LESSONS A MODERN BUSINESS CAN LEARN FROM MY MUM’S OLD BUSINESS MODEL

I am a native of Omu Aran, Kwara state. if you know just a little about my people, you will know us for trading.We are the ibo men among the yorubas, and it is so till this present day – ‘we love trading business fa’. My mum started business as a cement trader in the early 80s, few years after I was born. It was a very profitable business in the sense that the turnover was very high – she used to sell up to a trailer (containing 600bags) in less than 2 weeks. Although the margin was not great but as it is with many retail businesses, the more you sell the better is your bottom line (profit).

CREDIT FACILITY

Apart from the location which was an advantage for her business, her capital structure was 20% equity and 80% debt, which means there was huge access to credit facilities at that time, and the debt was at zero cost. The relationship between her and the credit providers(suppliers) was cordial because she would try as much as possible to settle her debts within the agreed time. After a few years, her profit from the trading venture grew and formed part of her seed capital, resulting in a reduction in the debt component of her capital structure.

SAVINGS CULTURE

It was easy for my mum to save when her business was booming because her overhead expenses were very low and her children were not in the university at the time. Public primary and secondary schools were tuition free – no school fees at all. she had several contributions (AJO) she was doing, and she was also a member of a cooperative society. With all these various savings avenues, she was able to manage her cashflow conveniently as she saved her money when she had no need of it, and it was available to her when it was required.

DIVERSIFICATION

Every business goes through a good and a bad time. For my mum’s business, it was not different. After two decades in business, her cement business began to face various challenges; new entrants into the market increased, suppliers became retailers, drop in sales volumes and other economic challenges. At this point, whilst she kept her cement business, she had to divest into other businesses to protect her capital which was 100 equity at the time. The new business at this point was ‘’provisions - groceries’’, another retail business with a very high turnover if your location is right. At this point I had completed my National Diploma (OND), so I did my industrial attachment with her, helping her to manage the business. She did this new business for more than 7 years and made a lot of returns on her investment.

?LESSONS FOR A MODERN BUSINESS

1.??????You should understand that you do not need to have a lot of money to start a business as there are many sources of capital other than your seed capital. The bank of industry today offers loan at 9% to small businesses and farmers with viable business plans.

2.??????Another lesson is for every business new or old, to cultivate a savings culture because of risks and uncertainties that businesses face. A booming business may lose a major customer or supplier anytime exposing such business to various challenges especially cashflow which is the backbone of every business.

3.??????In this age of disruption, you must know when to diversify and venture in to other profitable ventures, this is very important especially in a market or industry with little or no barriers to entry.

4.??????A modern business should strive to remain agile and lean with regards its overhead/structure.

5.??????Also, a cost reduction strategy should be enshrined into the main fabrics of the business model.

6. Another important thing a business must take along in its journey to success is the concept of continuous improvement, your business model or processes can never be good enough.

?

???