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D E Wasake

And now you too want to become a DJ?

Outide Looking In
D E Wasake

A few years ago in 2002, my mother threw me into the deep end of this business. She bought DJ equipment and said there boys "go play music". I had to replace my knowledge of Kirk Franklin and Fred Hammond with Snoop Doggy Dogg, Evanescence and Ziggy Dee. She was no DJ herself and so of course didn't buy us the full set of equipment and so learning the hard way; "gwe DJ oli musilu! osobola otya oku playinga "Eggali Ekozzeko?" I set out my simple observations.

First the CONS OF COURSE

1. The sector is over saturated.
Every tom, dick and Sebanenya who thinks playing music in the night is the most sure way of getting laid wants to become a DJ... and yet they forget every mother's advice to their well brought up daughter; "Stay away from DJs!" But that's not the point. Every person I know has at least 3 DJs in their phone book(that's an exaggeration). Every mall in kampala has a DJ(that's another exaggeration) and CD burning place in the corner, yes right under the steps where you have to bend your head to speak to the owner(knowing Luganda is key here). To succeed in this sector, you must develop yourself a niche. One of the persons I know who first started working with me in my mum's company now focusses only on corporate functions. He is doing pretty well, he dropped out of his Architecture degree to pursue this. He has no regrets I believe.

2. Your family/personal life will suffer The life of a DJ or of an owner is not necessarily a glorifying one as often you will be required to provide the entertainment into the wee hours of the morning and in many cases rural areas(I once played music in a banana plantation) and the more inebriated your patrons become, the longer they expect you to play music. A DJ is usually the first to arrive and the last to leave and as such if you are say a typical family person and are to play at a typical function which say starts at 7pm, you will be required to arrive at least 3 hours before(technical glitches can take impossibly long to fix) and you will have to leave when the last guest cannot stand up.

3. Start up capital and equipment In order to differentiate yourself from the every Tom, Dick and Mukasa, you will need to invest in top of the range equipment. There is no compromise here as you have not incurred the wrath of a client who paid you only to give them a Microphone that cannot go beyond 100 yards and is critical at that Kwanjula. I therefore summarise the costs here of decent brands taken primarily from this site; The total cost is about Shs. 24m. and comprises of the following

CD player(CDJ 900): Shs 8m, Mixer(behringer): 850k. Flight case(road ready): 729k. Amplifier (QSC): 1.7m. Crossover (DBX): 810k. Speakers-tops (4 pairs, Mackie): 4.4m. Speakers-Bass bins(wharfdale titan): 3.6m.Speaker stands(2 pairs): 490k. Microphone (pair of shure wireless): 1.6m. Computer system: 1.1m and cables: 450k.

These costs do not of course include the cost of the music which will be a continous expense but of course depending on your ethics will range from buying original CDS or legal downloads to bootlegs and a youtube converter programme.

I have also excluded the cost of transport as you will usually need a van or pick up. It is perhaps more cost efficient to however hire unless the vehicle is used for alternative uses during the week as most DJ gigs are over a weekend.

4. Seasonality/Long period for return on capital
As the typical DJ gig is going to be on weekends, it is subject to the seasonality factor i.e business is not daily or regular and so unless you are very successful or have a residency(ie are playing at a venue on a fixed basis) you will need to have many gigs to recover your investment (of Shs 24m) as in 3 above. Assuming a client pays you 350k per function and you have a function every 2 weeks i.e twice a month, and costs of say 150k (transport, DJ fees and generator hire), you will retain about 200k per function which works out at 400k a month. You will at this rate get a return on your capital in 60 months, which is about 5 years.

5. You must know your music. Alot of it.
Music is such a private passion that unless you are a mind reader it is difficult to sometimes know what people want. A successful DJ is one who can "read the crowd" and this is a combination of knowing what type of crowd you have, knowing the popular hits and also the classics and of course a mix of luck and genius. Fail at this and you have failed at the fundamentals (in addition to the 4 above). In knowing your music it goes without saying that you must know how to use your equipment well. Nothing annoys clients more than a DJ who can't mix!

6. Skills are not transferrable How do you replace a good DJ? or replicate his skill when say you consider expansion of the business? Apprenticeship can partially solve this problem though.

AND NOW THE PROS

1. Entertainment is big business with no saturation limit
Music is a passion and as a good DJ you can command fees way in excess of the market rate. So know your music/niche and you will have the crowd eating out of your hands. Tied to this, whilst the "market" is saturated in reality there is no limit to how many DJs there can be as for almost every aspect of Ugandan life music is central.

2. Alternative uses
Good quality equipment serves as a Public Address(PA) System and with loads of seminars and conferences and the like there is a good opportunity to make money say during the week without the stress of having to play music. This should reduce the "seasonality issue" mentioned amongst the cons.

3. Cash business
This is a business which primarily deals in cash. Payment for services is often in advance and in form of cash and as such debts are generally avoided.


Final word There is an enormous market out there and the DJ who can establish a niche coupled with some good marketing so as to stand out from all the "noise" will do well and they can quickly re- coup their expenses. It is however critical to invest in good equipment being played by a good DJ. Of course now you just need to go out there to find the best DJ. This site has some pointers and this newspaper article lists several names.


