

-IASB established as an independent ‘International Accounting Standards-Setter’ based in London, England

-IASB assumes responsibilities from IASC on March 1st 2001

FASB and the International Convergence (2012-2014)

-GAAP (established by the FASB) is being considered for merger into the IFRS (established by the IASB)

3.1 Reality Accounting versus the Future Role of Accounting?

What is Reality Accounting and what then should Reality Accounting encompass? Wikipedia.com defines reality as the totality of all things, structures (actual and conceptual), events (past or present) and phenomena whether observable or not. Reality is thus seen as a term that links ideologies to world views or part of them (conceptual frameworks). Reality Accounting is close to ‘Fair Value Accounting’, which is both a basis and theory of accounting. And it seems to be transforming into the Future Role of Accounting. In Financial Accounting, it is easily seen that accounting reflects corporate and economic realities as they are, though it is common sense to know that accounting cannot adequately reflect reality particularly in relation to the technical limitation of double-entry bookkeeping and Fair Value Accounting. As part of the changes emanating from Reality Accounting, a new concept of ‘Natural Capital’ has surfaced. At the Rio+20 Summit on Sustainable Development organised by the United Nations Conference for Sustainable Development (UNCSD), which took place in Brazil on 20-22 June 2012. At the Conference, a Natural Capital declaration was made such that Natural capital is now understood to be comprising of all Earth’s natural assets (soil, air, water, flora and fauna) and the ecosystem services resulting from them, which make human life possible. It estimated that ecosystem goods and services from natural capital are worth trillions of US dollars per year and constitute food, fibre, water, health, energy, climate security and other essential services for everyone.

3.2 The Concept of Natural Capital

Neither the services, nor the stock of Natural Capital that provides them, are adequately valued compared to social and financial capital despite being fundamental to all that exists. The daily use of Natural Capital remains grossly undetected within our financial system. There is therefore the need to use Natural Capital in a manner that is sustainable. All stakeholders, including the private sector and governments must begin to appreciate and account for the use of Natural Capital and recognise the true cost of its economic growth as well as sustaining human wellbeing now and in the future.

3.3 Natural Capital Framework

Natural Capital though treated as a free good but must be seen as part of a global pool of wealth for which governments must act now and wisely to create a framework that shall regulate, reward or tax the private sector for its use. Reliable policy frameworks that can report the value, use and depletion of natural capital must be the intent of any government desirous of making a good start with this new accounting phenomenon. Deeper economic influence is given to accounting under Reality Accounting since all that are regarded as real are only truly real in their consequence and not in their physical. Therefore the value of Natural Capital for instance would be the value ascertained after considering various factors that give rise to such valuation. These factors include the size, presence of mineral resources, location, other natural resources, presence of plant and animal life etc.

Illustration.2- The Emerging Role (Future) of Accounting

HUMAN AGE………….HUMAN EVOLUTION…………………………….ACCOUNTING EVOLUTION

Primitive age………..Hunter – gatherer……………………………..Self Accounting

(Independence)……(Subsistent living)……………………………..(Abacus)



Colonial age…………Colonialisation…………………………………Stewardship Accounting

(Dependent age)…..(Being efficient)……………………………….(Book-keeping)



Modern Age………….Technology driven by Industrialisation…….Financial Accounting

(Independence)…….(Being effective)………………………………(Financial Reporting)



Modern Age………….Technology driven by Knowledge…………..Management Accounting

(Interdependence)…(From effectiveness to greatness)…………(Decision making)

?↓

The Future Age………Technology driven by advancements……..Reality Accounting?

(Efficiency…………….Environmentalism?…………………………..(Not as a tool for decision

based on……………..Developmentalism?………………………….making but providing

Interdependence……Spiritualism?…………………………………..accurate solutions to

…………………………(From greatness to what?)………………….financial problems)

4.0 CONCLUSION

As man seeks greater heights in a modern world full of scientific and research discoveries, Accountants must ponder what the emerging role of their profession must be. From merely providing information on the wellbeing of a business to financial reporting as a corporate responsibility and now decision making managerial approach for future forecasts, what then does that future hold for accounting or how is accounting expected to remain professional and relevant in that future which seems would be molded by environmental and developmental challenges all over the globe. As accurate records and reports have supported good decision making though sometimes bad interpretation and judgment of the reports and their recorded results have led to bad decisions taken, the present roles of accounting, which have formed the bed-rock with which accounting standardisation of principles and procedures have evolved are now facing evident changes.

Under the scope of Reality Accounting, it is clearly observed that concepts such as International Convergence, Natural Capital, Environmentalism, Developmentalism and Fair Value Accounting will sooner than latter set the path for the future of accounting.

This paper is to stimulate academic arguments for or against the subject matter in order to bring to the awareness of accountants about a subconscious change that is already taking place. It is recommended therefore that seasoned researchers should come forth with further ideas, summaries and reviews that can boost a clear pathway for the future of accounting.

REFERENCES

1. http://www.investopedia.com (Accounting Theory)

2. http://www.eHow.com (The History of Accounting Theory)

3. Berelson, Bernard. Content Analysis in Communication Research. New York: Free Press, 1952

How Often Should You Change Your Website Design?

After spending loads of money on a good website design and after a couple of years of seeing the same old page, webmasters usually get bored and look out for new options and a significant overhaul of the layout and design. Let’s just say that they want an excuse to change the website design. It’s happened to all of us who have been in the industry since a few years. This article explains when and why to allow your website to evolve into something better.

