5 Essential Steps For Launching A Life Coaching Business

What is life coaching?

It’s motivating people to change something in their lives so they can experience greater joy and less pain. It can be in any area of a person’s life, and different areas of life overlap and influence each other. A relationship problem can affect finances, and vice versa. A health problem can affect a career issue, and vice versa.

So, probably he first thing to consider once you’ve decided to become a coach is:

“Do you want to be a general life coach, or do you want to specialize in one area?”

The main areas of a person’s life are:

· Health

· Relationships

· Personal Development

· Career

· Finances

· Spiritual Development

If you have experience in one area of life where you solved a problem that many others have, then you might want to specialize in that area. For example, if you taught yourself some ways to get through a divorce amiably, you could coach others on how to do that. Or, if you developed a technique for recovering faster from cancer treatments, you may want to share that with others.

Or you may have training in a specific area. For example, you took a training in how to help someone change their diet by using specific techniques you are now certified to teach. Then you may want to use a specific title for your coaching, such as “Massey Method Coach.”

But if you want to coach a person in all areas of their life, then you may want to call yourself a “General Life Coach,” a “Personal Growth,” or a “Personal Development” coach.

No matter what you choose, your job as a life coach is to motivate people to take action to change their lives for the better. You do that with methods, processes, accountability and inspiration to do the work. The problem is that most people want change, but they don’t want to do the work. So they hire a life coach to help them stay motivated while they do the hard work.

In fact, about 90% of people pay for life coaching just to hold them accountable. But they also want you to be an expert in the area they are working on. So it’s important for you to get proper training.

Notice I didn’t say get “certified.” There are many certification programs for life coaching. But there are also courses that aren’t for certification but may be helpful. So just be aware of that.

What’s important is that you get the necessary training, so you know how to deliver life coaching to clients. And, if it’s a certification program, that will just add to your credibility. Or you may be someone who has had a lot of experience in coaching already, and that in itself may be enough credentials.

Most people won’t ask for your credentials, but if you have them, it’s good to display them on your website and in your email signature.

Launching Your Coaching Business

Starting any kind of business can be fulfilling, but it also can involve hard work, difficulties and challenges. Having an awareness of where the obstacles in the road lie in a life coaching business, gives you an advantage. So I’ll share some basic information you need to know when launching.

There are several components that need to be in place in order to start and run a life coaching business:

1. An entrepreneur mindset

2. A coaching process/program to offer

3. Basic bookkeeping skills

4. Business systems

5. Tools for running a business online

Let’s dive a little deeper into each one of these.

1-Mindset is half the battle.

When starting any kind of business, you need to have an entrepreneurial mindset. That means making decisions based on statistics and not on emotions. It definitely means doing income-producing activities such as, market research to determine the needs of your audience, rather than only doing easier and more fun activities.

Most of the entrepreneurs I’ve met who are not having the kind of success that they desire, have a problem with their mindset. I can sense it when I hear them talk about their business. Unfortunately, they aren’t aware of their mindset, so they don’t know that it’s the problem. Before their finances improve and their business thrives, their attitude toward business needs to improve.

Mindset is something quite intangible. You can’t just say, “Oh, you’re spending too much money; that’s your problem.” Or “Your conversion rate isn’t high enough to justify your advertising expenses.” Those are tangible problems. Mindset is illusive, and harder to pinpoint.

One way to discover if your mindset is aligned with your business is to try to uncover any hidden beliefs that are holding you back. Beliefs that don’t support your desires are the main culprits that can keep you stuck in an undesirable situation. But beliefs are just thought patterns that are habitual. This is good news because habits can be changed. The best way to change a belief is to substitute a new one that’s more in alignment with your desires.

Just like being in any long-term relationship, as an entrepreneur, all of your issues will come up and need to be dealt with. One common issue is your relationship with money… how much you think you deserve, how much you can ask for, how much you can keep, and how you treat money in your personal life.

Another major issue that comes up is lack of self-confidence. The best way to handle this is to coach 10-20 people. It doesn’t matter if it’s a practice session or a 6-month program. You will learn a lot from your first coaching clients and it will also give you the potential for referrals, more confidence, and possible revenue.

A third issue that can come up is in how you handle stress. Do you stay calm and strong when a client is venting on a stressful experience, or do you get caught up in their drama? Do you leave the office and your business behind you at the end of the day and relax with family/friends, or do you tend to “take your business with you” and think and strategize too much on your off time?

