Running Costs

People often get dizzy when we start talking numbers, my self included haha. Accounts are boring, they're mathematically taxing to the brain yet very important for scaling and record keeping. Without numbers you can't see your growth and progress, you can't see your stagnancy either.

There have been many instances where my bananas failed me and I'm lying here realizing the lessons I've been passively learning that business is trial and error, and takes time. I have borrowed money from a few friends and had to pay it back in due time only to remain broke still, I understood why but I couldn't quite put a finger on it until now that I've started playing with numbers. You see there's no business which produces 100% profits after running costs, you'll be lying! Profits range between 25% & 37%. A crate of bananas is $7,50c and produces a profit of $1,80c before running costs. What could possibly be a running cost on a crate of bananas? A $1 for transport to go and buy it and return it to your market. It's $0,50c to board to town and $0,50c to return home. But fortunately I am quite a fit guy, so I ride bike instead, saving the dollar. Now here is the thing, you don't always make $1,80c profit off a crate, there are challenges and damages, sometimes some of your 110 bananas may turn brown so now you have to grade them according to shade, the bright yellow ones on one side and the shaded ones on the other. You will sell the bright ones at R2 each and the shaded ones at R1 each. What causes this? The sun, the rain or too much handling or touching. My point is you may run on a loss. Another challenge is some may get squashed during conveyance, it's happened to me a lot of times, accidents happen. Another challenge is they may take longer than expected to sell out, you don't always get customers hey, so they perish or if you're lucky they go overripe which cuts the price down bad still. The sole point here is you don't always make $1,80c profit off a crate of bananas. Visualize this in any business concept you have, there will be challenges towards a target figure, you won't always meet it. I used to sell ice creams, sometimes it would get so hot and all of a sudden I'm selling waffle-yogurts, sometimes it would get so cold I didn't make a sale, sometimes there would be breakages, it was difficult explaining that to my employer as they wanted their target figure reached without considering possible hoops. My aunt sells broilers, sometimes she doesn't reach her target figure because of pests, diseases, suffocation and mosquitoes, sometimes it's loadshedding. So every business from a crate of bananas to a fleet of cars has challenges. 

Where am I going with this? People who've never ran an enterprise think it's always a win win thing. If I was down bad and borrowed $10 from you to buy stock (a crate of bananas) at $7,50c and profiting $1,80c per every sell off, it would take me at least five days of $10 re-use until I can gather $7,50c to buy a crate for myself and return your $10 whilst on my feet. That's $1,80c profit per sell-off x 5 good business days = $9. Re-use means (using capital again and again). Oh no, too many numbers in your eyes now you're getting dizzy and bored out haha! Going on, my problem with borrowing money (as capital) was returning it as soon as I sold off my crates instead of re-using the capital, why? Because I make promises to friends on when I would return it. Hence why I would remain broke and insufficient. The thing is you don't want to have a bad reputation especially with regards to money, you want to remain trustworthy and I am very sensitive on that part, I hate to be an inconvenience which is why I don't like to put people's money under that stress. Unfortunately it has never helped me or my business, which is why it's important to either have an alternative business or get a job. You just can't self sustain an establishment, you need crutches. Actually, ideally, to run a business you don't just need capital, you need excess capital. If a crate of bananas is $7,50 you need $27 to be safe, this covers running costs, expenses and possible losses until profits have culminated to a self sustaining margin which is $27. Once a crate is self sustaining, you need to buy another one with another excess capital amount of $27, now you are ahead and building an income generation system off of one product. However sticking to one product is quite a strangle, take it from me, I am stubborn with my banana, but to generate more income there's need for variety, which then makes it a complex product management system as every fruit is sold different. Now it's no longer just a crate of bananas, it's a box of apples, a punnet of grapes etc. Selling various fruits is recommended, especially in the city on a scorch-cart, I've done it before, running costs include municipal bribes, lunch, scorch-cart rental fee, overnight lockup fee, damages such as swindles, there are many swindlers in town, and, in the case that your wares get looted you have to prepare a contravention fee ontop of losing all of your stuff. That's business for you! So for you to stay ahead, you need an excess capital of about $220. 

If I've learned something, you can generate huge amounts of money (say $1,200 per month) in your business and it will all filter into your running costs; the shop or area you're renting, taxes, bills and employees' salary. End of the day you are earning $70, a nurse's salary. The better part is you're the boss of your own establishment. What then makes you a higher earning entrepreneur is expanding your ideas into like systems which exponentiate your income after running costs, which in the most simplest instance is a second crate a third crate a fourth and so on. Your braai spot runs at $1,2K per month? Establish two. Open a phone shop which runs at $400 per month. Open a car sales which runs at $1,6k per month. All of a sudden your initial $70 profit after running costs is $70⁵. That's why this stuff takes time, patience & perseverance, it is not easy and also requires a good circle and support system, people who trust you with their money, people who actually have the money, you can only go as far as the people around you. You want to start selling iPhones? Who around you can trust and loan you $1200 as capital to stock 5 iPhone Pros from Dubai? Lol. Going on, sometimes the person you have appointed as a manager of your establishment may be earning $120 whilst your take away is $70, what makes you better is having two or three or four more establishments where your takeaways are $70USD from each. Lol, isn't it mal? 

 The study of entrepreneurship has been solely pragmatic for me and nonetheoretical, it's trial and error, but I continue to learn and discover, we can only get better the longer we work. I hope we don't only get better in knowledge whilst lacking capital or supportive circles, it's the worst thing to have an idea which you can't finance. Finances aren't the only capital though, your integrity, goodwill, character and discipline are intangible assets which set you apart.

Image shot in 2019 | Remy Shoots | Year of humble beginnings.