Don’t change the core

While the webmaster and the website owner maybe thoroughly bored of their website, a visitor or user maybe most comfortable with the same design. Over a period of time, your users and visitors have mastered the interface of your website and have memorized every nook and cranny which is useful to them. They are most comfortable with navigating your existing site and have figured out exactly what is where. A sudden face lift may trigger panic and confusion, especially if you have not sensitized and trained up your users for the switch. Hence it is best to avoid changing the core layout and theme of your website, when it is not necessary and only make modifications to the existing layout.

Festivals

Changing parts of your site during festivals and special day’s can draw some much needed attention to it. Many website’s change color based on the season, with the site sporting a yellow or bright colored theme during summer and a cool blue or white theme during the winter season. Small motifs and the festival mascots adorn the site’s to signify the website’s celebration of the festival. Many Europe or America based businesses deck up their site and offer huge discounts during Thanksgiving and Christmas. In India and South East Asia, many businesses offer promotional pricing during Diwali and the Hindu New Year. Businesses based in the Middle East, put up decorations and fancy banners during Eid to connect with their local clients and prospects.

Events

When a company is hosting or organizing a trade show or large event for their industry, its very overtly visible on their website. Changing your website to reflect the theme of your event or conference can help boost the brand image and positioning of the event and your website. Not only will related traffic flow through your website, but even event related sales are sure to get a boost when your website is also in sync with the event. If you have setup a stall at an event or trade show or exhibition, it will surely benefit you if your website also carries the event branding and your location at the event. Many webmasters renovate the home page or at least a major part of it and dedicate that space to provide details of the event.

Search Engine changes

Search Engine compliance is one of the main things for a webmaster or website owner to look out for. If your website does not adhere to the best practices or guidelines of Search Engines, it is best to revamp the website to ensure compliance. Search Engines compliance takes priority over design and layout. Businesses spend hundreds of dollars on getting their website optimized for Search Engines. Many businesses spend in thousands to correct mistakes which have led to their downfall in Search Engines. When Search Engine ranking is concerned, its best to ensure that your website complies with the requirements at all times.

New Technology

As programming languages evolve, every website made with old programming techniques should also be upgraded. What HTML standards were used in 2000 are mostly phased out and replaced with new and modern standards which modern devices and browsers understand. Outdated code can become a nuisance for users of modern devices and may also lead to lower rankings in Search Engines. The latest HTML5 and CSS3 standards incorporate features for efficient use of system resources while reducing duplication of coding. If your website is using ancient HTML code, it will not validate with the latest standards and will fail in many newer browsers. Its best to overhaul your entire site with the latest CSS scripting techniques as soon as possible.

Better usability

With the advent of tablet PCs and internet enabled smartphones, there is an urgent need for Responsive Design to enhance the site visitor’s experience on those devices. Most websites do not have any special optimization for viewing on mobile devices. Not many webmasters even know that you need to optimize the site for smaller screens. Many who are aware of this try and take shortcuts by using software and scripts to "mobify" their website. All it takes is just some modification in CSS. However, if you are really interested in serving up quality content on phones and tablets, it is best to make a mobile website specifically designed for those devices and browsers.

Don’t forget to make Backups of your website before you try out any design changes or allow others to make changes to your website.

How to Create Your Own Product 2 – Setup and Marketing Approaches

MODULE 1

CHAPTER 12

How to Create Your Own Product 2

– Setup and Marketing Approaches

1.0 Introduction

2.0 Objectives

3.0 Main Content

3.1 Definition of Business Model

3.1.1. Types of Business Model

3.1.2 Email Marketing (Freemium Mixed Model)

3.2 Experts and Friends Appraisals

3.3 Payment Processor

3.4 Traffic, Traffic, Traffic

3.5 Launching Your Product

3.6 Two Important Decisions

3.7.0 Selling on Your Own Personal Website

3.7.1 Benefits

3.7.1.1 Be Your Own Boss

3.7.1.2 Cashing in on Your Virtual Authority

3.7.1.3 Ever-flowing Streams of Residual Income

3.7.1.4 More Opportunities

3.7.1.5 Top Secret Reason Why You Should Create Your Own Product

3.7.1.6 Expert-In-The-Making

3.8 Challenges

3.9 Selling Your Products on Third Party Websites

3.10 You Are In For the Long Haul

3.11 Rinse and Repeat

4.0 Conclusion

5.0 Summary

6.0 Assignment

1.0 Introduction

I covered most parts of this process in the preceding chapter. I purposely did that so I can have enough time and space to discussed other critical factors that may affect the profitability of your digital product(s).

The area so far covered include:

  • The Process
  • The Act and the Art, etc.

The following areas are to be covered here in details:

  • Your Business Model
  • Your Long-term Strategy
  • Friends and Expert Appraisals
  • Payment Processor
  • Product Launch
  • Traffic, Traffic, Traffic
  • Two Important Decisions
  • Among Others.

2.0 Objectives

At the end of this ecourse, you will be able to:

  • Know the different methods you can use to market your information product in online marketplace
  • Choose the best method to market your information product for higher profits
  • Choose the best method to market your information product for better control

3.0 Main Content

3.1 Definition of Business Model

Business model is the approach you are using to run your own business, in this case selling your own information product.

There are many definitions of the phrase ‘business model’.

It is only one of them that I am going to use here because, it is not too academic for our practical use.

That one is the definition provided by Investopedia which states inter alia:

‘A business model is the way in which a company generates revenue and makes a profit from company operations’.