One thing that happens when running a life coaching business is that you find you must adapt and evolve with it. Things happen that force you to either change something in your business or change something in yourself in order to move forward. And it’s helpful to know how to keep a positive attitude.

2-Your Life Coaching Program

Besides developing the right mind-set, you need to develop a program to offer clients. It may be the process you developed when you solved the problem that you now can help others with. It may be a method that you got training on. Or it could be a combination of the two.

Planning out your program in advance is necessary in order to have something concrete to offer in enrollment conversations (discovery calls). And you need to plan out what results your clients can expect to have from your program.

Here are some steps to consider:

· How long your program will last? One-to-one coaching programs range from a few weeks to a year or more, depending on the depth of the information and the outcome clients will achieve.

· What steps does the client need to go through to achieve the desired results?

· What tools will need to be included in your program?

· How will you connect with your clients, and when and where will the contact happen? Will you deliver via phone calls, zoom calls or email support?

The bottom line here is:

What will make your clients feel supported, without causing you to burnout?

Pricing your services

Perhaps the most difficult decision to make when it comes to your private coaching program is pricing your services. That may take market research.

Beginning life coaches might charge as little as $97/month, while top business coaches can easily command $40,000, $50,000 or even $100,000 per year. Where will your program fit? It depends on a variety of factors:

· Niche

· Duration

· Outcome

· Your experience level

Once your coaching program is planned out and priced, you will be ready to market yourself.

3-Bookkeeping

Every business owner needs to know how to determine whether they can stay in business, i.e., if they are making a profit. Life coaches are no exception. That’s where basic bookkeeping skills come in. Keep track of both expenses and income on a spreadsheet, or (I suggest) in a simple software program such as, Quicken . Quicken is inexpensive and is all you need for a small business.

Then you need to keep accurate records and track where your money is going and how much you are actually earning. Income always starts slowly, and you may have more expenses than income at first. But there are so many low-cost or even free tools available that you should be able to keep operating costs to a minimum.

4-Tools for running a business online

The Internet has opened up a “world” of opportunity for life coaches. You can coach anyone anywhere in the world. But that means knowing how to use online tools to market and run your business. Fortunately, there are many helpful tools, resources, and software to make your business life easier. Earlier, I mentioned having a bookkeeping tool.

Here are 5 other essential ones:

a) Website

b) Scheduler

c) Autoresponder

d) Delivery Platform

e) Documents

Website

Some coaches have asked me if they need a website. You don’t necessarily need a website—I have members in my life coaching association who don’t, and they have other ways of getting clients—but it does look more professional to have a website. A simple one is a WordPress site. You’ll need to get a domain name for it and a hosting service. You can start out with a one-page site that just has information about what you do, and your contact info.

There are a number of tools associated with a website. For example, if you want to track how many people come to your site, you can install Google Analytics. There are also a number of WordPress plug-ins that make the operation of your site more efficient. Your webmaster will know what you need.

Scheduler

You’ll also need a way for clients to book appointments with you. Don’t get caught in the “email tag” game! Get a scheduler with a link that you can send to any client or prospect. Basic free tools include Calendy, Setmore, and Squareup.

Autoresponder

If you are running an online business, and are sending traffic to your website through your marketing, not everyone who comes to your site will be ready to hire you. So, you need a way to stay in touch with those people. An easy way is with an autoresponder, such as MailChimp or AWeber. It’s a tool that sends out emails automatically to people who sign up on your website. You write up the emails once, and they go out without any more work on your part. Usually, you’ll need to offer some kind of “freebie” (or “lead magnet”) to get people to sign up for your emails.

Delivery Platform

If you have materials such as PDFs, templates, checklists, or recordings, you’ll need a way to deliver them to your clients. For documents, it can be as simple as using Google Docs. You upload the document and give the link to your clients. But if you want something fancier, you can use a platform such as Teachable, LearnDash, Kajabi, or OptimizePress Member. Using one of these software programs ensures that your materials are only available to people you designate (password-protected).

Coaching Documents

You will also need some coaching documents such as a client agreement, client feedback form, Wheel of Life chart, intake session form, invoice form, client action sheet, and client info form. There may be others that you’ll need depending on your topic.

5-Business systems

You will need to set up several systems so your business runs smoothly.

Here are the ones I recommend:

a) Content Creation system

b) Lead generation system

c) Social media marketing system

d) Sales conversion system

e) Onboarding clients system

f) Client retention system

g) Follow-up system

Content Creation system

The first system you will need to set up is content creation for your business. That means creating valuable content that educates people, tells them what you do, and how to hire you. As you market your business, you will always be creating content. This includes content in your branding, your blogs, your website pages, and your email campaigns, and it all supports lead generation. You will always be creating content to keep your name in front of the people in your audience.

