Today one of the key issues that Oman is faced with is fostering a favourable business environment for small and medium enterprises (SMEs), a sector that has witnessed around 50,000 start ups in recent years. Lending institutions point out that around 90 per cent of the start-ups that come up in a year fail due to lack of skills and poor financial management. Government authorities have realised that to ensure the growth of the economy in the coming years this sector has to be aggressively promoted, which has resulted in a slew of initiatives.
Earlier this year, the Ministry of Commerce and Industry (MoCI) revised the definition of SMEs to make it easier for classification of businesses. According to the circular, micro entities are establishments with less than five workers and annual sales of less than RO25,000, small entities are establishments with five to nine workers and annual sales of RO25,000 to RO250,000, while medium-sized entities are companies employing between ten and 99 workers, with annual sales of RO250,000 to RO1.5mn.
Loan guarantee programme funds have been set up by the public sector while banks have set up separate divisions to cater to the needs of this segment. For instance, the MoCI has launched its SME loan guarantee programme, which provides a guarantee for 50 per cent of each SME loan up to RO250,000 with an interest rate of three per cent. Another such project, namely a RO100mn SME Development Fund, to support small and medium enterprises (SMEs), has been launched by the National Company for Projects and Management (NCPM).
Like NCPM, some new investment vehicles that can offer operational guidance and support, along with funding with lower rates of interest (below ten per cent) than the finance leasing companies have come up in the sultanate. Knowledge Oasis Muscat also houses a business centre with incubators, electronic and physical libraries, structured training courses and evaluation initiatives for entrepreneurs.
But as authorities focus on promoting this sector with a slew of initiatives like funding programmes and workshops, it is perhaps also the time to bank on the experience of the older generation that was able to craft business empires that today stand as a testament to successful entrepreneurship.
Valuable experience
When one looks at the mammoth presence that some of these businesses command in the industry, with a well established corporate structure, it is often forgotten that some of these businesses flourished from modest beginnings. The old generation of entrepreneurs who set up these companies are leaders in a true sense, crafting success stories through humble beginnings in the last four decades at a time when educational and financial resources were minimal. It happenned during the time when Oman was embarking on a new phase of development.
Even as new opportunities and territories were opening up, these businessmen did not have a prior growth story to refer to or avenues for consultations. They were often seen taking on a business that had little to do with the education they obtained, leaving it up to instincts and self taught lessons to lead them along the way.
The leaders at the helm of these large business houses are often modest and while they are completely hands-on in each and every operation at their respective firms, they have kept a low profile in the media limelight. But today these veterans with large businesses open up about what it takes to run a successful enterprise even with meagre finances. Some of them feel that the resources that the current generation have at their disposal are sufficient to craft a good success story.
But they have pointed out that patience is the key to progress and it is always better to aim for steady and natural growth in a business rather than hoping for overnight success. Constant determination is a crucial factor. They believed that it is wise to stick to one's comfort zone instead of sticking their fingers into too many pies.
On the other hand, some of the medium enterprises that are now stepping up their game to move on to the next level and become a large enterprise, reveal that in order to carve a dominant presence in the market, diversification and a constant evolution of strategies is the key.
Upcoming talent
A survey of the 21st century reveals that the mindset and strategies of modern day small and medium entrepreneurs who have grabbed the limelight in the recent days is quite different from that of the older generation. Many of them are seen breaking into the market by focusing on niche segments. But looking at the high rate of failures of SMEs in this market, some have waited to garner experience either in the private sector or through their own family businesses before they decided to branch out.
The reason for stepping out on their own has much to do with the craving for independent decision making and freedom to explore new avenues. These entrepreneurs have invested anywhere between RO10,000 and RO100,000 of seed capital. They reveal that lending institutions have become more strict and often demand for at least ten per cent of the initial capital from the entrepreneurs.
Many of them are still in the SME phase but some have managed to expand their operations significantly in a span of a decade and believe that proper marketing is key. One thing, however, is common between both the old and the new generation - even today entrepreneurs are often seen taking a keen interest in a field that is completely unrelated to their educational background.
As the sultanate's current generation of entrepreneurs are stepping up their game and looking at exploring new growth areas, many of them demand for more support from the public sector and larger establishments. Accordingly, government authorities are seen amending rules and providing more incentives. While such initiatives are clearly aimed at promoting the SME sector that helps enterprises to determine their position in the market, the sector itself sometimes still lags far behind the development seen in neighbouring markets.
Executives from SME funding investment vehicles reveal that the quality of services and skill sets of the modern day entrepreneurs have to improve and these factors have prompted these institutions to bring about tighter controls.
As these SMEs seek more support, they too need to research the market more carefully to determine their competencies and come up with financial projections to show to the industry how seriously committed they are to the cause they demand support for. These executives also point out that the market needs to open up further to the idea of entrepreneurship, where larger establishments are open to doing business with new names in the market and that initial failures of start-ups are not harshly judged, discouraging the entrepreneurial spirit.
