02/01/2024
So Many People Ask: "What Business Can I Start With X Amount Of Money?" I think that this the wrong question.
The right question, in my opinion, is two fold. Firstly, Where Can I Find A "Hungry Crowd" Of Potential Customers? And Secondly, How Can I Best Invest The Resources I have In "Feeding" This Crowd, at a Profitable & Sustainable Rate?
Let's Illustrate this with a little case study:
CASE STUDY: Feather Soft Econo Tissue Company
There was once a man named KK, and he wanted to start a Toilet Paper Company, as he noticed that the prices of toilet paper varied greatly between stores downtown, and those in the Mall.
He had R100 000 to invest, and planned on keeping his day job to maintain himself. Unfortunately KK was blacklisted, and couldn't get a loan at any banks due to a fraudulent past.
KK asked you to advise him as to how he could best invest his funds into the business, so that he could ensure growth in the business without needing to rely on any additional capital.
Which Is The Best Option?
1)Buy Manufacturing Equipment for R35 000 and start manufacturing your own toilet paper in a space where you're also selling it. Your total additional operating and rent expenses add up to R10 000 p/month.
Get the business up and running and start selling to walk in customers, hand out flyers for the opening, and start trying to supply your toilet paper to shops around the city.
2)Find A Supplier Of Toilet Paper who can sell you any amount between 1 & 20 units. Find Another Supplier who can supply you with 20 to 100 units. Find Another Supplier Who Can Supply you more than 100 units.
Set Up Office At Home & Work After hours on your business.
Pay a Digital Marketing Agency R1 500/Month To Kickstart A Marketing Campaign
And Then Stock and Sell As He Gets customers?
Obviously option 2 is better. There are virtually no start up costs and it'll only cost KK R1 500 investment monthly to keep his business in the market.
On the other hand, with option 1, he shall have already sunken R45 000 into the business before he even starts. With operating costs of R10 000 a month, his investment can only afford his business 5 months of operations, and in order to break even, they would need to make a gross profit of R10 000 a month from day 1.
This business would not last, and KK will end up losing upto 75% of his investment, if he can get lucky and sell the Toilet Paper Machine for R25 000 down the line.
Does this make sense? Let's chat about it the comments, I'd love to hear your thoughts