Lead generation system

How will you find prospects to talk to about your services? That’s what we call “lead generation.” Leads are potential clients who are attracted to your content. So you need to have a system for attracting them.

There will be people who are attracted to your content and consume it, but aren’t ready to hire you yet. And if you don’t have a system for staying in touch with them until they are ready, you’re leaving money on the table. That’s where your autoresponder comes in—you can use it to build a list of leads that you can keep in touch with.

It’s helpful to have a gift of some kind to offer potential leads, so they get on your list. Called a “freebie” or “lead magnet”, this is a small piece of content that your audience wants and needs so much that they are willing to give you their email address, knowing that you will be sending them more content.

The lead magnet leads them to an email series that you have on your autoresponder. These emails educate your leads more about the problem they face and how you can help them solve it. Your autoresponder email series leads to an enrollment conversation, a free consultation or “discovery call,” where you enroll them into your coaching program.

This system also may include using ads to re-target people who clicked on your links to encourage them to connect with you.

Social media marketing system

A necessary part of lead generation is marketing on social media. It’s a whole system in itself! You will need to make social media posts, which include content and graphics, to distribute to the platforms you are using. Part of this system involves having a regular time for engaging with people on social media who are potential clients. You will have to do more market research to find out where to find your ideal leads on social media.

This system can also include advertising on various platforms. Each one is different, and, to stay organized, you should focus on one platform at a time, so you can get a steady stream of leads from it before you start working on another one. Also, there are ways to automate your social media marketing.

Sales conversion system

Once you get a lead into a free sales conversation, you need to have a set of steps to take them through to see if they are right for your program or service.

Here is a sample conversation formula:

a) Warm Up Questions – icebreakers

b) Setting Expectations – your agenda for the call

c) Making the Promise – what they will get out of the call

d) Qualifying Questions – their ability to invest

e) Personal Questions – their reason for consulting with you

f) Offer – your solution

g) Close – your call-to-action

h) Technical Questions/Objection handling – help them make a decision

There are many courses available on sales conversation techniques and formulas. Know that salesmanship is an acquired skill that anyone can learn.

Onboarding clients system

Once you have enrolled a new client, there needs to be a procedure or onboarding process that they go through. This can include a welcome letter or welcome package, registration on your delivery platform, getting their personal information, or filling out a questionnaire.

Client retention system

It’s a lot easier to reenroll a current client than to find a new client, so it’s a good idea to have a client retention system. Current clients have already been sold once and they know and trust you. So it doesn’t take as much work to convince them to buy again. Part of this system is how you treat your clients while they are working with you. The other part is keeping in touch with them after their program is over and introducing them to the next step or another program. This can be done through an email series or phone calls.

Follow-up system

One more system a life coach needs is for following up with people. There are 4 follow-up series that you need to create:

a) People opting in for your “lead magnet

b) Prospects you meet on social media platforms

c) Current clients who are in one of your programs

d) Past clients who need the next step

The thing to keep in mind is that people are more likely to buy from you if you follow up with them regularly with courteous, helpful, non-pushy contact via email or phone calls.

In Conclusion

Becoming a life coach can be as exciting as it is formidable! And as a life coach you may run into some unique challenges. But there are ways to deal with it. We discussed what life coaching is and the 5 steps that need to be in place in order to launch a coaching business.

There are other things you can do too. You can hire a coach to help you. You can take extra trainings. And you can become a member of a life coach association, such as the International Association of Professional Life Coaches®. Membership will give you visibility, credibility, and business and marketing training. Visit the website to see if it’s a good fit for you!

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ENTREPRENEURIAL CHALLENGES – The Case of Royal Bank Zimbabwe Ltd

Industry Shake-up

In December 2003 Mzwimbi went on a well deserved family vacation to the United States, satisfied with the progress and confident that his sprawling empire was on a solid footing. However a call from a business magnate in January 2004 alerted him to what was termed a looming shake- up in the financial services sector. It appears that the incoming governor had confided in a few close colleagues and acquaintances about his plans. This confirmed to Mzwimbi the fears that were arising as RBZ refused to accommodate banks which had liquidity challenges.

