December 07, 2013   by

Mistakes that spoil chamasEvery Chama makes mistakes, but the key is to learn and not repeat them. That can be easier said than done. If strategic, mistakes serve any function; they are to teach Chamas how to avoid messing up. Ideally, Chamas everywhere should be evaluating mistakes and not repeating them. The problem is, the same ones keep happening again and again. Here are the most common mistakes Chamas make.

No Strategy

This is one of the most common errors. Some chamas limp along from year to year with no strategy. They have not goal and thus no criteria upon which to base their decisions. As a result, they have no view of what investments they want to make and what financial goals they want to achieve. They really do not understand the investments they want lurching from one opportunity to another and undergoing losses when they put their money in the wrong investment. They are just not in control of their destiny.

Getting tactics mixed up with strategy

Tactics are short-term; strategy looks out over many years. For example, two chamas might be investing in stocks. One chama might sell its shares every time the prices drop. Then a few weeks later, the price might really be back up again and they lose. That’s tactics. The second Chama focuses on the strategy of long term investment and principles are built around that strategy of holding on to stock and not disposing it at the first sign of trouble. That’s a strategy, a totally different. Chamas have to make a choice: if they go with tactics, they will always be at the door or losing money. Most times, it pays to have a strong strategy on how you handle your investments.

Not planning for problems

This comes with the territory of no-strategy. Every strategy has to build in scenarios of events that may threaten the Chama. Failing to do so is irresponsible. The only thing that’s certain about business is that it’s uncertain. Every Chama needs a plan B because things happen and if your entire Chama is not prepared, you will be in trouble.

No exit strategy

Many Chama leaders make this mistake – they think they will run the chama forever. This is similar to the way some chama leaders fail to anticipate problems. They just don’t think about them. A good piece of advice is “to start with the end in mind.” Chama leaders need to determine what they will do with the investment in the Chama at some point in the future. Will the Chama be dissolved the assets shared, how about if a member wants to pull out? What happens. As a minimum it is important to have an exit strategy.

Poor member recruitment

Recruiting members for your Chama is not a certain science, but there a lot of basic things that people can do to increase the success rate. For instance, take prompt action if a member is not a good fit. Don’t fall for the tendency to give such members just a bit more time hoping they will out. They usually don’t. In addition, avoid bringing members into the Chama just because they are your friends or family. Recruit members based on investment attitude and demonstrated passion for investment. Attitude makes the difference most of the time.

Trying to do everything

In the beginning Chama leaders come wear all the hats. The problem is if they keep doing that, they will not be able to focus on the broader strategic issues. The biggest mistake in every chama is failing to make time to work out what the Chama is about; what you what to achieve, how you want to invest and your financial goals. If you spend all your time on administrative matters without delegating to other members to help you, your Chama will stagnate and will not grow.

 

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This post was written by Chamasoft

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