3.1.1 Types of Business Model

In this case I want you to decide ab initio on which of the following models you are going to use to do your business:

  • Information Marketing (Mixed Soft/Hard Selling)
  • Email Marketing (Freemium Mixed Model)
  • Blogging (Mixed Soft/Hard Selling)
  • Guest Blogging (Mixed Soft Selling)
  • Forum Marketing (Soft Selling)
  • Niche Site Model
  • Review Site Model
  • There are many more models that could be listed…

You need to get used to one model and stick to it for a while, when you have become conversant with it then you add another one and so on and so forth.

For this reason I will only review only one model here.

3.1.2 Email Marketing (Freemium Mixed Model)

This is the best, simplest and possibly the fastest model to set up your online business and run it into 6 or even 7 figure in the shortest possible time, initially using free and later even paid resources to scale it up for higher profitability.

Running your business on this model involves 5 simple steps namely:

  1. Traffic
  2. One-page website
  3. Autoresponder
  4. Thank You Page
  5. Broadcasting (to email or phone sms)

You can find details of these steps here.

3.2 Experts and Friends Appraisals

Whichever model you choose to run your business on, do not forget to test-run it by yourself as well as using some experts and your friends, before opening it up to the public.

The experts are people with impeccable experiences in your chosen field who are willing to mentor you for success. They will later become your business associates (Joint Ventures) or provide some revered testimonials that will positively impact on your profitability.

On the other hand, you are going to sell to ordinary people like your friends and relations, thus their own side of views can give you some insights that will make your product to be readily absorbed in the market.

So give a sample copy of your own newly created product to them and request for their assessment and testimonials.

3.3 Payment Processor

The next thing to consider is how you intend to collect your money from the sales you make for your information product.

Today in most parts of the world, you can use online payment processor to sale any kind of product on the internet. This was not the case ten years ago when I first began this business.

Just Google for payment processor and you will have enough to choose from, ranging from PayPal, Shopify, WooCommerce, 2CheckOut, Stripe, AuthourizeNet, Amazon Payment, to Google Wallet.

The setting up process is getting easier by the day. Also the instructions on how to integrate them to your website are available on each site. Go there.

3.4 Traffic, Traffic, Traffic

Even when you plan to use other marketers to sell your products as affiliates, you will still need to do marketing by yourself to some extent. This is advisable so that you can get some proves to convince your affiliates on the marketability of your product.

For most beginners with little or no budget, using social media is the preferred way to go. This should be combined with other methods of free or inexpensive traffic like EzineArticles.

I will write more on this in another chapter of this ecourse.

3.5 Launching Your Product

The most important thing to do before your product launch is: planning.

Make a detailed plans of how you are going to swing the market momentum to your side to ensure the profitability from your product sales.

Such plan may include but not limited to:

a) Plan your launch date to start as early as possible, i.e. early planning

b) Get the Big Wigs of the Industry involved – possible make them joint venture partners, give certain percent of your profit.

  1. Make it easy for many people to learn about your product – Social Media
  2. Make Your Product Mobile-Friendly – today the mobile web holds the market sway, it will be foolhardy to ignore it
  3. Make it an Event
  4. Create a Suspense towards the launch date to heighten desire and expectation. This has been proven to increase sales on the launch date.
  5. Take beta pre-dated orders at a reduced price
  6. Use a Press Release
  7. Focus on your Avatar/Persona and not your product
  8. Create Your Universal Selling Point (USP)

There are other details on product launches here.

3.6 Two Important Decisions

There are 2 important decisions that you have to make after your new product is ready for sell. These are:

  1. To sale it on your own personal website or
  2. To sale it on a Third Party Website

3.7.0 Selling on Your Own Personal Website

If you are selling on 3rd party websites, most of the steps discussed above will be a walkover for you, as the company will do them on your behalf.

However there are some benefits that you will also miss for doing so.

3.7.1. Benefits

Such benefits include those listed below among others.

3.7.1.1 Be Your Own Boss

Selling on your own website controlled (managed, hosted) by yourself is the best way to become your own boss. You set your prices, you set your targets, you set your commissions, you set your own time of work, and you set and plan for the level of profits that you want to make.

Have you seen any other business that is sweeter than this?

You are really your own boss in the truest sense of the word! You are in full control and it is you that determines all of your monetization methods.

Building your information product is actually the easiest way to achieve everything that you want in life as well as helping others to realise their destinies and their dreams.

But you will miss all these and subsequent ones if you are selling on third party sites.

3.7.1.2 Cashing in on Your Virtual Authority

As a product owner you gradually build up your Goodwill over time. Of course I suppose that you and everyone else know the importance of a Goodwill. If you want to know more, ask the corporate giants and they will tell you that their Goodwill is worth Billions of Dollars.

And that is worth relying on over time as a product owner. To develop a high-value Goodwill, you need to develop a good product and not a scrap, as well as use your blog, vlog and social media skilfully.

3.7.1.3 Ever-flowing Streams of Residual Income

Residual income is type of income that you don’t regularly and actively work for it to provide a continuous cashflow. You only set up and forget, and the money keep flow ceaselessly to your bank account.

This is different from employment income that you have to work for it on a daily basis.

For your own information product, the initial work may be intensive, but subsequently, you only update it once in a while to keep up with trends in your industry.

The work is decrementally negligible while the product is incrementally profitable.

This means if you have 2 or more products, you can quickly attain a special status: unemployable.

3.7.1.4 More Opportunities

At this level of success you will be open to opportunities to joint venture with the captains of the Industry. And do not be surprise if you thenceforth experience not just success, but astronomical success: unlimited income.