P.S
If you would like to work with me on this business series or would like me to feature your article in the same format above, please dont hesitate to email me at: dewasake@gmail.com.


And now the disclaimer: While I have taken steps to research this information as well as based on my experience, you should not rely on the information given here to base your investment decisions. You should seek business advice from a professional knowledgeable of your specific circumstances. I shall therefore not be held responsible for any loss you may incur when acting on this information.

So you think you can get into Forex trading in Uganda?

Outside Looking In
D E Wasake

If you are a Ugandan, you have probably heard all about the forex trading that seems to be the hottest business in Uganda. If not, read about it here.

I wanted to invest $10,000 togther with a cousin in a company that I understand is one of the leaders of forex trading. While recently in Uganda this May, I even visited their offices and saw a vast array of computers with lots of graphs and a TV on Bloomberg TV or other business channel (The analysts didnt however appear busy as I would have expected from watching alot of "Wall street" movies). Anyway I returned to the UK and was saving. I recently called a good friend in Uganda and casually mentioned the idea to him. He casually mentioned: "I just put $2,500 which Mrs told me not to put into that company. They have missed my monthly payments (supposed to be 20.4% interest and principle per month) for the second time." He indicated that this company is a ponzi scheme, commonly called a pyramid in Uganda.

So is forex trading the real deal? I set out my observations.

The cons (first of course).

1. Sector unregulated in Uganda

"....Mr Stephen Kaboyo, the director of financial markets at Bank of Uganda equally disregarded the business despite being in charge of currency markets in the country.

"It is not regulated business. It's really outside our regulatory provision as far as the forex market is concerned," he said in an interview on Friday. "It's just like any other business. If you are interested, you go in. If you go there and lose your money, you don't complain."

Source: All Africa.com

As an unregulated sector, this creates a risk especially for the cautious investor(as anyone should be!) especially when for example compared to Switzerland, which seems to be the hub of online trading and has a well regulated sector as per this link.

This of course may not be a major issue for a typical Ugandan as hardly anything is effectively regulated anyway! In Uganda, it would appear many regulations remain on paper and the Bank of Uganda (BOU) director was perhaps just being realistic, its a dog eat dog world.

2. Experience/reputation of traders
The sector has only been recently formed in Uganda and with a myriad of "traders" how does one verify who is "legit" and who is quack. How do you know who is well experienced and who is not. This is compared to the established players like say HSBC who will clearly tell you how the sector is performing. See an example of their investment profile for Exchange Traded Funds(ETFs) which are a financial investment products not too dissimilar to Forex trading.

3. High Starting capital A good forex trader or investment broker will usually ask you to have starting capital of $10,000. This is because forex trading relies on such tight margins (called "pips") such that to make you a decent return they need to invest a fair amount of money. At today's exchange rate, $10,000 is Shs. 28m!

And now the Pros

1. Liquidity. The market is huge. It is the largest type of market in the world and if you open yourself an account say with FX pro with oanda.com or similar other self traded or managed broker accounts, you will find you can easily buy and sell. Read a summary of the size of the market here.

2.Good returns In the Investment and securities market, I am not sure if there is any other business model giving better liquid returns especially at the moment. Of the website of investment managers I have researched it is not uncommon to find those that give returns typically of 6%. Compare this say to a high saving interest account with Barclays Uganda or Crane Bank which give returns of at most 5%.

An example of a website I see with proper disclosure of returns information is here. You can see that the return for 2010 on a $10k investment was 21.3% but compared to 2011 to date which is now only 3.44%. You should of course know that like any trade in securities, returns are not usually guaranteed and many a trader post losses particularly those who trade for themselves on trading platforms being promoted by so many companies such as this one.

3. Can be easy to deal with
Like many investment products such as stocks and other securities, if you have a managed account, then you have a broker handling this for you. Yes they charge fees(check out their fees and compare with others) but this means you don't have to constantly monitor the position as the brokers do this and will usually send you portfolio statements or even you can view these online and as such can choose to liquidate should you wish.

Final Word

In today's world of unpredictability in the securities markets, this appears to be one doing okay irregardless of how the market performs but do your research well and unless you are willing to teach yourself how to be a forex trader (for example at this site) you should seriously consider putting your investment in forex trading through a reputable investment broker/bank who will manage the account for you.

If necessary,open a foreign currency account in one of the Ugandan banks to handle this aspect and deal with a foreign player who is regulated. For example this company and this company are both regulated in the UK by the Financial Services Authority(FSA).There are several scams out there and I dont think its worth investing a significant amount of money in someone who is not tested and tried and doesn't have quality control mechanisms to protect your money from for example rogue traders or simply inexperienced people.


P.S
If you would like to work with me on this business series or would like me to feature your article in the same format above, please dont hesitate to email me at: dewasake@gmail.com.


And now the disclaimer: While I have taken steps to research this information as well as based on my experience, you should not rely on the information given here to base your investment decisions. You should seek business advice from a professional knowledgeable of your specific circumstances. I shall therefore not be held responsible for any loss you may incur when acting on this information.