Fostering BusinessThe veterans
Some successful last generation entrepreneurs detail lessons learnt in their initial days and offer advice to the current generation
Juggling success
OHI Group Founder: Maqbool bin Hameed al Saleh
More than four decades ago when Maqbool bin Hameed al Saleh decided to quit his job in the private sector in Bahrain and set up his own business in Oman despite having meagre finances, his intention was simple - he just wanted to be his own boss. But that bold decision was the first step towards creating a business conglomerate that today has a total turnover of RO113.87mn.
To craft out a business like OHI Group was no small feat for al Saleh. He started out on his own in 1976 by selling nuts and bolts, after his initial proposal to import gas cylinders from Bahrain into Oman failed to materialise due to insufficient funds. Al Saleh recalls how during the initial days of his business, he played multiple roles as the cashier, driver and the general manager of his enterprises.
Even when the company got one of its first breaks in business to import Pepsi into Oman from Dubai, al Saleh recalls driving the trucks himself. "Initially I used to drive these trucks myself until the volumes being imported grew big. Even as I was carrying on this business for a short period, I had plans, what then was wishful thinking, of being an agent to reputed principals," says al Saleh, emphasising that one should always dream big.
The growth of OHI Group has been slow and steady and so also its success, reveals the entrepreneur. "I created OHI Group with a desire to build business and be represented in several sectors of the economy. It has been a planned expansion in terms of both volume and breadth of activity." Today OHI Group has one of the most diverse mix of businesses, with its interests spread across diverse sectors like the oil and gas, entertainment, financial services, construction and engineering, retail, real estate, telecom, hospitality and others.
When it comes to diversifying the business in this manner, al Saleh says that this is the best way to spread risk. "A diversified business has entities with different business cycles of growth and slump. Therefore you will usually have businesses within the portfolio doing well even as some others may not be. Being diversified is good risk mitigation. The overall business management expertise is adequate to manage a diversified business as well as a single line of business."
Al Saleh points out that today, even after three decades, some challenges are common for old businesses as well as for the modern day entrepreneur. "Business brings within its wake many challenges - competition, financing, operations, human resources and customer satisfaction. I have been in this business for more than three decades now and during this period the critical issues for the success of the business have changed from time to time.
Following the advent of the global financial crisis and its aftermath, there are significant challenges to overcome. Being diversified in terms of operations has helped OHI." The present generation, however, has some advantages in entrepreneurship, according to al Saleh. "The current generation has better education than the people from my generation and in the case of family businesses, they have had exposure to business from a very young age. They are therefore better off. Even as competition has increased significantly, opportunities also have grown. There is no stopping a bright entrepreneur today from reaping success."
Advice to The New generation
"They should have a clear strategy, patience and perseverance. Hard work is essential. There are no short cuts to success. They should not be disheartened by the failures that are part of any businessman's journey. They should learn from these failures, as there is an important lesson to be learnt from each of these - in fact I would say that this is a more important lesson than what success provides."
The visionary
Oman Cables Industry Founder: Hussain bin Salman al Lawati
Sometimes dreaming the impossible dream has its benefits - it gives birth to creativity and generates ambition, key drivers behind the success story of Hussain bin Salman al Lawati, the entrepreneur who established Oman Cables Industry (OCI), the renowned manufacturer of electrical wires and cables that currently has a total turnover of RO134.35mn.
Al Lawati remembers beginning his journey for Oman Cables when he had a midnight dream while escorting an ailing aunt in Mumbai in 1979. He had dreamt of cables and wrote down the idea on a piece of paper and shared it with his friend the next day, who helped him get a simple technical paper drafted. But al Lawati points out that while it took four years for the concept to materialise, he refused to let the idea die down.
His efforts included touring across the Far East for researching the facilities of cable companies there to develop his knowledge base and workout costs of equipment. Al Lawati admits that procuring funds was difficult in the initial days and while the big names in the industry rejected his idea, the smaller ones were able to help. He got a personal loan from a commercial bank and then a project finance loan from the Oman Development Bank was approved in a week's time even before the IPO of OCI was floated. A factory was set up in Rusayl on a 10,000sqm plot with an initial capital of RO250,000. Commercial production began two years later.
The company embarked on its first phase of expansion in 1994 to manufacture low voltage cables. Three years later it got its first major alliance with Netherlands' Draka Holdings. From then on OCI expanded into the UAE and Qatar and began exports for international markets in 2002. Today, the company has a formidable presence across several markets such as the Middle East, Europe, Australia, New Zealand, Africa, Far East Asia. To continue the success of this venture in the future, OCI has committed RO7mn towards a capital expansion and upgradation programme for 2012 that includes a new manufacturing facility and a product reliability test centre in Rusayl.
