One of the most
critical periods in a startup business is between the first day when you open
the door for customers to come in and buy your offering and the time you start
to make enough money to cross the break-even point.
This is the period when most Beginning Entrepreneurs want to throw in the towel. No one has prepared them for the type of hard time they will encounter at this take-off stage. When you hear the statistics that say about 90-95% of new businesses fold up within the first year, this is what is responsible for it!
It's a terrible period. It's a time when the sole of your shoe takes in water when it rains because it has a gaping hole in it. A time when, on a lonely night, you lay awake wondering whether you were insane to have started your own business! An experience you had during the day had set your mind thinking. You recall how you spent much of the day pleading and begging your bank manager to grant you an overdraft, which your uncleared cheque could easily take care of because what you're requesting is a mere fraction of it, but he bluntly refused.
It is also a time when, once a month starts to approach twenty something, your blood pressure starts to rise dangerously because another staff salary is due soon! I am not too sure I can graphically describe the horror a business owner goes through during this period. But I'll try.
Let's start by first understanding what a break-even means in business. When you take into account all your expenses for producing a product or service, and it matches what you get from selling the product or service, that is when you have broken even.
For example, if your total cost for a product is N75 per unit and you sell the same product for N7 5, then you are breaking even. There are no surpluses, meaning you're not making profit -just barely getting as much out of what you're selling as you're putting into making the product or service available to customers.
Note that by 'total cost of production', I'm referring to the cost of all the items you bring together to make the product, which includes overhead costs like salaries, electricity (or cost of running your generator if. any), rent, bank charges and so on.
In business, there is a long way between when you start offering your product or service to the public when you reach the break-even point. And between a break-even point and making profit, there is another great distance, depending on the type of business you're in and the business model you're using.
I call this gap "no man's land." It's a nightmare zone for every Beginning Wealth Builder. There is only one way I know that an entrepreneur can take to avoid the pain of this period. That way, which is not even foolproof, is when you follow the new method of identifying your customers first before you go ahead to get them the product or service that they want to buy.
If you follow this method, you increase your chances of success by as much as 95%. You think about it. Here you are with a list of 100 (or 1,000 to 10,000) people who want to buy a particular product. They are hungry for it. They are ready to buy the product at a price that is reasonable to them. You even get to discover how much they are prepared to pay for the product.
And then you do the easiest thing in the world . . . you go and shop for (or produce) the product and make it available to these eager, anxious and ready-to-buy customers. Can you lose? Oh no, you cannot!
I've sold a product to a hungry market like this many times now. There's an information product that I called Export Success Golden Key. Before I wrote a word of this information product, I had identified my customers and I was sure they were ready to buy the info product. I even had a good idea of how much they were prepared to pay for it.
Motivated by this information, I quickly went to work. Lo and behold, within four days of my launching this information product, I'd sold more than N400,000 worth at NI0,000 apiece. In four short days, I recouped my investment on the product. And everything I'd sold of the product ever since was pure profit. That product has brought in more than N1m revenue since then. Can you think of a better way to launch a new product or start a new business?
As I said, this business model is not fool proof. And if this model is not totally risk-free, just think of the odds you're up against when you spend all your money to get a product or service into the marketplace and you've to search everywhere for customers!
Are you asking yourself how one may still burn his fingers with my almost risk-free model of starting a new business? Let me share this experience I'll never forget with you. I was so dangerously boxed into a corner that I had to call on God fervently to save me.
It all started towards the end of 1995. We had a vision to publish a daily sports paper at Complete Communications Limited. Our goal was to join five other countries or so (as at that time) that had a daily sports paper.
We went to work to realize our dream. The timing was in our favour. The African Cup of Nations Championship kick-off was about a month away. And Nigeria's Super Eagles were favoured to win the trophy back-to-back in South Africa, having won it in Tunisia two years earlier. Football fans were looking forward to a show-down between South Africa's Bafana Bafana and the Super Eagles. You couldn't get a better setting for getting the attention of football fans with a well-packaged product.
So, on December 18, 1995, we launched the sports daily, Complete Sports. But barely two weeks later, General Sanni Abacha, Nigeria's Head of State, pulled Nigeria out of the competition. And with that decision, the market we had hoped to cash-in on, disappeared over-night.
