Few Zimbabweans are going for the professional business qualification of the Chartered Institute of Management of Accountants (CIMA). And this has led to less than 5 graduating each year leaving the Zimbabwe CIMA office to relocate to Zambia where enrolment is better.
One of the interesting concept from Management Accounting is the Learning Curve which is also called the Experience Curve concept. It is defined as ‘the rate of a person’s progress in gaining experience or new skills’ and expressed as a mathematical formula Y = a X b , (also seen as Y = aX^b).
Given that CIMA studies are based on practical scenarios, the learning curve questions can be challenging especially when variance analysis and other complex concepts are added.
What students could miss out though is the application of the concept on start-ups. How easy is it to start a business operation in Zimbabwe? At what stage do you start to turn red losses figures into profits?
Let’s draw lessons from top musician Baba Harare.
On his latest post, Baba Harare mentions the first days when he left fellow musician Jah Prayzer and flying solo. One of his first musical shows was in Centenary in Mashonaland Central and he hitched a hike from a long distance driver to the venue and what did he meet?
Shock as a total of 10 musical fans turned up and this was a mega flop for a musician who had become one of the fans favourite guitarist at Third Generation Band and used to performing in front of thousands of ecstatic fans.
However he persevered and went on to build one of the top musical brands in the country.
The learning curve essentially captures inevitable embarrassing moments in the first days. It captures the losses many are not comfortable to publicly share.
Given that 1 out of 5 start-ups remain on feet beyond 5 years, the learning curve costs could be argued to be 80%. High probability of losing plus or minus 80% of capital invested in the first days or years. A key lesson for risk managers and financial analysts.
However through thorough researches and mentorships—you could reduce the costs. If you ask around for business ideas—you are unlikely to be given learning curve costs. Everyone comfortable with sharing the successes but how they reached the stage? The missing link!
In other words Profits=Experience.
Of course the purpose of this article is not to scare you—but just a reality check. The ending of this article of course an inspiration from Baba Harare. From the big flop of 10 fans to thousands of fans attending shows years later.
Keep on grinding.
