By Ajayi Joel
If you are actually starting a business, then this article is a good piece for you and trust me, I will break it down step by step for you to understand. Most times, when we talk about business in Africa or in the world generally, motivation is what is dished out and not the process, leaving people out there to figure it out and eventually give up or go bankrupt. This will be along read and I will want you to get your note, and pen to write down a lot of points. The approach can be applied in any business across Africa and the world only that you need to understand context of location and all, and know how to be smart about the process.
Firstly, I will be debunking some myths of businesses and also give you a mind shift about running a business in Africa. The average approach to business in Africa is to have some substance to flip, to make some profit to feed the family, and send the kids to school. It’s high time you understand that as a business person, your business matters a lot to Africa and its development. There are so many un-scalable businesses around Africa and it is corrupting the business space. What you should know as a business person or someone who wants to start one is that you should have an industry mentality, an expansion mentality, and an empire mentality.
This article will point out the fact that it is not okay just to remain a small business, the fact that we need to change the conversation around the narrative of African businesses and also the step by step process. I will start a business from scratch with my analysis; break it down from idea stage to growth stage, then expansion stage. And I will recommend that you share with your friends and business partners. The example I want to use is starting a laundry in a small location.
Now, when the word laundry is mentioned, the picture that comes to mind is a wooden store with a faulty banner or an “okay” banner and a young man washing clothes with his hands, and then spends five years washing till he buys a washing machine. He then employs some folks and then maybe seven years later, he expands to a bigger location and continues like that. While that might sound really impressive, I want to change your mind about business and how you can think big even while being very small or even broke.
My name is Ajayi Joel, I want to start a laundry service business in a small location and I hope to have this business worth a million dollars in 7 years. Now, that definitely sounds stupid or crazy. Who makes 1 million dollars from a laundry business in Africa? How possible is it? Well, I want to paint the picture further to myself being a 23 year old young man who just graduated from the university, freelances, and makes fifty thousand Naira monthly.
I have loved laundry since when I was young, and I can do it all day without having to complain and even claim being tired. The first mistake young entrepreneurs or lots of people who want to start businesses make is the belief that they need huge amount of money to start. While it is good to have huge amount of money, it’s not always readily available at the point of starting and no investor will want to throw out funds into a business that isn’t running. It’s too risky as an investor to throw funds into a business that hasn’t even started yet. So quit thinking that your uncle needs to give you a million Naira to start.
Now, I must establish that nobody puts his hands into something without counting the cost. So the first recommendation is to sit down and draw out a business plan. Mind you, your business plan doesn’t need to be perfect but it is needed to help you navigate from where you are starting to where you want to get to. So what are the things to consider before you venture into this?
Do they need a laundry service in this location?
This is the first thing that should cross your mind. A lot of times, people build businesses as solutions to problems they feel exist. They develop the solution, then begin to look for where the problem is. That’s a quick way to fail in business and it is by building a business that has no customers. What you should rather do is to look for a need, a problem, a loophole, a fault, then work on creating a solution for it and building a business on it. So do they need a laundry service in this location of mine? If they don’t need a laundry service in my location, where is a laundry service needed.
For analysis sake, I will admit that I noticed that they need a laundry service in my location. So, I will mark it down that this needs to go to the next stage.
Are they ready to pay for this service?
Now, this is very crucial and as a business strategist, I have seen a lot of start-ups scattered across Africa make this mistake. That I need a medicine for my headache doesn’t mean I can automatically afford it. So if you notice that I have a headache then go spend a lot of money to develop a medicine for me, you will go bankrupt because while I desperately need your medicine, I cannot afford it. At this stage, I need to ask so many questions to come up with a unique selling point to be able to get to be their client. However, before you analyze that, I want you to be very practical, go around, and make inquiries on who in the street needs such service that can pay. Ask people in the street. You are a business person,; you cannot stay in your room! Go out!!!! Are they positive? Are they much? Tick it.
Count your cost
Now here’s the point. You had thirty people who said they needed your service in the street. Now sit down and begin to draw out a cost plan. Remember you have been able to figure out that you already have a market and that it is a go ahead. While it looks like a go ahead, you can make the worst mistake not counting the cost. Besides, you can be running in deficit for the next seven years feeding hand to mouth if you do not pay attention to this. While this part seems technical, it is simple logic and people run away from this a lot. I used to, but it is an interesting part in business and if you need me for all these, you can reach me.
Back to the point. You have 200 ready customers. How much are they willing to pay? They all agreed on N200 per cloth. Now, pay attention. Every stone must not be left unturned in this phase. How many clothes per day will I receive from each of them in a day? How often do they use their clothes and what are the chances of receiving a cloth from them in a day? While this sounds ridiculous, this is the best approach towards building a business that will scale. If each of them brings a cloth a day, and I charge 200 Naira daily to 200 people, then that means I have a revenue of 40,000 Naira daily.
Revenue is actually different from cost and you can be increasing in revenue while still running at a huge loss. So in order to make profit, the cost of operation must be lesser than the revenue made.
Who are your competitors?
While it sounds interesting that you will have 200 customers daily bringing at least a cloth a day, it is business-minded to understand that there will be competitors already on ground and if there are no competitors already on ground, there will be competitors pretty soon which means that your 200 customers will no longer be 200 customers and your daily forty thousand Naira will no longer be forty thousand since they will have a share in the ready customer. So the question you need to ask yourself is how do you still keep making forty thousand Naira in spite of the competitors? How do you play the game of chess with competitors and knock out their queen with your knight?
I have written a comprehensive article on that and I will want you to go read it so as not to make this article more bogus because there are so many things to still discuss here. Follow the link below to read on that.