Does Size Matter? - How many clients to build a successful Caribbean business

Building businesses in relatively small island markets that we have in the Caribbean comes with challenges that the typical textbook on business strategy may not grasp. Even your popular online guru sharing generally useful, and sometimes vague advice may not understand what it’s like creating solutions without some of the typical US-American or European tools easily accessible. 

In the Caribbean and similar communities, business is extremely personal. You can give your business whatever fancy corporate name you please, but in the customer’s mind they are deciding whether they want to engage with the owner, and often that owner’s family. We see a warped version of this where large companies have a very obvious key person as the face of their business. Think Steve Jobs or Tim Cook at Apple, Bill Gates at Microsoft, Bezos at Amazon, and perhaps the more polarizing figure Elon Musk at the helm of X (Twitter), Space X and Tesla. However, these companies have achieved a scale and embedded themselves in users' lives to a point where people are often willing to push aside their feelings about the founder and focus on how much utility they get from the product or service. 

People will criticize Bezos, yet still shop on Amazon for the price and convenience. They will disagree with how Tim Cook maneuvers relationships with high ranking government officials, but that’s not enough to make them switch away from the iPhone. However, the Caribbean is different. The question goes beyond just, “Is this product or service worth the price?”, to “Do I really feel like giving Mary and her people my money today…after she didn’t greet me in church on Sunday?”  

Sounds ridiculous right? But these are the realities.

Another challenge is affordable access to tools such as receiving electronic payments from local and international clients, recurring billing to credit cards, popular point of sale software, and easy modern banking.

I recall two frustrating incidents. The first was trying to set up a PayPal business account and being told that my region only allow for sending, not receiving payments. Meaning you can shop, but people can’t shop with you. 

The other was trying to move funds from one locally operating bank to another and being charged about $150, since it was considered an international transaction.  “International?”, I thought with confusion. I could see the receiving bank across the parking lot from the sending bank where I was sitting. I was close to the point of just withdrawing cash and taking the one-minute international walk across the coconut trees to deposit the funds myself.

You see one bank was technically Canadian, and the other was based in Puerto Rico, both with branches operating on my island. I was trying to pay bills. They were engaged  geo-political financial gymnastics across SWIFT and correspondent banks who each needed their pound of flesh for moving my few dollars across the parking lot.

Without setting these challenges aside completely, let’s turn the corner to actual numbers. Now the Caribbean is not a monolith. Some islands have a few thousand people and others have a few million, so we appreciate how these population differences change the conversation.

Part of the economic magic of the USA, European Union and other regions is the ability for businesses to scale across borders and access resources from other locations with minimal static. The currency is the same, tariffs and duties aren’t charged whenever the product moves a few kilometers. Shipping is more affordable, so one can source materials widely, assemble, then sell across the region to many customers without worrying about having the correct passport.

So how many clients does it take to build a successful Caribbean business? That depends on the type of business, type of clients, type of owner one want to become.

There are two primary ways to make a significant amount of money. Either, 

1. provide a low price solution to a simple problem, to a high volume of people, or 

2. provide a high price solution to a complex problem to few people who can pay that premium price.

In many Caribbean countries businesses such as trust and law firms eat at both ends. They provide business incorporation services for fairly low prices at mass. Then they charge a stiff premium for advising on more complex legal issues.

When we look at more fundamental low margin business such as supermarkets, the game changes. As important as food is, the products are generally homogeneous making it hard to really differentiate. People are seldom open to spending more money on groceries while they absorb price increases in smart phones and other luxuries.

So with price and product fairly fixed, it becomes a numbers game. Who can attract the most shoppers to buy almost the same product on sale at the competitor? Or more accurately who has enough free cashflow to sustain selling at prices below a realistic profit margin until the competitor folds?

Who is able to purchase inventory in volumes and low cost outside the Caribbean, or combine purchasing for multiple small Caribbean markets?

It’s a game of who can hold their breath the longest. 

There are more factors at play but we can save that for another discussion.

The final element asks what kind of owner one wants to be? This is a “how do you define successful?” question. 

If making just enough money to pay the business expenses, and cover personal expenses, without paying yourself a realistic salary is enough for your version of success, then yes this is achievable in many cases. 

However if we are trying to develop real economic power, we need more people to own businesses rather than own their jobs. The bigger goal should be (or at least can be) building a business with systems that operate independent of the founder, that can generate enough money to replace the founder’s role in daily operations, and eventually management. 

At this level we are working more as chairperson of the board giving guidance to expert operators whom we hire as CEOs an other roles. With this freedom we can build thing B, while thing A generates returns. We may sell thing A completely, retain an ownership stake, or hold a controlling interest as others invest their capital.

The question is do you want to be the owner who operates the business, or the owner who guides operators? I pose this question with zero prejudice applied to either stance. It’s a personal question that each has to weigh. The answer to that question affect how many clients you need to grow from one level of success to the next.

As Caribbean communities we have to wrestle with how to balance the existence of the large corporation guiding their operators, against the role of independent business owners different tools available. 

For the Caribbean, unless you’re operating in one of the larger single markets such as Trinidad and Tobago, Barbados, Jamaica, Dominican Republic amongst a few others, businesses need access to more clients to scale enough to free the founder. At the very least, we need to continue building commercial bridges that let us exchange goods, services, and payments amongst our Caribbean neighbours. 

Ideally we begin trading more aggressively with global markets in Latin America and further abroad. For this to work Caribbean businesses need access to commonly used electronic payment solutions. In the case of physical good, we work on new efficient shipping routes.

There’s more more to discuss, but let’s pause here for today. 

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Dalan Vanterpool, for Tracking Money