The last two months of 2003 saw interest rates soar close to 900% p.a., with the RBZ watching helplessly. The RBZ had the tools and capacity to control these rates but nothing was done to ease the situation. This hiking of interest rates wiped out nearly all the bank’s income made within the year. Bankers normally rely on treasury bills (TBs) since they are easily tradable. Their yield had been good until the interest rates skyrocketed. Consequently bankers were now borrowing at higher interest rates than the treasury bills could cover. Bankers were put in the uncomfortable position of borrowing expensive money and on-lending it cheaply. An example at Royal Bank was an entrepreneur who borrowed $120 million in December 2003, which by March 2004 had ballooned to $500 million due to the excessive rates. Although the cost of funds was now at 900% p.a., Royal Bank had just increased its interest rates to only 400% p.a, meaning that it was funding the client’s shortfall. However this client could not pay it and just returned the $120 million and demonstrated that he had no capacity to pay back the $400 million interest charge. Most bankers accepted this anomaly because they thought it was a temporary dysfunction perpetuated by the inability of an acting governor to make bold decisions. Bankers believed that once a substantive governor was sworn in he would control the interest rates. Much to their dismay, on assuming the governorship Dr. Gono left the rates untamed and hence the situation worsened. This scenario continued up to August 2004, causing considerable strain on entrepreneurial bankers.

On reflection, some bankers feel that the central bank deliberately hiked the interest rates, as this would allow it to restructure the financial services sector. They argue that during the cash crisis of the last half of 2003, bank CEOs would meet often with the RBZ in an effort to find solutions to the crisis. Retrospectively they claim that there is evidence indicating that the current governor though not appointed yet was already in control of the RBZ operations during that time period and was thus responsible for the untenable interest rate regime.

In January 2004, after his vacation, Mzwimbi was informed by the RBZ that Royal had been accommodated for $2 billion on the 28th of December 2003. The Central Bank wanted to know whether this accommodation should be formalised and placed into the newly created Troubled Bank Fund. However, this was expensive money both in terms of the interest rates and also in terms of the conditions and terms of the loan. At Trust Bank, access to this facility had already given the Central Bank the right to force out the top executives, restructure the Board and virtually take over the management of the bank.

Royal Bank turned down the offer and used deposits to pay off the money. However the interest rates did not come down.

During the first quarter of 2004 Trust Bank, Barbican bank and Intermarket Bank were identified as distressed and put under severe corrective orders by the Central Bank.

Royal Assault

Royal Bank remained stable until March 2004. People who had their funds locked up in Intermarket Bank withdrew huge sums of funds from Royal Bank while others were moving to foreign owned banks as the perception created by Central Bank was read by the market to mean that entrepreneurial bankers were fraudsters.

Others withdrew their money on the basis that if financial behemoths like Intermarket can sink, then it could happen to any other indigenously controlled bank. Royal Bank had an advantage that in the smaller towns it was the only bank, so people had no choice. However even in this scenario there were no stable deposits as people kept their funds moving to avoid being caught unawares. For example in one week Royal Bank had withdrawals of over $40 billion but weathered the storm without recourse to Central Bank accommodation.

At this time, newspaper reports indicating some leakage of confidential information started appearing. When confronted, one public paper reporter confided that the information was being supplied to them by the Central Bank. These reports were aimed at causing panic withdrawals and hence exposing banks to depositor flight.

Statutory Reserves

In March 2004, at the point of significant vulnerability, Royal Bank received a letter from RBZ cancelling the exemption from statutory reserve requirements. Statutory reserves are funds, (making up a certain percentage of their total deposits), banks are required to deposit with the Central Bank, at no interest.

When Royal Bank began operations, Mzwimbi applied to the Central Bank – then under Dr Tsumba, for foreign currency to pay for supplies, software and technology infrastructure. No foreign currency could be availed but instead Royal Bank was exempted from paying statutory reserves for one year, thus releasing funds which Royal could use to acquire foreign currency and purchase the needed resources. This was a normal procedure and practice of the Central Bank, which had been made available to other banking institutions as well. This would also enhance the bank’s liquidity position.

Even investors are sometimes offered tax exemptions to encourage and promote investments in any industry. This exemption was delayed due to bungling in the Banking Supervision and Surveillance Department of the RBZ and was thus only implemented a year later, consequently it would run from May 2003 until May 2004. The premature cancellation of this exemption caught Royal Bank by surprise as its cash flow projections had been based on these commencing in May 2004.