Al Lawati says such a success story was possible mainly due to his constant strugggle to realise his dream and never back down even though initially people rejected his idea as an unrealistic one. "Entrepreneurs should never stop dreaming and this wishful thinking should be converted into action. But one should be practical.
At one point in my life, I wanted to start a textile manufacturing business and then electric bulbs but I had to hold myself back as I realised I was more suited for the electrical cables business," says al Lawati. "It took me four years to realise my dream but a modern day entrepreneur might just take two years or may be even less. But each generation has different challenges and advice from the older generation can be applied only to an extent in the current situation."
Constant learner
Al Hassan Group of Companies Managing Director: Maqbool bin Ali Salman
When one looks at the success stories of entrepreneurship in Oman, clearly some of the large business houses stand tall and proud as a testament to this. One such case study is the story of Al Hassan Group of Companies. What started in 1975 as a small electrical shop in Muttrah is today a business house with a mammoth presence in contracting, trading and manufacturing sector of Oman - and one of the main drivers behind this success story is the constant toil of Maqbool bin Ali Salman, its managing director. To this businessman, the inspiration for entrepreneurship started with the simple idea of owning a small office during his youth.
Salman clinched the opportunity to become an entrepreneur when he purchased ceiling fans from a trader in Muttrah who was unable to make a sale for a low cost. Salman remembers hunting for wires and switches thereafter as he did not know much about electricals at that time. The one aspect that helped Salman during his initial years as well as in the present day is his constant thirst for knowledge that prompted him to read up on electricals.
Initially Al Hassan may have started out as a trading shop, but once the company got its first real break in an auction for electrical goods in 1978, the group began to witness a slow and steady rise in profits that prompted the business to expand into contracting and manufacturing of switchgears. The company got its first value adding contract in 1988 when it secured a four-year service contract for south of Oman oilfield and wells. It was able to set up its switchgear manufacturing workshop four years later and in 1998 the company's trading and contracting business went public, listing the company as Al Hassan Engineering on the Muscat Securities Market.
The group also expanded its presence into the UAE market through its manufacturing and trading business. Al Hassan Group currently operates through 11 companies and one joint venture. The success story of Salman is one which today's entrepreneurs aspire for, but the entrepreneur points out that market conditions have got a lot more challenging for new businesses now.
"When I started, opportunities were vast, new sectors were coming up and there were a lot of untapped territories. But today the competition is stiff and there are challenges in cultivating a high performing culture." That being said, Salman points out that the modern day entrepreneurs have more facilities in the market than the older generation when it comes to technology as well as comfort. "I feel our generation was more hard working," says Salman.
Advice to the new generation
"In entrepreneurship one should always have a passion for what one is doing. They should have a self drive and a burning fire. It is also wise for entrepreneurs to try to be more focused on one area where they have ambitions or goals and not to try to do too many things at one time. It might only result in failure. Entrepreneurs should focus on team building and share the credit of success with their team."
Galfar Engineering and Contracting Managing Director: P Mohammed Ali
When one looks at the prominent presence of Galfar Engineering and Contracting, one of the oldest and largest construction companies in Oman, it is hard to envision the establishment as a small construction business and the man at the helm of its success, busy toiling in a construction site. This humble beginning was made more than four decades ago by Dr P Mohammed Ali, vice chairman of Galfar Engineering and Construction Company, who developed this business.
Ali first came to the region in 1970 to Dubai from India after working for the Border Road Organisation. He reminisces, "Everyone from India was looking for opportunities in the Gulf at that time and I, too, wanted to be a success story." In Dubai he was in wage employment during which he garnered contacts and acquaintances in the construction industry. He came to Oman in 1972 and with an acquaintance, Sheik Salem Said al Fannah al Araimi, he set up a small construction business. "The initial investment was almost negligible," says Ali.
Though the entrepreneurs had contacts in the construction industry, the country was still at the nascent stage of development. "There was no proper infrastructure and city development had just started. It was difficult to travel from one place to another and transport materials. Recruitment was also a challenge at that time."
It was nearly six years before Galfar got its first major contract, which included building some schools in the sultanate, for about RO500,000. The next major contract was a township project worth about RO2mn during the same period. From then on Galfar was seen dominating the infrastructure scene even after competition stepped up when other major global construction firms entered the market after 2000.
Some of Galfar's landmark projects in recent years has been the Muscat Expressway project and the Salalah Airport expansion project, procured in 2010. The construction company has also forayed into markets like India with a subsidiary, along with Kuwait and Libya.
As of June 30, 2012, Galfar has a total turnover of around RO154.58mn with an order book of RO700mn. While this is a long way from the initial years of struggle for Ali, he points out that the challenges have compounded for the new generation of entrepreneurs. "It is a very competitive market and there are delays in the decision making processes. Finding qualified manpower is a challenge but many opportunities are there for the current generation."
