By Ajayi Joel
This concludes this piece.
I feel these few points, discussed, are germane enough to help you understand if your business will scale or not. However, the process is where the practical really lies. Building a business or going into business has been over-hyped and I feel it is quite dangerous to upcoming entrepreneurs to feel it is quite easy. They feel they will become millionaires in just a few years. The dark sides of building businesses are hardly spoken about. The process is quite critical in knowing if you will break even or not, if you will be able to make 1 million dollars in seven years. The first thing to look at is your current position. So let’s go back to Ajayi Joel (myself).
I have freelanced for some time and saved some money. What are the things needed to start a laundry service. There are different ways to look at this stand point but the wrong approach is trying to borrow money to start a business. While I may not recommend it, some have proven that it works for them. Table the cost that you will incur to start: office space, equipment and all. Now, there’s such a thing as growing lean and I will link it with branding. Remember, we are assuming the person in consideration is not rich. He doesn’t have hundreds of thousands of Naira to rent an exquisite location. So, possibly it is convert your own room in your dads house to the location to store the clothes and your backyard to wash and dry those clothes.
You have a good iron, well fine. Now, this has two implications. If your competitor brands well to be more standard, then you might lose if you appear local. If your customers are business people, they wouldn’t want to come over to enter your house to get their clothes. It makes them look less of a business person; this is where branding comes in. It’s either you negotiate to deliver in three days to their houses yourself or get a decent office space.
Getting a decent office space also costs money, now there are some calculations you need to make. Mind you, at this stage, you have not even begun the business, you are planning and I feel lots of people just jump immediately they have an idea. I wish I held a masterclass for entrepreneurs across Africa on how to build great businesses.
Getting a decent office space will require painting, rent, electricity bills and other expenses that come with it. I recommend you start with this only if your location is a classy one where your competitors might seem to win you with better branding. Count the cost in a year. Let’s say everything will cost N150,000 in a year, and you are going to make N440,000 from the 200 customers. This means you will have N290,000 as profit. You spent 150,000 Naira on rent, electricity, soap etc. Your profit in a year is 290,000 Naira. That seems to be a good business ideally. I am assuming that your competitors do not exist and you worked thirty days a month and your customers deliver a cloth a day which is practically impossible.
But it’s fine; I can give you a go-ahead to start this business because I know you are set. However, that’s not just the intent of this post. The intent of this post is to help you scale. Making 290,000 Naira as profit is nit pretty impressive and cannot achieve a million dollars in 7 years in revenue for you. What do you do?
This is what a lot of people do not know so they just stop at this point and keep running and probably employ some people in the next few years and drive good cars. Well, that sounds nice. But maybe you can move to the next level. What do you do?
Let’s talk about growing!!!
First year gone already and “ideally” you made some good profits, we should be impressed. However, there’s more to business than making some small profits. How do you expand?
Now here’s my issue with our mindset in business, and I give the Igbos respect for always thinking about expansion. This year, one shop, and the next three shops; then the next shops for their wives and like that. How do you reach 1 million dollar in revenue in the next 6 years?
This requires more than just common thinking; it requires sitting back again to consider a lot of things. This is where the role of technology comes in. As a business person, you should be able to look for ways to integrate technology to every part of your business to help you scale. How do you get more customers? How do you wash more clothes? Where do you get more customers? What will it cost you? What else can you leverage this business on?
Now let’s progress again as Ajayi Joel decides to get a washing machine. Purchasing a washing machine can be useless if it doesn’t drive in more profits on the long run. Here’s what I mean: I wash 200 clothes daily, how many clothes can a washing machine wash daily and what does it cost to run a washing machine in a year. Giving another analysis, a washing machine washes 500 clothes daily. That’s brilliant, isn’t it? But that means the electricity bill will increase. Now calculate the cost that you will incur to run a washing machine and subtract from the extra clothes that it washes asides the two hundred clothes you wash normally. Does it equal the profit made on the three hundred clothes or is there an extra profit? If there is; very cool. Now you have time to do some other things while the washing machine is running. However, remember that you can only get two hundred clothes to wash from your street. This means that if you want to get extra three hundred clothes, you will need to go beyond your street which will be another cost.
I’m quite aware I didn’t consider that at first because I needed to establish a point. So where will you get the extra three hundred clothes? Four streets away, right? How will they get to know you? Do they have other competitors in the street? Now the problem begins to get complex but it can be simplified. How do you apply technology to get more reach? I wrote an article on that as well and you can learn some things from it. However, I will give a better approach. There is such a thing as collaboration and leveraging and I discover that a lot of business folks do not really understand this, and its power of which I will explain fully in the future in another article.
You cannot be in ten streets or in hundred streets at the same time if you want to. It’s your choice. It’s simple; look for someone whose core skill or profession is social media management or who is a good sales person. Can you afford to pay such person to bring three hundred new persons to you? Well, not likely. Paying salary might really be a torn in your flesh. If you can, then it’s fine but your profit needs to still be constant.
However, if it’s not, then you can leverage on negotiations. What if you partnered with some company who can help in marketing or someone who can help with that and offer equity? That’s the problem, a lot of business owners or entrepreneurs want to take all the glory to themselves. At the growth stage, you cannot run every aspect yourself. You need people in your team and people to leverage on. Meet with friends; tell them they will get percentage commissions if they refer people to you. You need to learn to collaborate at this stage to get more visibility and reach.
Let us also say this part gets successful, the next phase is quite interesting and it is the expansion stage. By this stage, your brand value must have increased and you charged higher. But let’s assume you didn’t increase your charge rate, it is still almost impossible to attain the 1 million dollars revenue after seven years of running. So what do you do? Look for more problems!!!
You must be very observant as an entrepreneur or business person. If you do the laundry and you already know your customers, you are aware of the types of clothes they wear and the quality. You need to expand to clothe sales. The type of clothes they wear should be your prototype and believe you me, that’s another place to begin to expand into. You only need to follow this same process for this new market but it is an open market for you already. Then, the next stage is to focus on branding the cloth sales line. Build a clothing brand because you already have over one thousand customers that patronize your laundry service and like that.
While this sounds pretty easy, it is more technical in its application. However, this is how to build a business that will expand into an industry and drive the economic growth as well as bring you huge fortune. We need lots of businesses to follow this model and reduce the list of non-growing businesses in Nigeria. I have simply given you the practical approach on how to build and scale a business.