07/03/2020
Dear intending small business owner, we are in the knowledge age. Money alone cannot bring enough money, you must blend in some knowledge, no matter what business you intend to do.
Here's a story of K**e and T**e, who both got one million naira each, from their uncle who advised them to register under a milk major distributor, as sub-distributors.
As you read the story, you will see the place of knowledge in the business of one, over the other.
K**e collected the money and ran off straight to pay 700k into Alhaja Abidun's account. Alhaja is the major distributor whom their uncle introduced them to. She got a shop for 200k per annum, hired a sales girl for 20k per month, used the balance to setup the shop and took delivery of her first consignment from Alhaja.
It is 3 months since the business started. K**e has made sales of 2000 cartons, profit of 100 naira each. That's 20k in gross profit. She has paid salary of 60k to her sales girl, paid some local government and light dues, made nothing yet for herself. She is positive that it will go well in the future, afterrall thats how all other sellers on the market survive. She hopes that sales will increase and she will make a net profit at least in 8 months.
T**e got the money, put it in a fixed deposit for 180days and went off to build a financial model. She downloaded a template online and populated it. She saw from the model that the shop style returned very slim margins and she would not be happy with such margins.
T**e decided not to have a shop, she decided to sell the milk to corporates only and probably make more margins per carton.
She spent two weeks researching on businesses with at least 200 staff in the building. She made a list and visited some companies to find out those who serve tea to their staff. It took sometime, but in a little over two months, T**e got into 3 companies.
She then went researching and found that Alhaja Abidun did not even offer the lowest possible price. She went to another distributor and signed up a Just-in-time delivery contract. This means, she would pay say 500k ahead, but only take delivery when she needed to make immediate supplies. T**e wanted zero warehousing or shop cost.
Using her father's old jeep, she started deliveries. She was making 500 naira per carton and the 3 corporates were buying 60 cartons each week. That's 30k gross profit per week.
T**e built some more relationship and got two hotels to supply. The hotels were buying over 100 cartons each week.
T**e is currently speaking to investors to raise more capital, since most of her corporate clients pay after 14 days and she wants to increase client base.
Friends, take out some paper and do the math. T**e has only fuel cost for her father's car, car maintenance costs, telephone, some printing and internet costs.
Whose business model is more profitable?
Who applied more knowledge?
Who is more likely to thrive?
Did you also notice that the more knowledgeable person did not even have to sell a higher volume than the other?
Selling just 60 cartons with more intelligence is better than selling 2000 cartons without planning.
Listen, business is not about collecting money from someone. You need to think. You need to plan. You need to research.
If you are still thinking that business is all about capital, please think again.
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