Deals website like Groupon, Bloggers and other marketers with large Lists when properly targeted will open up a whole new world of internet marketing for you full of unlimited pleasant surprises.

3.7.1.5 Top Secret Reason Why You Should Create Your Own Information Product

– Affiliate Program. This is one main reason why you should own some information products online. When many people are selling your products for you, you will surely experience income explosion in your own business.

I have already noted elsewhere that affiliates bring to your business their own expertise as well as their large lists of free and targeted traffic. These are great assets that will have great impact on your business.

Setting up an affiliate program is getting easier by the day. Software like iDevAffiliate and Post Affiliate Pro are almost turning the process of selling your own products through affiliates to an all comers’ affairs.

3.7.1.6 Expert-In-The-Making

Everyone see you as an expert when you write a book. Even if you are just beginning, it is only you and your spouse that know that secret – that you are only a beginner.

If your info product is professionally written (even by a Ghostwriter or Ghostworker as they are often referred to) it opens up several windows of opportunities for you. These include but not limited to Conference Speaking, Guest Blogging, Joint Venturing, etc.

Purse for a while and think on these avenues, it is only expert that are invited to participate at such meetings. But even one product owned by you can open up those opportunities for you. As a newbie when they begin to come, do not be afraid to accept those invitations and confidently perform your work.

The basic truth is that even with this ecourse alone, you know more that 95% of your audience, you are already an expert (at least in the making).

3.8 Challenges

But there are some challenge along the way such as:

– having to deal with Customer Service and

– the Learning Curve involved, etc.

It is for these very reasons that some people prefer using third party websites.

3.9 Selling Your Products on Third Party Websites

There are so many third party websites that are waiting and ready to sell your own product for you. They include but not limited to ClickBank, Send Owl, JVZoo, Payspree, Commission Junction, DPD, Post Affiliate Pro, iDevAffiliate, and others.

You can also sell at Amazon by creating your product in their special format known as Kindle Book to be downloadable and readable in their special device known as the Amazon Kindle Device.

The main advantage all of them have are:

  • the setup speed (some are free, others one-time payment)
  • their wide array of experienced affiliate marketers,
  • payment processor
  • professional customer service and
  • free promo

But they will take the control of most aspect of your business from you. They can also de-list you at will and without any specified reason(s).

I want to state here that for obvious reason, it is better to learn and use both systems to maximize your profits over time.

3.10 You Are In For the Long Haul

When you have a product in the market, you are in this business for the long-term benefits.

What you do now will surely hunt you in the future for good or bad. So be a man of your own word, deliver on your promises and when not possible give cogent reason(s) as soon as possible and make refunds where applicable.

That is: – Transparency.

Over time this will result in positive reputation and a good public image for your business. These are the souls of Internet business.

Notice that most people that you deal with in this business do not know you in person. They only act on trust, please do everything possible on your side to preserve that trust.

Once beaten, twice ashamed, I think that’s a valid saying here.

As you might have suspected this is not a get-rich-quick kind of business. So if you were looking for such type of business, please dumb this one and look elsewhere.

However if you can pull yourself through the learning curve, I can assure you that there is no other business that can pay you returns on your investment that is as high as this one.

You will be unemployable!

3.11 Rinse and Repeat

The process of creating a digital product is as simple as that. Well, as you become more experienced, you can go on to add the fancies and jingles, but for someone who wants to make money as soon as possible, this is all that you will need to set up a successful business.

As the profits roll in, you can then think of other ways to upgrade your product for greater profits. You can also expand to create products in others niches with the sound reputation you built from your initial market niche.

Never be discouraged if you don’t make much money with your first info product. You only need to make sure that it is as solid as gold in terms of quality.

Down the road you will discover that it was the launchpad to your newfound success, a major milestone that shot you to limelight.

4.0 Conclusion

With a good product to sell, you need a little knowledge of market research, SEO and copywriting to launch out profitably. Some of them have been covered while others will soon be covered in other parts of this ecourse.

5.0 Summary

This is the concluding part of what you need to do to set up the information product you created and sell profitably.

Two powerful software (websites shown as images) were also introduced to simplify the process for you.

Next, you will need to create and set up a salespage and that is what we will discuss in the immediate chapter of this ecourse

6.0 Assignment

By now you might have started this business using Affiliate Product. This is important so that you can be making money along the way while working on your new product.

Please go over the last two chapters again and start experimenting on those ideas in your mind.

Yes, you can!

Royal Entrepreneurship – The Case of Royal Bank Zimbabwe Ltd Formation

The deregulation of the financial services in the late 1990s resulted in an explosion of entrepreneurial activity leading to the formation of banking institutions. This chapter presents a case study of Royal Bank Zimbabwe, tracing its origins, establishment, and the challenges that the founders faced on the journey. The Bank was established in 2002 but compulsorily amalgamated into another financial institution at the behest of the Reserve Bank of Zimbabwe in January 2005.

Entrepreneurial Origins

Any entrepreneurial venture originates in the mind of the entrepreneur. As Stephen Covey states in The 7 Habits of Highly Effective People, all things are created twice. Royal Bank was created first in the mind of Jeffrey Mzwimbi, the founder, and was thus shaped by his experiences and philosophy.

Jeff Mzwimbi grew up in the high density suburb of Highfield, Harare. On completion of his Advanced Level he secured a place at the University of Botswana. However he decided against the academic route at that time since his family faced financial challenges in terms of his tuition. He therefore opted to join the work force. In 1977 he was offered a job in Barclays Bank as one of the first blacks to penetrate that industry. At that time the banking industry, which had been the preserve of whites, was opening up to blacks. Barclays had a new General Manager, John Mudd, who had been involved in the Africanisation of Barclays Bank Nigeria. On his secondment to Zimbabwe he embarked on the inclusion of blacks into the bank. Mzwimbi’s first placement with Barclays was in the small farming town of Chegutu.