Advice to the new generation
"My advice to them would be to adopt a very proactive approach. I think the current generation of entrepreneurs need more drive to thrive, survive and excel. One should accept the current conditions prevalent in the market and learn to adapt well to different situations. You should understand what is required during a given situation and imbibe it in your learning process. Every situation presents an
opportunity."
Stepping up the game
In the medium enterprises segment, there are some businesses, which began in the 1980's and 90's that are now embarking on their next phase of growth
Quantifying success
Majan Engineering Consultants proprietor: Shawqi Sultan
In Oman, Majan Engineering Consultants is known as one of the oldest quantity surveying companies, along with its engineering services. And the success story of its proprietor is truly a unique story of entrepreneurship. Shawqi Sultan admits that his initial career interest in the late sixties was in pursuing medicine in the UK but when this did not pan out as planned, he began exploring other options.
He was introduced to quantity surveying through a reference from his uncle. He was asked to meet the senior partner of Widnell and Trollope in the UK, a firm that already had a presence in Oman. "When I met with Christopher Myers, a very charismatic personality, he explained to me that this career could be very useful to me in Oman as my family was in the construction business and I could, therefore, be of use to them. So I gave it a try and really liked it. I thought to myself, at the end of the day if I could be half as successful as Christopher Myers, that would be great," says Sultan.
After working on Oman projects while still in the UK for 18 months, Sultan joined the Oman operations of the company in 1974 as a partner. He was also the first Omani quantity surveyor. He went on to become a senior partner and a majority shareholder of the business before buying it out completely when Widnell sold off its international business in 2000.
By then, Sultan had already begun his entrepreneurial journey by setting up a mechanical and electrical engineering business in 1981, namely Majan Engineering Consultants with a seed capital of RO10,000. He noticed that there was a high demand for electrical and mechanical works in buildings that were coming up. Once Sultan bought out the quantity surveyor business from Widnell and Trollope, he incorporated it into his own company as a separate division (MEC - QS).
"During the initial days of this business the main challenge was to convince clients that they needed quantity surveyors. We had to highlight our role to them and the advantage and benefits they gain by employing us on their construction project. We literally went around knocking on doors with aggressive marketing to bag clients," explains Sultan.
The company focused on government entities and architects. Majan Engineering currently has an employee strength of 80 and a total turnover of around RO1.5mn. Sultan says that one of the most important steps he took to grow this business was to invest in training the local workforce. "Oman currently has more Omani quantity surveyors than those in the whole of GCC and that is why there is a group of us trying to convince the Royal Institute of Chartered Surveyors to set up a regional base in Oman."
Sultan admits that the challenge today lies in the increasing competition but with the reputation that Majan Engineering has garnered over the years, he is not worried. When asked what is the next phase of growth for the company, Sultan has a modest reply. "I am content with my success. I now look forward to passing on the baton to the next generation of quantity surveyors and I might divest the mechanical, electrical and plumbing (MEP) business."
For the current generation of entrepreneurs, he has a few words of wisdom, "There is never any substitute for hard work. Sometimes you might find yourself doing something you don't enjoy, but if you intend to stick to the profession, then it has to be done."
Solutions for growth
Sitco Founder: V Jayaprakash
When a financial crisis in the late 1970s and early 1980s struck the UAE, an Indian businessman with an office automation supplies enterprise decided to look beyond the Dubai market into growth areas like Oman.
V Jayaprakash set up one of the first automation equipment and large format printing solutions supplies provider in 1983, Sitco. This was a time when sectors were opening up and new businesses setting up offices in the sultanate. What started then as a small business with a clientele of around ten has today turned into a lucrative business catering to more than 300 clients.
During the first year of operations, Sitco had just three employees, but now this has grown to 65. It distributes products of brands such as Rex Rotary (a Ricoh company) and Optoma. Sitco is the sole distributor of Domino, a leading coding and printing solution provider and Evolis card printers. It is also the regional distributor of Sericol, the ink brand used in screen, narrow web and digital printing applications. The company has catered to ministries in the sultanate and one of its most notable tenders has been with the Ministry of Education to supply educational equipment to schools.
Jayaprakash recalls how the company built its presence in Oman over the years by adopting a strategy of slow and steady expansion. "Coming from a market like Dubai we had the skills to hardsell, if required, but the Oman market was a virgin territory where demand reigned high."
This does not mean the company did not face any challenges while breaking into a new market. The dynamics in the Oman market at that time were very different from the environment in the UAE where deals could be clinched through telephonic conversations. In the Oman market, customers trusted businessmen only if they personally met them and this trust had to be built over many years.
Jayaprakash looked at this as a learning experience to imbibe the culture and the sensitivities of customers and points out that one thing that can stand out in this line of business is after sales service. "We are also constantly upgrading ourselves with the latest technology products and solutions. For instance, when we noticed that the demand for architectural drawing equipment was declining while that of electronic equipment was increasing, and then the market was gravitating towards digital equipment, we upgraded our offerings accordingly," says Jayaprakash.