When the RBZ insisted, Royal Bank calculated the statutory reserves and noted that, due to a decline in its deposits, it was not eligible for the payment of statutory reserves at that time. When the bank submitted its returns with zero statutory reserves, the Central Bank claimed that the bank was now due for the whole statutory reserve since inception. In effect this was not being treated as a statutory reserve exemption but more as a penalty for evading statutory reserves. Royal Bank appealed. There were conflicting opinions between the Bank Supervision and Capital Markets divisions on the issue as Bank Supervision conceded to the validity of Royal’s position. However Capital Markets insisted that it had instructions from the top to recall the full amount of $23 billion. This was forced onto Royal Bank and transferred without consent to the Troubled Banks Fund at exorbitant rates of 450% p. a.

FML Saga

When FML was demutualising, the executives were concerned about the possibility of being swallowed by its huge strategic partner, Trust Holdings. FML approached Royal Bank and other banks to act as buffers. The agreement was that FML would fund the deal by placing funds with Royal Bank so that Royal would not fund it from its balance sheet.

Consequently FML would leave the deposits with Royal Bank for the tenor of the loan. The deal was consummated through Regal Asset Managers and was to mature in December 2004, at which time it was anticipated that the share price of First Mutual would have blossomed, allowing Royal Bank to harvest its investment and exit profitably. The deal resulted in Regal Asset Managers owning 57 million FML shares. Royal Bank gave FML some securities in the form of treasury bills as collateral for the deposit.

The Reserve Bank and the curator wrote off this investment because at that time FML was suspended at the ZSE. However the fact that it was suspended did not invalidate its value. Recent events have shown that this investment has generated huge capital value for Regal Asset Managers as the ZSE rebounded. Yet the curator valued this investment negatively. Around March 2004 there had been a contagion effect at FML due to the challenges at Trust Bank. This resulted in the forced departure of the FML CEO and chairman. FML was suspended from the local bourse as investigations into the financing structure of Capital Alliance’s acquisition were carried out. Because of the pressure brought to bear on FML, it wanted to withdraw the deposits held by Royal Bank, contrary to the agreement. FML could not locate and return the treasury bills that had been provided as collateral by Royal. Royal Bank suspected that these had been placed with ENG, another asset management company which collapsed in December 2003. A public row broke out. Royal Bank executives sought counsel from Renaissance Merchant Bank, which had brokered the deal, and the Chairman of the ZSE, who both agreed with Royal that the deal was legitimate and FML had to honour the agreement. At this stage FML sought court intervention in an attempt to force Royal Bank into liquidation. Even the curator contested the FML position resulting in his taking it for arbitration. Royal’s position remained that if FML fails to return the securities then it will not get the funds.

Royal bank directors claimed political interference on the issue. The Royal Bank executives believe that the governor, against his better judgment, decided to act against Royal Bank under the pretext of the political pressure. In retrospect, the political support for cracking the whip at Royal gave credence to the rumour that the governor had an underlying agenda in taking Royal and merging it into ZABG because of its strong branch network.

Royal Bank had been warned by friendly RBZ insiders that if it ever accessed the Troubled Bank Fund it would be in trouble, so it sought to avoid this at all costs.

However on 4th August 2004, Royal was served with papers that effectively placed it under the curator. Interestingly, the curator’s contract was signed two days earlier. Until this time no depositor had ever failed to withdraw his deposits from Royal Bank.

The lack of credibility of the Reserve Bank in handling this case is exposed when one considers that some banks were given more than eight months to stabilise under curators, e.g. Intermarket and CFX Banks, and were able to recover. But Royal and Trust Bank were under the curator for less than two months before being amalgamated. The press raised concerns about the curators assuming the role of undertaker rather than nurse, and hence burying these banks.This seemed to confirm the possibility of a hidden agenda on the part of the Central Bank.

Victor Chando

Chando was an excellent financial engineer who set up Victory Financial Services after a stint with MBCA. He had been the brains behind the setting up of the predecessor of Century Discount House which he later sold to Century Holdings. Royal Bank initially had an interest in discount houses and so at inception had included Victor as a significant shareholder. He later acquired Barnfords Securities which Royal intended to bring in-house.

Victory Financial Services was involved in foreign currency dealings, using offshore companies that bought free funds from Zimbabweans abroad and purchased raw materials for Zimbabwean corporations. One such deal with National Foods went sour and the MD reported it to the Central Bank. On investigations the deal was found to be clean but the RBZ went ahead to publish that he was involved in illegal foreign currency transactions and linked this to Royal Bank. However this was a transaction done by a shareholder as an account holder, in which the bank had no interest. What confused matters, was that Victory Financial Services was housed in the same building as Royal Bank.