In 1981, a year after Independence, Jeff moved to Syfrets Merchant Bank. Mzwimbi, together with Simba Durajadi and Rindai Jaravaza, were the first black bankers to break into merchant banking department. He rose through the ranks until he was transferred to the head office of Zimbank – the principal shareholder of Syfrets – where he headed the international division until 1989.

The United Nations co-opted him as an advisor to the Reserve Bank in Burundi and thereafter, having been pleased by his performance, appointed him a consultant in 1990. In this capacity he advised on the launch of the PTA Bank travellers’ cheques. After the consultancy project the bank appointed him to head the implementation of the programme. He once again excelled and rose to become the Director of Trade Finance with a mandate of advising the bank on ways to improve trade among member states. The member states were considering issues of a common currency and common market in line with the European model. Because the IFC and World Bank had unsuccessfully sunk gigantic sums of funds into development in the region, they were advocating a move from development finance to trade finance. Consequently PTA Bank, though predominantly a development bank, created a trade finance department. To craft a strategy for trade finance at a regional level, Mzwimbi and his team visited Panama where the Central Americans had created a trade finance institution. They studied its models and used it as a basis to craft the PTA’s own strategy.

Mzwimbi returned to Zimbabwe at the conclusion of his contract. He weighed his options. He could rejoin Barclays Bank, but recent developments presented another option. At that time Nick Vingirai had just returned home after successfully launching a discount house in Ghana. Vingirai, inspired by his Ghanaian experience, established Intermarket Discount House as the first indigenous financial institution. A few years later NMB was set up with William Nyemba, Francis Zimuto and James Mushore being on the ground while one of the major forces behind the bank, Julias Makoni, was still outside the country. Makoni had just moved from IFC to Bankers’ Trust, to facilitate his ownership of a financial institution. Inspired by fellow bankers, a dream took shape in Mzwimbi’s mind. Why become an employee when he could become a bank owner? After all by this time he had valuable international experience.

The above experience shows how the entrepreneurial dream can originate from viewing the successes of others like you. The valuable experiences acquired by Mzwimbi would be critical on the entrepreneurial journey. An entrepreneurial idea builds on the experiences of the entrepreneur.

First Attempts

In 1990 Jeff Mzwimbi was approached by Nick Vingirai, who was then Chairman of the newly resuscitated CBZ, for the CEO position. Mzwimbi turned down the offer since he still had some contractual obligations. The post was later offered to Gideon Gono, the current RBZ governor.

Around 1994, Julias Makoni (then with IFC), who was a close friend of Roger Boka, encouraged Boka to start a merchant bank. At this time Makoni was working at setting up his own NMB. It is possible that, by encouraging Boka to start, he was trying to test the waters. Then Mzwimbi was seeing out the last of his contract at PTA. Boka approached him at the recommendation of Julias Makoni and asked him to help set up United Merchant Bank (UMB). On careful consideration, the banker in Mzwimbi accepted the offer. He reasoned that it would be an interesting option and at the same time he did not want to turn down another opportunity. He worked on the project with a view to its licensing but quit three months down the line. Some of the methods used by the promoter of UMB were deemed less than ethical for the banking executive, which led to disagreement. He left and accepted an offer from Econet to help restructure its debt portfolio.

While still at Econet, he teamed up with the late minister Dr Swithun Mombeshora and others with the intent of setting up a commercial bank. The only commercial banks in the country at that point were Standard Chartered, Barclays Bank, Zimbank, Stanbic and an ailing CBZ. The project was audited by KPMG and had gained the interest of institutional investors like Zimnat and Mining Industry Pension Fund. However, the Registrar of Banks in the Ministry of Finance, made impossible demands. The timing of their application for a licence was unfortunate because it coincided with a saga at Prime Bank in which some politicians had been involved, leading to accusations of influence peddling. Mombeshora, after unsuccessfully trying to influence the Registrar, asked that they slow down on the project as he felt that he might be construed as putting unnecessary political pressure on her. Mzwimbi argues that the impossible stance of the Registrar was the reason for backing off that project.

However other sources indicate that when the project was about to be licensed, the late minister

demanded that his shareholding be increased to a point where he would be the majority shareholder. It is alleged that he contended this was due to his ability to leverage his political muscle for the issuance of the licence.

Entrepreneurs do not give up at the first sign of resistance but they view obstacles in starting up as learning experiences. Entrepreneurs develop a “don’t quit” mind-set. These experiences increase their self -efficacy. Perseverance is critical, as failure can occur at any time.

Econet Wireless

The aspiring banker was approached, in 1994 by a budding telecommunication entrepreneur, Strive Masiyiwa of Econet Wireless, to advise on financial matters and help restructure the company’s debt. At that time Mzwimbi thought that he would be with Econet probably for only four months and then return to his banking passion. While at Econet it became apparent that, once licensed, the major drawback for the telecommunication company’s growth would be the cost of cell phone handsets. This presented an opportunity for the banker, as he saw a strategic option of setting up a leasing finance division within Econet that would lease out handsets to subscribers. The anticipated four months to licensing of Econet dragged into four years, which encompassed a bruising legal struggle that finally enabled the licensing against the State’s will. Mzwimbi’s experience with merchant banking proved useful for his role in Econet’s formation. With the explosive growth of Econet after an IPO, Mzwimbi assisted in the launch of the Botswana operations in 1999. After that, Econet pursued the Morocco licence. At this stage, the dream of owning a bank proved stronger than the appeal of telecoms. The banker faced some tough decisions, as financially he was well covered in Econet with an assured executive position that would expand with the expansion of the network. However the dream prevailed and he resigned from Econet and headed back home from RSA, where he was then domiciled.

