On the feed on OyaPay exit, a community member dropped a great line “… businesses don’t usually fold because of lack of capital. They usually fold because of lack of cash flow.” If you have managed a business, no matter how small, you will understand the potency of that line. When people say Cash is King, they do not necessarily mean physical cash in your drawers or cash registers. They mean the capacity to have liquidity through superior cash flow framework.

I will add one line at the other end of it: the most important cost that matters in scaling (online) businesses is marginal cost. (From Wikipedia, in economics, marginal cost is the change in the total cost that arises when the quantity produced is incremented by one unit; that is, it is the cost of producing one more unit of a good.) If you take care of that cost, you will find new markets and territories. Remember, in a perfect internet market, marginal cost is near-zero, meaning that web products tend towards being free. So, if you want to scale and thrive on the web, the marginal cost (practically, your transaction cost and distribution cost) of your product must be close to zero. Sure, I do not expect you to sell at zero!

This is the heart of the freemium model where you get many things free, which is possible because of the aggregation construct, where companies provide those digital products and then create an ecosystem to sell adverts. The firms benefit more than the suppliers by providing the platforms [Facebook makes money for photos supplied by families. Sure you like the Likes]. As shown in the Figure, great companies deliver the near-zero marginal price for high quality product, making it challenging for anyone that carries a non-zero marginal price to compete, exacerbated if the product is even not top-grade. This is one of the biggest challenges digital entrepreneurs face.

As you watch the marginal cost and have a laser-focused attention to cash flow, you will not meet surprises in that business.

Marginal Cost And How To Price Digital Products

LinkedIn Comment on Feed

• To succeed in any business, three key skills are essential: knowledge of product, marketing and finance. The truth is that not many business owners and entrepreneurs understand how important the third component is; and that is where majority of the problems lies. Consumers will always demand for cheaper prices or even free offerings, while producers – in their bid to appear ‘nice’ and outdo competitors, go on to plan their own downfall, by offering deals and going on expansion drives that are clearly unsustainable. You cannot have access to free money forever, so your business should be able to take care of its financial needs. Just know that when the party is over, consumers will always move on, while you are left alone to rue your past misdeeds.
• Yes, cash flow and marginal cost are lifelines that must be kept at optimal levels as business structures navigate growth. Keeping a balanced scorecard between funding, payment and sales models is essential if the outlook must remain positive. However, there is another risk factor that must be managed-Profits. Yes, misrepresentation of short term profits is a big risk. Embarking on an aggressive growth plan by leveraging short term profits as an indication of cash flow adequacy will certainly pile up opex and marginal cost. To this end, if funding options are no at near zero rates, good start ups run the risk of kissing the dust. In Africa, caution is the deal maker!
• You’re so right. Cashflow is so important that it’s sometimes necessary to sacrifice potential profits for cashflow i.e. for money to come in faster. We in the real estate industry are especially faced with this dilemma on a daily basis. In general, it’s good for businesses to understand this and plan for it

I will be speaking to international press including BBC during the Business Analytics Conference next month in Lagos which I will keynote. As I make it into Lagos for this event, I also want to meet the young people who have signed-on for the Tekedia Business Innovation Webinar. I have asked my colleagues in our business to tell you where we can all meet.

Join me for Tekedia Business Innovation Webinar on Friday March 22, 2019 (repeat, Saturday March 23, 2019). For $15 (or N5,000), you attend and also get access to the exclusive parts of Tekedia.com, reading my book – Africa’s Sankofa Innovation.

Certainly, when I was getting into the job market in early 2000s as a university graduate, things were simply better. Banks did mass interviews weekly that some people had multiple job offers within weeks of graduations. But things have changed since then.

Yet, our governments are working. I am confident everyone understands that Nigeria missed golden opportunities in 1960 to build a solid foundation for sustained prosperity of our nation.

Nonetheless, do not lose hope – there is abundance in the future. It is my desire to meet many of you when I make it into town.  In the midst of these paralyses, Nigeria remains a huge promise:  that is why I am always here sometimes two times in a month from America.

THEME:     Big Data, Analytics and African Development
VENUE:     Radisson Blu Hotel, Ikeja-Lagos, Nigeria
DATE:       March 5th – 6th, 2019

Why Nigeria Is The Best Place To INVEST

LinkedIn Comment on Feed

1. Comment. Whether Nigeria missed golden opportunities in 60s or not, it’s now immaterial. Of course we can comfortably blame those before us for messing up, but if we do not do anything significant now, in 40 years to come, our own “messing up” would be bigger.

There was no internet in the 60s, and there were fewer graduates then, so while we blame our fathers and grandfathers, our own blame is piling up. It is not enough to excel at individual level, but in our old age, if you cannot point where you contributed towards a better Nigeria and Africa, then be ready to tell your children and grandchildren what you did with your time; and do not tell them lies.

If you blame your father and grandfather for not making enough money, to prepare a better future for you, just ensure that you build empires before exiting; else do not expect even a paragraph to be written for you, on the good side of history.

2. Question: Definitely I agree with you that Nigeria remains a huge promise. Thank you for also pointing out how a bit easy it was for you long ago when you started your career, but it’s not an excuse for young people like us, we still have to push, we have to make a better living and one day be in your position to talk to people, I take my time to go through great people’s (eg you) profile on LinkedIn and I don’t forget to check their graduation year and how they have gradually climbed the success ladder. In as much as Nigeria missed a golden opportunity, it doesn’t stop we young youths to strive and also.make a difference. I will definitely love to meet you…. I gain alot from your post.

My Response: You are already inspiring many – Nigeria admires your courage, excellence and vision. Largely, there is never a better time to plant a corn than now. The fact is this: in my time, we did think those before had it easier. So, that is human nature. Charles Darwin traced it to the “quest” to survive. But yet, things are getting better yearly. In my time, there was no opportunity for a 2-year college grad to receive funding from venture capitalists from U.S. Today, Lagos has $millionaires who are less than 30 years old! The future is always better.

Can we reach 500 participants this weekend? We have 107 registered already. Join me for Tekedia Business Innovation Webinar on Friday March 22, 2019 (repeat, Saturday March 23, 2019). For $15 (or N5,000), you attend and also get access to the exclusive parts of Tekedia.com, reading my book – Africa’s Sankofa Innovation if you register.

The webinar will run for four hours and will cover business, innovation, strategy and African investing opportunities. Two hours will be reserved for questions/answers [we will follow up  via email, post, etc on questions which time will not accommodate]. The essence is to provide tools which can help people find new markets and territories with focus on Africa and specifically Nigeria, Kenya, Ghana, and South Africa. As technology redesigns markets, I break the implications and provide roadmaps during this webinar on how you can win.

Register here

Join Ndubuisi Ekekwe for Tekedia Business Innovation Webinar