Sitco is now catering only to the local market and is careful about expansion plans. The company has two offices in the sultanate (Muscat and Salalah), and is looking to open more branches in the coming years.
"Today the competition is tough. There are at least ten other companies selling similar products in this market, but we at Sitco differentiate ourselves with service and support," says Jayaprakash. "The advantage for entrepreneurs in this market now is that it is a free economy. If an entrepreneur wants to break into a segment that already has some players, he should at least have his own expertise and skill set to sell differently."
Taking strides
Al Waqia Shoes Founder: Hussain Ahmed Jawad Ghuloom
Today, when one passes by a building or road construction site, or a factory facility, chances are that you would notice more than 80 per cent of the workforce wearing shoes and boots manufactured by Al Waqia Shoes, an Omani company. In fact this firm supplies safety, uniform and military boots to 17 other countries spread across regions such as the Middle East, Asia and Europe. Started in 1996 with an initial capital of RO250,000, its founder and CEO Hussain Ahmed Jawad Ghuloom, admits that this success story was born out of an idea that struck when Oman was beginning to witness a pick up in manufacturing activity.
After graduating from Portland State University in the US in marketing and information systems, Ghuloom worked briefly in his father's retail business before the concept of manufacturing boots was proposed by his friend. The entrepreneur, along with his partner indulged in some market research for a year and noticed that the demand for safety boots in the manufacturing and construction industry was picking up. They started the company a year later with funding from the government and banks. To market the product the company focused on factories and construction companies and also participated in international exhibitions to get more exposure.
In the first year itself, Al Waqia expanded into the GCC markets. Selling the product was not as challenging as maintaining low costs that thinned profit margins. Ghuloom admits that the project did not prove to be as feasible as was seen in the study and the technology used wasn't right. "The company sustained losses for more than four years and in 2001 we almost went bankrupt." The partners decided that only one of them should head the business and Ghuloom took it upon himself to inject fresh capital of RO250,000.
Technology was upgraded as the company made a strategic decision to diversify into military boots instead of banking on safety boots alone, targeting high value government contracts. At the beginning of 2004, Ghuloom says the company was able to make up for its loss of five years in a span of two years to become profitable enough to expand further into ten more markets like Kazakhstan, Tunisia and Australia. Until 2008, the company saw net profit grow between 18 and 23 per cent, reaching a total turnover of RO2.4mn.
If breaking into the Oman market during the initial years was a tough challenge, the fiscal crisis of 2008 threw across a whole new set of hurdles for Al Waqia. Due to the ongoing crisis in Europe, along with the increasing competition from Turkish and Chinese imports in the local market, Ghuloom admits that the company has not been profitable in the last two years, while total turnover currently stands at RO1.3mn.
The net worth of the company is RO650,000. But Ghuloom is confident that his company will bounce back to profitability soon. "We have enough orders in the pipeline and market conditions are seen improving. Our production line is a bit weak but we will be strengthening it in the next two months by adding more shifts." When it comes to the business environment for a small or medium enterprise in this market, Ghuloom believes that some support and encouragement is required from the government to help these businesses graduate to the next level.
"We don't get preferences in government contracts and tenders and the market is flooded with cheap Chinese imports that are not of high quality and should be tested properly." He further points out that the business environment itself for SMEs has changed since the 1990s that brought in a new set of challenges apart from competition. "Right now labour costs have increased, hence I don't think an entrepreneur should get into any line of business where raw materials have to be procured from outside. I don't think manufacturing is the right line currently for anyone looking to become a successful entrepreneur."
Some of the 21st century entrepreneurs who are still in the SME phase talk on how they are garnering attention in the market by focusing on niche segments
Formidable contender Midwest Oilfield Services
Founder: Mohammed al Jahwari
Sometimes a stubborn streak and the need to prove to society that one can perform a task better than the rest sparks the desire for entrepreneurship. This inner conviction has led to the successful venture of Mohammed al Jahwari, founder and managing director of Midwest Oilfield Services, an oil field drilling solutions provider, with a total turnover of about RO6mn.
"I have been exposed to entrepreneurship through my maternal grandfather. After leaving school, and taking a few odd jobs in the Gulf, I ended up in the oil and gas industry with multinationals Baker Hughes and Halliburton. But there came a time when I wanted to prove to others who doubted local competence that this job can be done by a local company better than the rest in the industry and that too independently," says Jahwari.
In 2001, with a seed capital of RO30,000, Jahwari took one year to set up operations and two years to break even. Following this, the revenue registered a growth of an average of 20 per cent annually. Jahwari recalls how during the initial days procuring finance for a new business was hard, especially where the equipment cost around RO40,000 to RO60,000. Marketing was an impossible task for a newcomer with no track record.