His Econet days bestowed on him a substantial shareholding in the company, expanded his worldview and taught him vital lessons in creating an entrepreneurial venture. The persistence of Masiyiwa against severe government resistance taught Mzwimbi critical lessons in pursuing his dream in spite of obstacles. No doubt he learnt a lot from the enterprising founder of Econet.

Debut Royal Bank

On his return in March 2000, Mzwimbi regrouped with some of his friends, Chakanyuka Karase and Simba Durajadi, with whom he had worked on the last attempt at launching a bank. In 1998 the Banking Act was updated and a new statutory instrument called the Banking Regulations had been enacted in the light of the UMB and Prime Bank failures.

These required that one should have the shareholders, the premises and equipment all in place before licensing. Previously one needed only to set up an office and hire a secretary to acquire a banking license. The licence would be the basis for approaching potential investors. In other words it was now required that one should incur the risk of setting up and purchasing the IT infrastructure, hire personnel and lease premises without any assurance that one would acquire the licence. Consequently it was virtually impossible to invite outside investors into the project at this stage.

Without recourse to outside shareholders injecting funds, and with minimal financial capacity on the part of his partners, Mzwimbi fortuitously benefited from his substantial Econet shares. He used them as collateral to access funds from Intermarket Discount House to finance the start up – acquired equipment like ATMs, hired staff, and leased premises. Mzwimbi recalls pleading with the Central Bank and the Registrar of Banks about the oddity of having to apply for a licence only when he had spent significant amounts on capital expenditure – but the Registrar was adamant.

Finally, Royal Bank was licensed in March 2002 and, after the prerequisite pre-opening inspections by the Central Bank, opened its doors to the public four months later.

Entrepreneurial Challenges

The challenges of financing the new venture and the earlier disappointments did not deter Mzwimbi. The risk of using his own resources, whereas in other places one would fund a significant venture using institutional shareholders’ capital, has already been discussed. This section discusses other challenges that the entrepreneurial banker had to overcome.

Regulatory Challenges and Capital Structure

The new banking regulations placed shareholding restrictions on banks as follows:

*Individuals could hold a maximum of 25% of a financial institution’s equity

*Non-financial institutions could hold a maximum of 10% only

*A financial institution however could hold up to a maximum of 100%.

This posed a problem for the Royal Bank sponsors because they had envisaged Royal Financial Holdings (a non-financial corporate) as the major shareholder for the bank. Under the new regulations this could hold only 10% maximum. The sponsors argued with the Registrar of Banks about these regulations to no avail. If they needed to hold the shares as corporate bodies it meant that they needed at least ten companies, each holding 10% each. The argument for having financial institutions holding up to 100% was shocking as it meant that an asset manager with a required capitalisation of $1 million would be allowed by the new law to hold 100% shareholding in a bank which had a $100 million capitalisation yet a non-banking institution, which may have had a higher capitalisation, could not control more than 10%. Mzwimbi and team were advised by the Registrar of Banks to invest in their personal capacities. At this point the Reserve Bank (RBZ) was simply involved in the registration process on an advisory basis with the main responsibility resting with the Registrar of Banks. Although the RBZ agreed with Mzwimbi’s team on the need to have corporations as major shareholders due to the long term existence of a corporation as compared to individuals, the Registrar insisted on her terms. Finally, Royal Bank promoters chose the path of satisficing- and hence opted to invest as individuals, resulting in the following shareholding structure:

*Jeff Mzwimbi – 25%

*Victor Chando – 25%

*Simba Durajadi- 20%

*Hardwork Pemhiwa- 20%

*Intermarket Unit Trust – 2% (the only institutional investor)

*Other individuals – less than 2% each.

The challenge to acquire institutional investors was due to the restrictions cited above and the requirement to pump money into the project before the licence was issued. They negotiated with TA Holdings, which was prepared to take equity holding in Royal Bank.

So tentatively the sponsors had allocated 25% equity for Zimnat, a subsidiary to TA Holdings. Close to the registration date, the Zimnat negotiators were changed. The incoming negotiators changed the terms and conditions for their investment as follows:

*They wanted at least a 35% stake

*The Board chairmanship and chairmanship of key committees – in perpetuity.

The promoters read this to mean their project was being usurped and so turned TA Holdings down. However, in retrospect Mzwimbi feels that the decision to release the TA investment was emotional and believes that they should have compromised and found a way to accommodate them as institutional investors. This could have strengthened the capital base of Royal Bank.

Credibility Challenges

The main sponsors and senior managers of the bank were well known players in the industry. This reduced the credibility gap. However some corporate customers were concerned about the shareholding of the bank being entirely in the hands of individuals. They preferred the bank risk to be reduced by having institutional investors. The new licensing process adversely affected access to institutional investors. Consequently the bank had institutional shareholders in mind for the long term. They claim that even the then head of supervision and licensing at RBZ, agreed with the promoters’ concern about the need for institutional investors but the Registrar of Banks overruled her.

Challenges of Explosive Growth

The strategic plan of Royal Bank was to open ten branch offices within five years. They planned to open three branches in Harare in the first year, followed by branches in Bulawayo, Masvingo, Mutare and Gweru within the next year. This would have been followed by an increase in the number of Harare branches.

