Hi,
My name is Tawheed.
I am going to talk about how to keep your cost low especially when you are starting your business.
In the beginning, as you lay the foundations of your business you need to ensure that your costs are as low as possible. You are not in business, especially in the early stages, to impress anybody, you are in business to stay in business, and to grow.
So when the foundation is not rock solid, then you know that whatever building you erect on top of it is going to be probably imbalanced, or shaky or has a potential to collapse and that is not why we are in business. We want to be able to sustain ourselves, create value and eventually make impact in the society or in the environment that we operate in.
I see many founders and entrepreneurs make the mistake of going all out, and doing things in a flamboyant manner, especially those founders that have been able to secure investments by way of equity or maybe even debt. It is important to know that you need to manage your capital judiciously, you would not like throw away your money when it is your savings. I mean that same or even much more level of duty of care and skill is required to manage your capital when you raise money through equity or debt funding.
If you raise money through equity or debt funding, at that point in time you are not even your own boss so to speak, you are answerable to others, you need to be able to account for all the expenditure that you incur, both capital and recurrent. Those long term expenses that incur are capital and those recurring expenses are those that happen year in year out. Ultimately, you need to be mindful of how you spend your money.
Just know that the way in which you generate income, make your revenue is not so much within your control. You put in all these structures in place, you have registered your business, you are battling with credibility, you are now in the process of convincing your prospective or an existing client to either do business with them or keep the existing business they have with them going. At this point, the decision ultimately lies with them to buy your service or product.
However, once monies have come into your business through your customers or you have got your capital that you are managing, that is much more within your control. So how you spend it is your business, you have no one else to hold accountable than yourself. So it is very important to ensure that you keep your cost low because by doing so you are extending your run way. Some founders raise up to $2 million for instance and it is big or small money depending on the perspective on how you actually manage it. Founders can incur expenses and within 12 months that money is gone, and others can extend that for up to 36 months, or less, or more, depending on what your business priorities are.
You can never get it wrong, in my opinion, when you keep your costs low because you are controlling it, you are managing it, and you are ensuring that your likelihood of survival in business is far greater than the industry standard. I mean there is a metric that most businesses do not even live up to five years right, so the odds are already stacked up against you and there are so many, numerous factors that can affect one business, that influence businesses, that get them to eventually shut down.
It may not even really be from the mistakes that you as an entrepreneur, a business owner may make because trust me you are going to make lots of mistakes. The most important thing is for you to learn from them, pick yourself back up once you have been knocked down and then move on. So that is another key aspect of managing your business and keeping your cost low.
Like I alluded to in the previous edition, you rent or get your first office space, buy the most luxurious furniture, for what? For who? Who do you want to impress? Is your business the kind of business in which clients come in the process of trying to get a contract? Do you have visitors come into your office to see where you are at, and the kind of environment, the way your office looks? Even before the COVID 19 pandemic, many businesses that did not even get customer visits.
In my previous place of employment for instance, throughout the year, I could count the number of vistors that we get on my fingertips. So, what then is the reason or purpose of beautifying your office in a manner that will break the bank? You need to really set your priorities right because ultimately, it is not like customers do not really care about how you look or how you package yourself, your business premises, that is not the most important to them, they really want to be treated well.
How do you make them feel in the service that you render to them or the products that you deliver? That is the most important and you do not need your office to look beautiful to render excellent customer service or supply the highest of quality in your products. So, why then do some entrepreneurs really think that customers are so concerned about how your office space looks like?
Just understand that for every expenditure that you incur, there are different levels to it. So it could be high, medium, and low, you need to always optimize for the lowest and that is where negotiation skills come in. You need to ensure that you get the highest value for the lowest cost, that is another key aspect you need to look out for. You do not necessarily have to compromise on quality because you want to keep cost low, I mean there is also the penny wise pounds foolish perspective to this.
These are the bits of business that you need to really look out for. What are your priorities? Why are you in business? You are not primarily in business to impress your customers by how you look or how beautiful your office space is. You are in business to render the highest level of quality and excellence in your service delivery as well as your product, that is what you really need to consider. So all the factors that influence that positively is where you need to pay attention to.
And definitely there is a hierarchy and scale of preference because some businesses especially those that are in the Hospitality, Aviation and Tourism industry, it is how things look that impress your customer. So that is, I would say to a certain extent an exception, however you still need to really keep your costs as low as possible because I mean there are made in Nigera products that can give you what you are looking for and then there are those that you import.
Importing goods is not even so much about the quality, it doesn’t really define the quality. So you can even get made in Nigeria products that are of high quality, but because of the negative perception to local content in Nigeria you find that some entrepreneurs decide to import. And the cost of importation is not even really so much value of the item, there are custom duties and taxes that you have to pay because you are bringing products and more or less importing poverty into the country.
So just pay attention to what matters to you most.
And think BIG, start small.
In the next edition, I am going to drill down on how you need to lay the building blocks, the foundation of your business and those salient things you need to look out for in terms of how you win customers over, the kind of service you render to them, the touch points that you need to pay so much attention to, so as to ensure that you get customers to refer you because that is the best way to grow your business.
Thank you so much for reading.