Hi,
My name is Tawheed.
In the last edition, I talked about the building blocks of your business, from the foundation, down to raising the pillars, and eventually the roofing of your building. Now I am going to address the financial aspects of a business.
For you to hit the ground running to build a business from the foundation to the roof, you need some money. There are some preliminary expenses that you would incur, so you might have raised capital or not. Now, I addressed this in one of my previous editions so go check it out, I am just going to go straight into how to manage your capital. So this capital might have been from equity investment or maybe your savings. I am going to use an example that is close to home.
Lately I have been thinking about how to make my content more interesting and engaging. There are lots of ideas that I have, at least I consume some content. Even from the skit maker and many other experienced content creators out there. And for a two minute video that we watch that is so engaging and interesting to watch, I am sure that there are lots of hours of creation that have gone into such content that we like.
Now because I am an entrepreneur and I manage multiple businesses, it is difficult to allocate my time for most of these things. Right now this content is just for the time being, I would say a way to give back. I am not really generating any income from it yet, so I need an editor and possibly even a producer and for someone that preaches how to start a business with Zero Naira (₦0), I am going to pay the editor, a producer if I get one or two of them. Anyway you are stuck with me for the time being because I am going to continue doing it on my own and I hope to improve along the way so thanks for sticking around.
So bringing it back to creating contents like myself and building a business like yourself. Having capital can make a lot of difference depending on the size of that capital and how you allocate the capital. So businesses have resources — financial, human, and otherwise. In this case you and I are human, financial is the capital. So how we are going to deploy these resources ourselves, the things we do, and then the monies that we spend in the business to build it.
- Let me start with some of your favorite startups out there, one of the most recent minted unicorns. The growth is a fantastic and inspirational story, went the traditional route. As cost effective as that method might have been definitely some funds were allocated to MARKETING the business by acquiring the merchants traditionally and meeting them where they are.
- An alternative neobank would deploy a different approach and we have an example in reality that went on to splashing funds and monies in marketing to acquire direct consumers. And well, one can make a case of the business models of these two banks being different. However, they are both neobanks and they both have microfinance licenses in Nigeria.
You find that lots of monies can go into marketing a business and that is a way to build the business and brand, but then again you need to ensure that your return on ad spend (ROAS) is significant. I mean if you want to incur loss in the early years of your business, what is likelihood that the subsequent years will be able to underwrite those losses and make up for them with the profit that you make in the future.
That is one aspect to a business from a financial standpoint, deploying capital for marketing. You can also deploy capital for TALENT. For me, as a DIY, do it yourself kind of person, there is really nothing that you set your mind to that you will not be able to learn. However you can’t split yourself into multiple places. Notwithstanding this, in the early days of your business, you are going to be wearing many caps especially as the Chief Executive Officer. You are going to be handling finance, business development, credit collections, marketing, even human resources. Because whoever you are going to work with, whatever they do, you are responsible for their output.
Talent is another aspect you can deploy your capital into and depending on your business, the financial power you have, if you want to go for the juicy talent out there, the professionals right. I mean Mohamed Salah, his contract is up for renewal, sure Liverpool is in a quagmire thinking about what to do considering his age. What he is delivering as a professional is established, any club that wants to get Mohamed Salah will have to pay top dollar right. But then again if you want to build your business, maybe it is a project, you can decide to not splash money like Al-Nassr buying Ronaldo, maybe another Saudi club will buy Mohamed Salah. You can go for a young and a promising talent out there.
So if your business is mindful of cost, there are young graduates out there that are hungry for success and want to become professionals, the downside to this is you would have to train them. A lot of time and resources will go into training a promising talent as opposed to the time and resource that will go into a professional. A professional does not necessarily need to be trained on the job or what to do, just needs to be informed on how the business operates, nature of the business, and maybe certain preferences that are involved within the organization.
It is actually more expensive to get a professional because salaries you are going to be paying a professional will be higher, demands from a professional will also be higher in terms of tools right. So you need to also consider all these things, but then again if you want the best this is what it is going to cost you. If you are going for a promising talent, it may take you some time. And the promising talent may even outperform a professional with time, it just depends on your patience and what your vision is.
Deploying capital for talent is another aspect of a business from a financial standpoint. I am just going to touch on one more aspect which I think is integral to a business and that has to do with the OPERATIONS. How you are running your business on a day to day. Things that suck up monies on a day to day are expenses like electricity, internet. Depending on the kind of business you are operating, you may have a restaurant or a canteen and maybe meals are subsidized or free, that is another cost driver. We also have logistics, may be you have a fleet of vehicles and drivers within the organisation or you are using a ride hailing service.
There are many tactics that can be deployed to lower the costs, however, these are some of the examples with respect to operating your business on a day to day. It is important for you to consider what you are looking for, how you want to be perceived by the public, your clients—potential or existing.
So these are some of the nuances to business from a financial standpoint. These are the things that will show up in the books of accounts, the audited financials and all that right. So just consider those financial aspects of your business that are of paramount importance to you in terms of the objectives you want to achieve. Are you optimizing for “cost efficiency”or you are optimizing for “brand value?” Because the scale of cost and brand is more or less how your business will survive.
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Thank you so much for reading.