From their analysis they believed that there was room for at least four more commercial banks in Zimbabwe. A competitor analysis of the industry indicated that the government controlled Zimbank was the major competitor, CBZ was struggling and Stanbic was not likely to grow rapidly. The bigger banks, Barclays and Standard Chartered, were likely to scale down operations. The promoters of the bank project had observed in their extensive international experie nce that whenever the economy was indigenised in Africa, these multinational banks would dispose of their rural branches. They were therefore positioning themselves to exploit this scenario once it presented itself.

The anticipated opportunity presented itself earlier than expected. On an international flight with the Standard Chartered Bank CEO, Mzwimbi, confirmed his interest in a stake of the bank’s disinvestments which was making rounds on the rumour mill. Although surprised, the multinational banker agreed to give the two month old entrepreneurial bank the right of first refusal on the fifteen branches that were being disposed of.

The deal was negotiated on a lock, stock and barrel basis. When the announcement of the deal was made internally, some employees resisted and politicised the issue. The Standard Chartered CEO then offered to proceed on a phased basis with the first seven banks going through, followed by the others later. Due to Mzwimbi’s savvy negotiating skills and the determination by Standard Chartered to dispose of the branches, the deal was successfully concluded, resulting in Royal Bank growing from one branch to seven outlets within the first year of operation. It had exceeded their projected growth plan.

Due to what Mzwimbi calls divine favour, the deal included the real estate belonging to the bank. Interestingly, Standard Chartered had failed to get bank buildings on lease and so in all small towns they had built their own buildings. These were thus transferred within the deal to Royal Bank. Inherent in the deal was an inbuilt equity from the properties since the purchase price of $400 million was heavily discounted.

Shortly after that, Alex Jongwe, the CEO of Barclays Bank, approached Royal Bank to offer a similar deal to the Standard Chartered acquisition of rural branches. Barclays offered eight branches, of which Royal initially accepted six. Chegutu and Chipinge were excluded, since Royal already had a presence there.

However after failing to dispose of those two branches, Barclays came back and asked Royal “to take them for a song”. Mzwimbi accepted these for two strategic reasons, namely the acquisitions gave him physical assets (the buildings) that he could lease out to anyone who decided to expand into those areas and secondly, that created a monopoly in those towns. With time, the fortuitous inclusion of real estate into the deal increased the wealth of Royal Bank as the prices of properties skyrocketed with hyperinflation.

One of the major key drivers of the Zimbabwean economy is agriculture. After the failed Land Donors Conference in 1998 and the subsequent land reform programme, it was evident to the established banks that commercial farming would be significantly affected.

They sought to quit the small towns since their major clients were commercial farmers. Strategically to acquire these branches when the major source of their revenue was under threat would have required that Royal Bank should have put in place an alternative source of revenue from farming. It is not clear whether this had been considered during these acquisitions.

The acquisition increased Royal’s branch network to 20 and the staff complement by 50. Incidentally, the growth created problems of managing the system as well as cultural issues. The highly unionised Standard Chartered employees were antagonistic to management as compared to the trusting Royal culture. This acquisition resulted in potential culture challenges. Management controlled this by introducing Norton and Kaplan’s Balanced Scorecard system in an effort to manage the cultural clashes of the three systems.

The Challenge of Financing Acquisition

A major challenge in acquisitions is the financing structure. During licensing the Registrar of Banks refused to accept the nearly $200 million that had been spent by the promoters of Royal Bank as capital. She insisted that this be recognised as pre-operating expenses and therefore wanted to see fresh capital amounting to $100 million. The change of rules posed a challenge for Mzwimbi’s team. However, being an astute deal maker he strategically conceptualised an arrangement whereby the $170 million worth of equipment purchased be accounted for as belonging to Royal Financial Holdings and made available to Royal Bank on a lease basis. This would then be sold to the bank as it grew. The RBZ was appraised of this decision and accepted it, and even noted in the inspection report the amount of expenditure spent pre-operatively by the promoters. The remainder of the pre-operative expenses were converted into nonvoting non-convertible preference shares of Royal Bank.

In January 2003 commercial bank capitalisation was increased to $500 million by the regulator and hence there was a need for recapitalisation. This coincided with the branch acquisition deals. At this stage the Royal Bank team decided to partially fund the acquisition through a conversion of the preference shares into ordinary shares and partially from fresh capital injected by the shareholders. Since the bank was now performing well, it purchased the capital equipment, owned by Royal Financial Holdings, which it had been leasing. This deal included the redistribution and balancing of shareholdings in Royal Bank to conform to the statutory requirements. Retrospectively it may be viewed as a strategic blunder to have moved the equipment into the bank ownership. Considering the “sale” of Royal Bank assets to ZABG, if these and the real estate had been warehoused into RFH the take-over may have been difficult. This highlights the failure sometimes by entrepreneurs to appreciate the importance of asset protection mechanisms while still small.

However the RBZ accused the shareholders of using depositors’ funds for the recapitalisation of the bank. Partly this is due to a misunderstanding that RFH is the holding company of Royal Bank and so sometimes accounts flowing from Royal Financial Holdings were accounted by RBZ investigators as Royal Bank funds. These allegations formed part of the allegations of fraud against Mzwimbi and Durajadi when they were arrested in September 2004. Subsequently the courts cleared them of any fraudulent activities in January 2007.