So you want to start a VOIP business in Uganda?

Outside Looking In
D E Wasake


I have recently been reviewing the business model for a company that is dealing in VOIP. For the uninitiated, VOIP stands for Voice Over Internet Protocol(VOIP). It is basically a technology/ies that allows telephone calls to be made over the internet rather than over traditional telephone lines.

I set out my simple and straight forward observations.

First the cons (of course)

1. Internet stability.
Internet in Uganda can be very unreliable and where it is reliable it is very expensive. Now this is very critical as to make calls over the internet you need VERY RELIABLE internet and so this is the starting point for anyone looking to invest in this sector. It is however not uncommon for an ISP to charge $1400 per month for 64 kbps. That's not alot of bandwidth as a typical telephone call requires about 8kbps at any time and so 64kbps supports only about 8 simultaneous conversations or less depending on internet conditions. The good news of course is that this is changing with fibre optic cables being laid all the time and so internet costs reduce. My best advice. use ADSL and shared bandwidth. UTL does a good job here, with a great value and generally reliable product if you can get the telephone line.

2. Competition
VOIP prides itself in being cheaper than the traditional telephone companies and many a VOIP provider will give you rates that are much cheaper than the networks. That was until recently. Many telecom providers in Uganda for example Orange have great international calling bundles that give the VOIP provider a run for their money. The VOIP provider is therefore having to compete with the telecom companies in offering customers international calling services. You have to therefore be prepared to look at your financials closely and constantly lest you fall into losses so do yourself a favour, get a good accountant!

3. The Exchange rate
The Uganda shilling is depreciating against the dollar and this may continue to be the case. In 2006 for example the rate was Shs 1,700 to the dollar. In 2011 at the time of writing, it is Shs 2800. For VOIP,this is critical as the main purchase is "digital airtime" from international VOIP providers. This is purchased in dollars and as such the prices charged to customers need to factor in the exchange rate, in addition to ensuring remaining competitive against the BIG BAD WOLVES (I mean the telecom companies).

4. Technology know how
VOIP is a specialised sector and so it of course requires someone with interest but this is not such a significant matter as employing an IT person will help reduce the entreprenuers need to worry about this.

AND NOW THE PROS

1. Growth potential.
Like the rest of Africa, In Uganda there are tremendous growth opportunities in the ICT/ communications sector as per Uganda Investment Authority(see link here ). Call traffic continually increases as Ugandans enjoy higher incomes. Despite the biting inflation, there is a continual increase in call traffic. VOIP is not being left behind and I know of VOIP businesses with growths averaging 25% per year and turnover averaging Shs. 40m a year.

2.Low Start up capital
From my rough estimates, a typical VOIP business (say a phone shop to support 6 phone booths) can ideally start up business from as little as UGX 8.2m. This should cover; rent at 500k per month (including 2 month deposit bringing it to 1.5m), internet installation and subscription; 700k, purchase of the VOIP and computer equipment; 1.975m, furniture/ fittings; 1m an inverter; 2m and signage(to advertise); 500k. These costs will of course be higher if you for example want to have more phone booths or have an internet cafe as well as the call shop.

3. Diversified services
Despite the fierce competition, a VOIP business can survive by being diverse. Many VOIP providers do not only provide low cost international calls. They also provide other related services like cheap calls on your internet enabled phone, a foreign number(for example USA) even while in Uganda and use of VOIP in homes/offices. Some like this company provide a special Uganda rate. In addition many integrate an internet cafe within their models as well as selling telephones and accessories. The diverisifed services spread the over head costs and enable continued profitability.

4. Franchise model.
The beauty about a VOIP business is that it is very scalable meaning you can keep on expanding to other towns, other urban centres, other countries. The typical VOIP provider will give you a software management system which can be accessed anywhere on the internet (after all since calls are made over the internet, call logs are likewise internet based). This gives a key advantage of remote monitoring for the business owner. You don't have to necessarily worry about revenue as you can remotely monitor the sales(calls) on a real time basis because the call logs display calls(and costs) as they occur. The model can therefore be replicated by having you the business owner setting up agents who also get access to your system. I believe this is the model that this Ugandan VOIP company is promoting.


Final word
This is not an easy sector to invest in as the competition is fierce as well as the exchange rates continually changing. I know many VOIP businesses that have failed and so to invest in it you need to have not only technology know how but like looking at the financial numbers as the margins can be very tight. A business which has taken off can however enjoy a significant amount of turnover and diversifying and expansion through franchising seem to hold the key to success.

So are you ready to leave the world of employment and take a plunge into this sector?

P.s
If you would like to work with me on this business series or would like me to feature your article in the same format above, please dont hesitate to email me at: dewasake@gmail.com.

And now the disclaimer: While I have taken steps to research this information as well as based on my experience, you should not rely on the information given here to base your investment decisions. You should seek business advice from a professional knowledgeable of your specific circumstances. I shall therefore not be held responsible for any loss you may incur when acting on this information.