After failing to nail Chando to any criminal charges, the Central Bank issued an order for Royal Bank to force him out as a shareholder and board member. It is ridiculous that the Central Bank would vet who is a shareholder or not in banks – particularly when the people had no criminal records.

Negotiations with OPEC were underway for it to take over Chando’s shareholding. The Reserve Bank was aware of these developments. OPEC would then help in the recapitalisation as well as open up lines of credit for the bank.

The Arrest

In September 2004 the executive directors of Royal Bank, Mzwimbi and Durajadi, were arrested on five allegations of fraudulently prejudicing the bank. One of the charges was that they fraudulently used depositors’ funds to recapitalise the bank.

Three of the charges after police investigations were dropped, as they were not true. The two remaining charges were:

a) a conflict of interest on loans that were made available to the directors. The RBZ alleges that they did not disclose their interests when companies controlled by them accessed loans at concessionary rates from the bank. However the enterprising bankers dispute these charges, as they claim the Board minutes prove that this interest was disclosed. Even the annual financial statements of the bank acknowledge that they accessed loans as part of their employment contract with the bank.

b) money was owed to Finsreal Asset Management. However Mzwimbi argues that Finsreal actually owes them money and not the other way round. Royal Bank shareholders needed to inject money for recapitalisation of the bank and were requested to deposit their funds with Finsreal Asset Management. Since some had not paid their portion of the recapitalisation by the due date, Royal Financial Holdings, which had an account with Finsreal, paid the money on behalf of the shareholders – who were then indebted to Royal Financial Holdings. Somehow the RBZ confused this transaction as the bank’s funds and therefore accused the

shareholders of using depositors’ funds to recapitalise.

By retrospectively analysing the court case wherein the Royal Bank executive directors are accused of defrauding the bank it appears that the RBZ created a falsehood in order to frustrate the bankers. The curator who initially refused to take a stand before the RBZ appointed Independent Appeal, has in court clearly testified that no monies were stolen from the bank by the directors and that the curator did not (contrary to RBZ assertions) recommend charges against the bankers. In January 2007 the former executive directors of Royal Bank were acquitted by the High Court on the remaining criminal charges after the prosecution failed to present a convincing argument.

Royal Bank assets were sold by the curator to ZABG barely two months after being placed under the curator, without any audited financial statements. The speed at which an agreement of sale was reached is astonishing. The owners of Royal Bank went to court and, after a protracted legal struggle, the court ruled that the assets were sold illegally and hence the sale was “illegal and of no force or effect and therefore null and void”. The court then directed that the owners should appeal to the Central Bank for a determination of the actions of the curators. The Central Bank begrudgingly set up an “independent panel” to adjudicate the case. Strangely ZABG continued to trade on the illegal assets.

The panel advised that the appeal by Royal bank be rejected as it would be difficult to disentangle it from ZABG. They also cited the fact that ZABG had some contractual obligations with third parties who may not want to do business with Royal bank. This strange ruling fails to explain why these considerations were not made when the amalgamation was done. The ruling also redefined the agreements between the curator of Royal bank and ZABG as not being an “agreement of sale” even though the parties which entered into the agreement clearly intended it to be viewed as such. This was a way of circumventing the Supreme Court ruling that the agreement of sale was null and void.

But the panel did not explain how this disposal of the assets should be considered if it was not a sale.

Consequently the major shareholders of Royal appealed to the Minister of Finance who upheld the RBZ decision. Mzwimbi and his colleagues have therefore appealed to the courts. In the meanwhile there was a failed attempt to sell the disputed assets by ZABG despite the outstanding legal challenge. Just ice delayed is justice denied.

Mzwimbi and his team have been denied access to all bank records and yet are expected to defend themselves. As he characteristically puts it, “We are going into this fight blind folded and our hands bound, while fighting someone who has armour and a sword.”