Managerial Challenges

Retrospectively, Mzwimbi views his managerial team as being excellent apart from some “weaknesses in the finance department”. He assembled a solid team from various banking backgrounds. The most significant ones became founding shareholders like Durajadi Simba at treasury, the late Sibanda in charge of the lending department. Faith Ngwabi-Bhebhe, then with Kingdom, helped lay a solid foundation of human resource systems for the bank.

However, they had a challenge finding a financial director. The new statutory instrument required that CVs of all corporate officers be made available for vetting when the licence was applied for. Without a licence one could not promise someone in current employment a job and submit his CV as this would reflect badly on the promoters. Eventually they hired a chartered accountant without banking experience. Initially they thought this was a stop-gap measure.

With the unanticipated growth, they forgot to revisit this department to strengthen it. Because of these weaknesses the bank continued to face challenges in the treasury department, despite the gallant efforts of the financial director. Strangely, when other executive directors were arrested the FD was left untouched and yet all the issues at stake arose from treasury activities. It would appear in retrospect that the FD was intimidated into providing incriminating evidence for the others. She too was threatened with arrest.

Successful entrepreneurial ventures in a growth phase need both strong leaders and strong managers. It’s not enough to have strong leadership skills. As Ed Cole said, “It’s easier to obtain than to maintain.” The role of strong managers is to create the capacity to maintain what strong entrepreneurial leaders acquire. Interestingly a new field of research, Strategic Entrepreneurship now recognises the need for both entrepreneurial and strategic management competences for successful ventures.

Strategic Growth Plans

Royal Bank’s strategic intent was to create a full house of financial services. The plan included a commercial bank, a discount house, an insurance company, a building society and an asset management service. However the vision was later refined and the plans for a discount house were dropped, since a strong commercial bank with a powerful dealing room would serve the same purpose. A strong asset manager would also relieve the need for a discount house.

With the significant branch network, the commercial bank was solid but needed a presence in a few major centres e.g. Masvingo and Gweru. In Gweru they could not locate suitable premises.

In Masvingo, after a struggle they were offered premises which had previously been earmarked for Trust Bank. With Trust Bank facing challenges, it abandoned Masvingo. However, Royal was placed under a curator when it was about to move in.

Royal Bank courted Finsreal Asset Managers for a potential acquisition since there were synergies and shared beliefs. It had a solid corporate customer base and very good growth prospects since an astute entrepreneur led it. Unfortunately the deal was aborted at the last minute when the owner opted out. After the Finsreal flop, Mzwimbi and his team pursued the asset manager through organic growth. They developed their own company -Regal Asset Managers – during the last quarter of 2003. At this stage the capital requirements and licensing process of asset managers was fairly easy. Asset managers were quite profitable, with minimal regulatory controls. Regal Asset Managers completed two good deals, namely: a management buyout of Screen Litho, a printing concern, and a big deal for First Mutual at its demutualisation.

The Screen Litho deal had been offered to venture capitalists but their demands were excessive. That is when Regal Asset Managers was set up and concluded a funding deal through Royal Financial Holdings (RFH), resulting in RFH holding 99% of Screen Litho which was to be off- loaded once management was in a solid financial position. Screen Litho is performing very well and hence this investment has proven successful. The entrepreneurial Mzwimbi thus diversified his financial portfolio through this deal.

For the building society, Royal eyed First National Building Society (FNBS) and almost signed a memorandum of agreement. Royal Bank was almost ready to transfer its staff mortgage facility to FNBS, when a close friend with a powerful position in the Society discouraged it from committing to the deal without divulging the reasons. A short while later FNBS was placed under a curator, with the RBZ citing cases of fraud by the top executives. The increasingly acquisitive Royal Bank entrepreneurs shifted and trained their guns at Beverly Building Society. Intermarket had already failed to consummate a deal with Beverley. Royal Bank was now competing with African Banking Corporation (ABC), which beat it to an agreement but was denied shareholder authority to complete the deal. Royal Bank then went back to wooing Shingai Mutasa of TA Holdings in an effort to increase its institutional shareholder base. He was keen on the deal.

Mutasa was acquainted with the two British owners of Beverley and one of his board members sat on the Beverley Building Society board. His support would have been crucial in the deal. However this process was overtaken by events, as the incoming RBZ governor superintended a monetary policy which led the financial sector into a tailspin.

Some young entrepreneurs approached Royal Bank seeking for support to establish an insurance company. Since this was in line with Royal’s strategic plan it consented and helped start Regal Insurance Company. Royal Bank originated the name Regal Insurance.

Once the licence was acquired there were some shareholder disputes and Royal Bank distanced itself from the deal. The young entrepreneurs who had been supported by Royal Bank lost the company to the other shareholders.

The final thrust in the strategic plan was establishing a stock broking firm. An idiosyncrasy with stock broking licences is that they are not issued to an institution but to a person. Intermarket had the highest number of stock broking licences. Mzwimbi approached the Intermarket stock broking CEO, who was a friend, about the prospects of acquiring one of the stockbrokers and he did not seem to have a problem with that. At the same time Victor Chando, a major shareholder in Royal Bank, brought to the table his interest in acquiring Barnfords Securities. He was encouraged to pursue the deal with the help of Royal Bank with the plan of bringing it in-house as soon as possible. All Royal Bank deals would now be channelled through Barnfords.

It appears that Royal bank developed a strong appetite for deals. One wonders what it would have been like if it had taken time to develop strong systems and capacity before attempting so many deals. What could have been avoided if the appetite for deals had been controlled? Entrepreneurs may need to exercise restrain in their expansion in order to create capacities to absorb and consolidate the growth.