"Lack of recognition and appreciation for local products and local talent at every level, lack of funds from institutions when a concept like project financing did not exist were some of the major challenges we faced. It was all about money versus assets. There was also no clear-cut strategy for different market sectors. Integrated contracting strategies in most major projects driven purely by cost and convenience do not allow any scope for newcomers. In most cases your participation is not even desired."
But amidst these challenges, what helped was a clear business growth strategy that Jahwari had devised in the one year while he was planning to set up his operations, years of patience and perseverance.
Jahwari says the main investment in his business included training local talent and bringing in new technology. When it comes to marketing, this 36 year old entrepreneur points out that the word of mouth marketing is the most effective in this market along with honouring commitments to complete a project ahead of time in a safe and controlled manner.
Today in a span of a little over a decade, Midwest has grown into a RO7mn net worth establishment, with a workforce of 52 catering to clients such as PDO, Occidental Oman, Petronas, BP Oman and Abraaj. It caters mostly to the local market. "In the race for excellence there is no finish line. It's a tough world out there, so to struggle will be your duty but success is only up to God," says Jahwari.
What can be done to foster a better environment for entrepreneurs in Oman?
"The issue of poor contracting strategies in major projects should be addressed. We need to accept the fact that in entrepreneurship,
only a few are going to make it. For the entrepreneurs, perseverance is the key to success. Also, people need to invest more in ideas."
With inputs from Nimit Ramaiya, Vision Management Consultancy
Hussain Fadhil & Partners Founder: Hussain Fadhil
Often, entrepreneurs start out in a business segment that is very different from the core competencies they were trained in over the years. And such was the case with Hussain Fadhil, who started a construction company Hussain Fadhil & Partners in 2004. "Initially, I was in project finance with a bank and was also involved in the family business. I had many ideas in my mind after my graduation in the US, but at that time I wanted to study the market carefully to determine my interests."
Noticing the construction activity in the sultanate, Fadhil along with his present business partner decided to venture into this sector in 2004. The entrepreneur admits that during that time he entered into the business with much scepticism as he did not know as much as his partner about the industry. The same year, the duo who had only just registered the company, got their first break that fostered
Fadhil's confidence.
"We got a call from an acquaintance at the municipality who proposed a RO5,000 worth maintenance contract for the government. He said the profit we could make from this contract was about RO2,000. My partner believed that this was the turning point that would determine if we were really suited for this industry. And we were able to pull it off quite well," reminisces the 46 year old entrepreneur.
Started with an initial capital of RO50,000 officially in 2004, with the first project from a private client for RO100,000, Hussain Fadhil & Partners has today grown into a company with a project value of RO2mn that has sustained a net profit margin growth of about ten per cent per annum.
"We prefer to stay away from villas and residences. We concentrate on commercial building projects that are worth RO2mn and above," says Fadhil. During the initial days, procuring funds was not an easy task in the sultanate as finance leasing companies and banks fund few of the projects that are seen as sustainable.
Fadhil says he never approached the government for any soft loans and depended on non-banking finance companies who are considered to be a little more relaxed than banks and government entities when it comes to providing capital. The issue of procuring fresh source of funds to enter the next phase of growth is no longer a major challenge for Fadhil, having established a reputed name in the market. Fadhil says banks are now approaching the firm to help it take the business to the next level as the business is eyeing contracts in diverse fields.
This year the company is diversifying into the hypermarket and hospitality industry and has started off with a high-end roof-top restaurant in Ghala. "What works in this market is honouring commitments and delivering on time."
Having a good network also helps in this market, but entrepreneurs need to be confident and should be willing to do a lot of the work on their own, to return the support and trust the clients have shown in awarding the projects, Fadhil adds.
What can be done to foster a better climate for entrepreneurship in Oman?
"Manpower is a huge challenge right now especially due to the Omanisation rule. The government needs to relax on the labour laws for SMEs as this is not like the banking or oil sectors. Not many Omanis want to enter the construction industry."
Bin Mirza International Founder: Hani Ali Mirza
The ability to work flexible hours and the opportunity to break away from family corporate establishments were clearly the prospects of entrepreneurship that appealed to Hani Mirza. He decided to look outside of his family's construction and manufacturing business (Ali Mirza Group of Companies) and in 2004 set up Bin Mirza International Group, a company that invests in unique themed restaurants franchises and cafés. The company has brought brands like Nandos, Second Cup and BreadTalk into Oman since its inception.
It took Mirza nine months to start the business since conceptualisation and the entrepreneur reveals that the biggest challenge he faced was obtaining the required information to start his business along with manpower clearances for his two restaurants, namely Nandos and Second Cup Café. "There was a lack of information provided by authorities on certain requirements like financing and location. It was also a lengthy and time consuming process that required the restaurants to be ready for business before staff could be hired and trained. Our branches were ready for business two months before we could officially open to the public," says Mirza.