Around 2002-3 there were press reports indicating that the ruling party/state wanted to have a stake in the profitable banking sector. A minister of government at the time of the arrest confirmed this to Mzwimbi and his team. Another bank, NMB, had allegedly been assaulted and the major shareholders were told to dispose of their shareholdings to certain politically connected persons. They refused and had to leave the country after some trumped up charges were preferred against them. Unfortunately, the governor faced resistance and the politicians distanced themselves. One indigenous banker reported how he was summoned to the Central Bank governor’s office and informed that he should leave the country, as his bank would be closed. This banker credits Royal Bank’s resistance to being manipulated as the reason why his own bank survived. The bank was placed under curatorship on 4th August 2004. Mzwimbi had secured potential investors for the recapitalisation of the bank just before the deadline of 30th September 2004. Three days before that deadline, Mzwimbi met the curator and explained in detail the position for the recapitalisation exercise. Investors who had shown interest and were in advanced negotiations were OPEC, Fidelity Insurance and some South African investors. He further asked the curator to request the Central Bank for an extension of about a week. The very next day he was arrested on the pretext that he was about to leave the country. Mzwimbi and his team believe that his arrest at that critical stage was meant to intimidate the would-be investors and result in the failure to recapitalise. This lends credence to the view that the decision to acquire the bank and amalgamate it in ZABG had already been made. The recapitalisation would have scuppered these plans. Notably, other banks were given an extension to regularise their recapitalisation plans.

Shakeman Mugari reported that the central bank has in principle agreed to enter into a scheme of arrangement with Royal, Trust and Barbican banks which could see the final resolution of this issue. He argues that the central bank disregarded the value of securities that the banks had pledged to the central bank for the loans. If these are factored in, then the bank shareholders have some significant value within ZABG. If this scheme had been consummated it would have protected RBZ officials from being sued in their personal capacity for the loss of value to shareholders. From the article it appears like a memorandum of agreement had been signed to effect a reduction of Allied Financial Services’ share in ZABG while the former banks’ shareholders will take up their share in proportion to the value of their assets. This seems to indicate that the central bank has noted a weakness in its arguments.

If this proves true Royal Bank could regain a fairly big stake of ZABG due to its assets which included the real estate and its paper assets which had been undervalued.

The legal hassles show that entrepreneurs in volatile environments face unnecessary political and legal challenges. The rule of law in these countries is sometimes nonexistent. The legislative and political environments, instead of supporting investors, pose serious challenges to entrepreneurs. Entrepreneurs in these environments have to assess the associated risk in setting up their enterprises. However a new breed of entrepreneurs who do not fear the vicissitudes of political interference is making a difference. Entrepreneurs recognise that the environment is a constraint but can be manipulated until worthwhile opportunities are exploited for commercial value. These entrepreneurs choose not to be victims of the environment.
Assault on Entrepreneurs’ Character

The information asymmetry whereby the Central Bank played its case in the public press while the accused bankers had no right of response created a false impression, in the minds of the populace, of entrepreneurs being greedy and unscrupulous.

The Central Bank accused Jeff Mzwimbi and Durajadi Simba of siphoning funds from the bank. An example appeared in a press article in which it was alleged that the sale of Barclays Bank branches to Royal Bank was annulled and the refunded funds were remitted to Mzwimbi and Durajadi at Finsreal Asset Managers and not Royal Bank’s account. This was a clear case of deliberate misinformation as the Central Bank was aware of the truth. Royal Bank had included the purchase of the Bulawayo Barclays Bank branch building which Barclays Bank would lease a portion of from Royal Bank. When Royal Bank fell short at the Interbank Clearing House, it renegotiated with Barclays. This was after Royal was threatened that if it did not clear this amount it would be placed into the Troubled Bank Fund – which carried severe penalties.

The result was that Barclays refunded the amount paying it directly to Royal’s Central Bank account. The RBZ acknowledged receiving these funds. How can they now accuse the founding shareholders of siphoning the same funds which went directly to the RBZ account? Mzwimbi insists that Barclays can easily testify to this.

The RBZ also alleged that Mzwimbi and Durajadi withheld information from their CVs on application for the bank licence and hence questioned their integrity. They claimed that Mzwimbi withheld information on his involvement with a failed bank, UMB. But the business plan for Royal Bank which was filed with RBZ clearly states this involvement. The Central Bank would have these records anyway. They also queried Durajadi’s source of funds and cast aspersions on the net worth statement. Yet Durajadi had been involved in Zimbabwe Trust and a transport business with his brother, which gave him sufficient net worth value.

The RBZ contends that the Board of Royal Bank failed to comply with a directive to recapitalise by 29th July 2004. Royal Bank executives and Board state categorically that they never received this directive. Mzwimbi and his team argue that this is misinformation, as all banks were required to have recapitalised by 30th September 2004.

