"I will rather borrow than save up to start a business" -DODTheory

 

"Save up or borrow to start a business?"

You'll see my personal take...



Let's assume there are two young friends who want to do business. Amara and Chioma. Maybe they both wish to start retailing beauty soap.
They both go to the wholesaler to get 100pcs of the product to start, each costing ₦50. Totalling ₦5,000. Amara calculated the cost of transportation and other expenses incurred and arrives at a retail price of ₦80 per piece. Targeting a gain of ₦3,000 to cover transportation, and other things including take home.
This may take Amara a month to achieve before she would have to restock.

Chioma, on the other hand, sells her at ₦52 per piece. In that case, reaching more people because they know it's one of the cheapest rates they can get. In a week, she has effectively sold everything and made a gain of only ₦200. She goes back for restocking and gets more, maybe about 120pcs this time. She sells to maybe 90 of her old customers of last week and 30 new customers. Some of whom did not go back to Amara because they found a cheaper one. This time she makes a gain of ₦1,240. Then, the third week, she orders 200pcs. Making a gain of ₦5,400.

Then, because demands are growing; older customers are requesting and she's getting to newer ones, she opens a new branch and employs someone to man her older branch while she overseas and grows the new branch to make sure it stands.

Most people operate businesses like Amara.

You're already hungry for so much gain when you just started a business.
The big business owners share the gain they aim for over a large population of customers.
Instead of gaining ₦5 on 20 customers, you wanna gain ₦1 from 100 customers. Both, summing up to ₦100 gain. With ₦1 gain, 90% of your customers will repeat business, with ₦5 gain, some customers will discover the person doing ₦1 gain and leave you!

With ₦1 gain, your customer base is expanding; both with repeat businesses, voluntary referral (people will tell other people about cheaper prices) and your deliberate attempt to reach more people.
And eventually, when you've become a routine to majority of the population, you can decide to raise your price and you will still command more patronage.


Thanks for reading. Let's have your take on the comment section.

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