During that period the two tropical storms that hit the sultanate made the situation difficult and took a longer time period for the company to break even, adds Mirza. The entrepreneur went on to add Cinnzeo and BreadTalk in 2005 despite the challenges of breaking into the market. Despite difficulties, Bin Mirza was able to establish a strong presence in the hospitality industry by focusing on unique concepts.
In 2008, Bin Mirza won the gold award in the hospitality segment in the Oman Web awards while its Second Cup chain was voted as the best café in the Oman Today Restaurants Awards the following year. "We chose to establish ourselves as an operator of internationally unique concepts, bringing brands from all over the world to cater to the tastes of the Omani people. We entered the market during a time when the sultanate was gearing itself up for major developments in the tourism industry," points out Mirza.
What can be done to foster a better environment for entrepreneurs in Oman?
"Each obstacle we faced during the setting up of our business was a learning experience. Most entrepreneurs will learn that starting a business is extremely challenging, especially in an increasingly competitive market. The government can assist by easing some requirements for SME startups."
Gulf Mining Group Founder: Abdullah Ahmad Sulaiman al Hadi
Often entrepreneurs wait to attain sufficient funds and financial stability through other careers before embarking on their own dreams.
One such case is the journey of Gulf Mining Company that was started by Abdullah Ahmad Sulaiman al Hadi in 2005. Before starting the chromite and iron ore mining company, al Hadi was serving in the Oman army. "Right from my youth, I had this idea of running a new and different business. While in the army, I tried my hands on sale and purchase of some minerals from Africa and marble from Oman but on a low scale," reveals al Hadi.
Once retired from the army, al Hadi used the proceeds from his retirement, along with the sale of his house and some borrowings from friends to start this minerals-based business. The initial capital was 'small', according to Gulf Mining executives, but in six years time, the group has emerged with the largest chrome-ore mining and exporting business in the Sultanate of Oman. The group had started with chrome ore mining with a production of 1000mt per month in 2006 and in the same year, it broke even. Oman not being a major market for minerals, Gulf Mining Group had to cater to international markets like China and India, where the demand for minerals was seen increasing.
"Until 2006, Oman was nowhere in that list of suppliers of chrome ore and China did not want to buy chrome ore from Oman which is of low grade," explains al Hadi. The company had to step up its marketing efforts with numerous visits to China where advantages of Oman chrome ore (such as high chrome to iron ratio and a favourable magnesium oxide to aluminium oxide ratio) were highlighted. During the time of starting the business, the company was also faced with the hurdle of non-availability of authentic geological data on minerals in Oman.
"I have formed a small team of engineers who are always on lookout for minerals in the mountains and are visiting places regularly either via leads by individuals or on their own in the absence of any useful authentic data," says al Hadi. In 2009, the company progressed to processing of chrome ore in Samail, making chrome concentrate, the first of its kind in Oman. Today the sultanate is the third largest exporter of chrome ore to China.
Noticing the rising demand for marble due to the construction activity in the sultanate, Gulf Mining commissioned a marbleprocessing plant in 2011 with a capacity of 2000sqm per day. It started with a workforce of 12 in 2005 and now has 450 employees. It currently caters to markets like the UAE, Egypt, South Africa, China, India, Thailand and Singapore, apart from being present in
the sultanate. Its flagship company, Gulf Mining Materials recently signed an agreement with Freezone Sohar to set up a ferro-chrome smelter with a capacity of 50,000mn tonnes per annum with an investment of about RO12mn.
The group is also looking to set up an iron ore-beneficiation plant in Oman, as expansion plans abroad continue. The company hopes to double its current total turnover in the next three years. Al Hadi admits that competition is tough for the company, especially from South Africa and Turkey but the high demand in China and India during the periods of recession offset this. The 48 year old entrepreneur says that to maintain the competitive edge in the market place, businesses have to keep changing their strategy to face new challenges.
What can be done to foster a better environment for entrepreneurs in Oman?
"In manufacturing, it may not be a bad idea to set up in an industrial zone far away from the population where industrial process (environment related) norms can be a bit relaxed initially. Over a period of time, these norms can be upgraded to comply with international standards. This way not only local but foreign investment can also be attracted. within a short period."
With inputs from Nimit Ramaiya, Vision Management Consultancy
The optimist
Qais United Enterprises Founder: Qais al Khonji
In many instances some of the modern day entrepreneurs in Oman are those that have stepped away from their family businesses to craft their own success story. And Qais al Khonji, proprietor of Qais United Enterprises is an entrepreneur who fits the bill. "In a family business, you are not the final decision maker. You have a board and a whole set-up. One can propose ideas that are in mind, but then it goes through a board. A group decision has to be made and the process is a bit slow. That made me look at venturing out on my own and with my own establishment, I had control over how fast things moved," says al Khonji.