The regulators also allege that the balance sheet of Royal Bank had a deficit of $140 billion, which the bankers dispute. If one were to consider the disputed $23 billion for statutory reserves and the $20 billion as accommodation from the clearing house, this would amount to $77 billion with interests. However with the undervaluing of the assets and the $160 billion which was written off as uncollectible, there would be no negative balance sheet. The contention of the Royal Executives is that the curator, at the behest of the Reserve Bank, deliberately tampered with the accounts to provide a reason for the take-over. This may be validated by the fact that the curator’s balance sheet kept changing whenever he was challenged and he increased the write-offs, even of funds that had since been collected. Since Royal and Trust Banks were amalgamated into ZABG, the bank is still profitable, without any recapitalisation having been carried out. The very fact that this new amalgamated bank can operate for this long from insolvent banks’ capital without recapitalising lends credence to the argument of the Royal Bank’s owners.

The entrepreneurs contend that they were dealing with a Central Bank which was determined to see them sink and not to protect the integrity of the banking system. This environment was not conducive to survival and it amplified normal weaknesses which could have been resolved in the course of normal business.

Entrepreneurial Determination

Mzwimbi and his colleagues refused to give up under challenging situations. Despite intimidation they took the Central Bank to court and refused to budge until justice was done. They were presented with numerous opportunities to quit the country but would not.

It is reported that they have not given up on their dream. They have set up Royal Financial Services in Kenya, despite the challenges in Zimbabwe. Indeed a sign of perseverance. Press reports indicated that they are in negotiations with Trust Bank so that once they win their case they can merge and continue their operations in Zimbabwe. Trust did not confirm or deny this. The more likely scenario however is that both Trust and Royal could reach a compromise with the central bank resulting in them taking up equity in ZABG subject to an independent revaluation exercise of the assets which were taken over.

Entrepreneurial Principles

The entrepreneurial journey is fraught with risk but can be very rewarding. Some lessons that can be learned from the case study are as follows:

• Entrepreneurs take calculated risk. Mzwimbi did not use all his resources in the bank but left his shareholding in Econet intact. He also sought to diversify his wealth by keeping some investments with FML and Screen Litho. This has been the mainstay of his wealth creation strategy. The disaster that befell the bank did not completely wipe him out because of this prudent investment strategy.

• Entrepreneurs learn from their experiences. Mzwimbi’s vast experiences taught him critical lessons. His international banking experience enabled him to see the emerging trends as Barclays and Standard Chartered withdrew from country towns, creating a route for his entry strategy. His work with Econet taught him perseverance as he and his colleagues fought legal battles with government for the award of the licence. Little did he know that this was just training ground for the battle of his life – the battle for Royal Bank.

• Entrepreneurs need to continuously scan the environment for threats and opportunities. Whereas Mzwimbi and his team were good at noticing the emerging positive trends in the environment at inception, they failed to pick the changes in the regulatory environment when the new governor came on board.

• Entrepreneurial strategy emerges and therefore entrepreneurs should be flexible. Although Royal Bank had a plan to grow at a steady pace, when the opportunity arose to acquire other branches cheaply the entrepreneurs seized the opportunity.

• Entrepreneurs are faced with credibility challenges as customers, regulators and suppliers test the credibility of newcomers. Royal Bank minimised this by recruiting experienced and well known personnel in the market. However the lack of institutional shareholders led to credibility gaps with some corporate clients.

• Entrepreneurs need to craft into their organisations both managerial and leadership competences to ensure both the ability to exploit opportunities (entrepreneurial activity) and sustainable company performance (strategic management). The more contemporary view of entrepreneurship transcends just the venture creation and now encompasses strategic growth. Although Mzwimbi was an excellent leader he needed a strong and powerful manager to consolidate the gains and create solid systems to sustain the rapid growth. Leaders thrive on change while managers thrive on handling complexity and creating order.

• Business is built on relationships as these help in the scanning of the operating environment e.g. critical information about opportunities and threats was obtained from close relationships

Lets close this article with a few questions that an entrepreneur should consider. For instance, if Mzwimbi had expanded less aggressively, would Royal Bank have been safer from the regulators? How could Mzwimbi have protected Royal Bank from political and regulatory interference if he anticipated those risks? If Mzwimbi had selected to pursue his enterprise ideas in a country with a more dependable political and regulatory environment, how would he have performed? Would it have been wiser to keep the equipment, real estate and other assets in Royal Financial Holdings or other corporate entity and only lease them to the bank? In that scenario would the predators have been able to pounce on the bank?

Sources: I Dr Tawafadza A. Makoni confirm being the author of this work. The material for this case study was drawn from my interviews with Mr J Mzwimbi CEO of Royal Bank in February 2006 and two Royal Bank Board Members. Some material was drawn from an unpublished Royal Bank Strategic Business Plan, (2000)

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