This is the period when most Beginning Entrepreneurs want to throw in the towel. No one has prepared them for the type of hard time they will encounter at this take-off stage. When you hear the statistics that say about 90-95% of new businesses fold up within the first year, this is what is responsible for it!
It's a terrible period. It's a time when the sole of your shoe takes in water when it rains because it has a gaping hole in it. A time when, on a lonely night, you lay awake wondering whether you were insane to have started your own business! An experience you had during the day had set your mind thinking. You recall how you spent much of the day pleading and begging your bank manager to grant you an overdraft, which your uncleared cheque could easily take care of because what you're requesting is a mere fraction of it, but he bluntly refused.
It is also a time when, once a month starts to approach twenty something, your blood pressure starts to rise dangerously because another staff salary is due soon! I am not too sure I can graphically describe the horror a business owner goes through during this period. But I'll try.
Let's start by first understanding what a break-even means in business. When you take into account all your expenses for producing a product or service, and it matches what you get from selling the product or service, that is when you have broken even.
For example, if your total cost for a product is N75 per unit and you sell the same product for N7 5, then you are breaking even. There are no surpluses, meaning you're not making profit -just barely getting as much out of what you're selling as you're putting into making the product or service available to customers.
Note that by 'total cost of production', I'm referring to the cost of all the items you bring together to make the product, which includes overhead costs like salaries, electricity (or cost of running your generator if. any), rent, bank charges and so on.
In business, there is a long way between when you start offering your product or service to the public when you reach the break-even point. And between a break-even point and making profit, there is another great distance, depending on the type of business you're in and the business model you're using.
I call this gap "no man's land." It's a nightmare zone for every Beginning Wealth Builder. There is only one way I know that an entrepreneur can take to avoid the pain of this period. That way, which is not even foolproof, is when you follow the new method of identifying your customers first before you go ahead to get them the product or service that they want to buy.
If you follow this method, you increase your chances of success by as much as 95%. You think about it. Here you are with a list of 100 (or 1,000 to 10,000) people who want to buy a particular product. They are hungry for it. They are ready to buy the product at a price that is reasonable to them. You even get to discover how much they are prepared to pay for the product.
And then you do the easiest thing in the world . . . you go and shop for (or produce) the product and make it available to these eager, anxious and ready-to-buy customers. Can you lose? Oh no, you cannot!
I've sold a product to a hungry market like this many times now. There's an information product that I called Export Success Golden Key. Before I wrote a word of this information product, I had identified my customers and I was sure they were ready to buy the info product. I even had a good idea of how much they were prepared to pay for it.
Motivated by this information, I quickly went to work. Lo and behold, within four days of my launching this information product, I'd sold more than N400,000 worth at NI0,000 apiece. In four short days, I recouped my investment on the product. And everything I'd sold of the product ever since was pure profit. That product has brought in more than N1m revenue since then. Can you think of a better way to launch a new product or start a new business?
As I said, this business model is not fool proof. And if this model is not totally risk-free, just think of the odds you're up against when you spend all your money to get a product or service into the marketplace and you've to search everywhere for customers!
Are you asking yourself how one may still burn his fingers with my almost risk-free model of starting a new business? Let me share this experience I'll never forget with you. I was so dangerously boxed into a corner that I had to call on God fervently to save me.
It all started towards the end of 1995. We had a vision to publish a daily sports paper at Complete Communications Limited. Our goal was to join five other countries or so (as at that time) that had a daily sports paper.
We went to work to realize our dream. The timing was in our favour. The African Cup of Nations Championship kick-off was about a month away. And Nigeria's Super Eagles were favoured to win the trophy back-to-back in South Africa, having won it in Tunisia two years earlier. Football fans were looking forward to a show-down between South Africa's Bafana Bafana and the Super Eagles. You couldn't get a better setting for getting the attention of football fans with a well-packaged product.
So, on December 18, 1995, we launched the sports daily, Complete Sports. But barely two weeks later, General Sanni Abacha, Nigeria's Head of State, pulled Nigeria out of the competition. And with that decision, the market we had hoped to cash-in on, disappeared over-night.
TO BE CONTINUED...
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