In 2010, while attending a trade exhibition in Dubai, al Khonji came across a set of bathroom shower-head filters that gave him the idea to start a trading business. "I took some samples of the same product but different brands and after trying each of them I decided on one and got in touch with one of the companies." With his own savings, al Khonji set up a trading enterprise that would sell this product in Oman and hired one marketing executive to market the shower products. The establishment itself has only two people and al Khonji says he intends to keep it that way for the time being in order to maintain low operational costs. "It is also difficult to find skilled manpower," says al Khonji.
The 33 year old entrepreneur admits that the initial challenges for the start up include government bureaucracies that delay the decision making process and lack of professional marketing companies along with new ideas to market the product. "More than funding, marketing and spreading awareness about your product is the biggest challenge in this market. When it came to my product, initially people did not want to accept that there are problems with the water in Oman. We got responses from consumers that they are perfectly fine with the water they have been using for 20 years but the reality is that chemically-treated water leads to hair fall and dry skin. The shower-head filter helps weed out these chemicals.
Hence, I hired a technical person to explain these effects to consumers." Along with this form of marketing, al Khonji also noticed that after testing every media outlet, the best form of marketing was through getting feedback of customers and word-of-mouth. Despite these hurdles, Qais United became profitable within a year of its operations and the company has seen a single digit growth in net profit, although al Khonji admits that his expectations were higher.
For al Khonji the next phase of growth for his business is bringing in other new products like the shower-head filters for trading. The entrepreneur is also looking at setting up a vocational training institute in the coming months with a separate brand identity even as his trading business continues. "One has to be very patient and believe in one's idea while starting a business. You have to wait till it kicks off and this waiting period is not easy. And the key to success, if you are getting into sale of products and services, is the after sales service," says al Khonji.
What can be done to foster a better environment for entrepreneurs in Oman?
"New entrepreneurs need ease of financial support and advice throughout all the steps during the initial days. If the entrepreneur comes from a business family, the family has to support the entrepreneur to give the business a boost. They can simply buy the products or services which will help spread the word."
With inputs from Nimit Ramaiya, Vision Management Consultancy
Omani-Korean Company Founder: Suleiman al Yahyai
For many years as a businessman, Suleiman al Yahyai focused on building an illustrious career in finance and administration, occupying top management positions in well known establishments such as BankMuscat, BMI Bank in Bahrain and Oman Chlorine Company. But with a masters degree in business administration, a certificate in asset management and financial crisis from reputed institutions in the US and UK, in 2010 al Yahyai felt it was time to diversify his interests in the market by setting up his own business.
The following year, the entrepreneur set up Omani-Korean Company (OKC), an original equipment manufacturer for LCD, LED and 3D televisions, with an initial investment of RO8mn, partly through internal funding and external borrowings. The company manufactures television sets, namely Supra and other brands like Wansa and Ikon, for retailers like Jumbo Electronics. It has its own brand Suly in the LCD segment. "We wanted to expose Oman as a good player in the electronics segment. I brought Korean partners on board from whom we get the components and the technical know-how for the business," says al Yahyai. As he had contacts in the government, the company decided to focus on the public sector and marketed its products in the ministry offices.
Within a year of commercial production, by end of 2011, OKC had sold 10,000 units in Oman. In the sultanate's consumer electronics sector which is still considered to be in its infancy, this is a considerable achievement, as the company is the only OEM firm producing televisions in the Gulf. Al Yahyai admits that the first year of operations have been challenging for the company owing to the competition from international brands. "Margins are low and it will take about four to five years to break even in this business," admits al Yahyai.
But what has helped is the selling price of OKC's products which are substantially lower than the international brands with high quality.Unlike its competitors, OKC is the only firm that offers a replacement warranty on its brand Suly. The company currently has a market share of about five per cent in this segment in the country, primarily through Suly. "We are currently working on building our brand identity, which is key to sustenance in this business."
Having contacts in the government circle and adequate capital alone do not help in this business. "When you decide to become an entrepreneur, it is not government support alone and contacts that can help you. One needs to have the determination and clearly define the goals to be achieved," says al Yahyai. For any SME or entrepreneur, breaking into this market is no small feat and the 48 year old entrepreneur says SMEs today look for support that goes beyond financial help.
While a company like OKC is yet to achieve the kind of net profit growth that its competitors experience in this market, the company's management executives have already made plans to take it to the next phase of growth. The company has not yet ventured out of the sultanate into other markets, though it has been exempted from customs duty in 19 markets in the Middle East. Plans are in place for OKC to expand into the entireEast in the coming months.
What can be done to foster a better environment for entrepreneurs in Oman?
"When it comes to SMEs seeking government support, a lot of them don't just look for monetary backing. SMEs today need training and experience working with professionals and need help in getting the qualified manpower to start their business. The government can perhaps help in this area."
© businesstoday 2012
