In Summary

EARNING FROM ALCOHOL: After making several considerations, Betty Namagembe, a budding entrepreneur, decided to give up the grocery shop and go all in for bar business, writes Tony Mushoborozi.

Betty Namagembe runs a small liquor store in Lungujja in the western outskirts of Kampala.
Namagembe has been in the retail business for the last 10 years, though she only started running the bar two years ago. She spent the first eight running a neighbourhood grocery shop.

Like many retailers across the country, Namagembe’s motivation to start the small neighbourhood duuka was to help her provide daily bread for her children.
With time the 38-year-old was not making much progress in her business because she did not have any bookkeeping skills. She was struggling to keep the grocery shop open.

Stunted savings
“In the early days of the business. I realised I was not growing my profits at all. So I thought of a creative way to try and bring in more cash. I came up with an idea to add alcohol in my stock. By so doing, I attracted a group of new customers who just came to drink a beer or two. Finally, I was progressing,” says Namagembe.

Namagembe realised that the alcohol side of the shop was starting to grow at a faster rate than grocery. Her shop veranda was often crowded with revellers and her other customers started feeling uncomfortable to come buy groceries. But that was okay because, one, this only happened in late evenings, and two, because the alcohol was profitable. “I also realised that the grocery required more capital to run. I did not have that money,” she explains. Namagembe was happy to discover that in comparison, alcohol needed much less investment in stock.

Eventually, after making several considerations, the budding entrepreneur decided to give up the grocery shop and go all in for the bar. That was two years ago. She named the bar ‘Betty Home of Drinks’.

Frustrations
Namagembe soon realised that more cash in the drawer did not translate into more savings in the bank.
“Now that I was making more money, I expected to save more, but this was not happening for some reason. I realised that you can have all the cash in the basket but fail to grow,” Namagembe says.

This state of affairs frustrated Namagembe to no end. She did not quite know how to change things around.

She says she would just take money to the bank, only to follow it there the next day because she needed to go shopping.

Turning point
Namagembe would have wallowed in her helplessness had not one of her suppliers decided to offer her a week’s training in bookkeeping besides of other vital business principles.
“I was called by someone from Nile Breweries Limited who asked if I had time to attend a weeklong training. The person told me this would help me in my business, since I was new,” she says.

She had mentioned her woes to someone connected with the company and somehow, the information reached the right people. That was five months ago.
“We were taught how to run a bar effectively and profitably. We learnt customer care skills, we were implored to always advise people not to drive after they had been drinking, and so on. But most especially, we were taught how to keep books of accounts and save,” she says.

When Namagembe came back home, she started applying what she had learnt with a zeal of someone who has been yearning for change.

She embarked on stock taking and recording the money she spent, how much she made, and how much she had earmarked for saving. She says that today, unlike before, she accounts for every shilling.

Auditing
Like every retailer, Namagembe finds herself adding commodities in the stock every day of the week.

“I keep track of all the money in that week, even noting down the money spend on things such as transport to town or lunch. I make sure to write down the items and their prices. Then on Monday, after a peak weekend of selling, I calculate to know exactly how much I made in the week,” she says.

Cost cutting
One of the things that Namagembe had to do to progress was downsizing staff by half. Of the four workers, Namagembe has maintained two.

“Before the training I had four workers whom I fed and paid. I had employed these girls because I thought they would attract customers. What I did not know was that I was sometimes using part of my capital to pay them,” she says.

Namagembe’s key takeaways
Age is just a number in business. You are not too old or too young to start a business. Encourage yourself and other young women to try out new ventures. Do not say that you cannot start a business because you do not have money. Be innovative and think beyond start-up capital. If you own a business, treat your workers with dignity and pay them well. They are the primary reason you will succeed or fail.

Never underestimate the power of a satisfied or dissatisfied customer. “My business would not be where it is if my first customers were not satisfied with my services,” says Namagembe.

Opening a liquor store can be a great way to ensure a steady income, because people drink alcohol in both good times and bad. However, that same inflexibility in demand contributes to low profit margins—meaning you’re unlikely to get rich with just one store.

With proper counsel and wise strategies to boost traffic, your store can be a reliable income stream for years to come. Find a suitable location. The profit margins on liquor stores are low and demand is inelastic, meaning that it doesn’t change much over time.
That means the success of your liquor store is inextricably connected to its location. If you open a store in a market that’s already saturated, not only is your store unlikely to do well, but you’re likely to eat into a local competitor’s bottom line as well.

Research the market
When you have established that you will be able to sell alcohol at your chosen location, you need to take steps toward crafting a business plan.
The first of these is to research the market around your chosen location.

Create sales and cost projections
The market analysis is meant to give you a good idea of your customer base. With an idea of the composition of your customer base, you can create sales and cost projections based on buying habits and price points for items in your area.

For example, if you have a disproportionate amount of young single customers in your area, you can anticipate selling large amounts of beer and shooters such as tequila. Approach wholesale distributors about their case prices and compare that expense with the local price point of popular brands.

Buy your inventory
This is going to be your biggest expense. A well-stocked liquor store will have millions in inventory sitting on the shelves. There will be a temptation to try and compete with that, but you should resist. Tilt your initial inventory toward items which will sell quickly—the more you sell, the cheaper the cost to you—and then broaden your inventory later.