Don't Waste a Dime: Funding Your Startup for Maximum Returns

Hello and welcome. My name is Tavishma Aide. I saw sales and marketing challenges and I'm making today's recording at an undisclosed location in Abuja while waiting for a meeting. So expect to hear some interruptions in the background, you know, and music coming in through speakers and things like that. Anyway, the goal of the podcast is business education. I'm not here to tell you about my runs, so please spread the word when we're done so that friends and family members in Nigeria and abroad can benefit from the questions that we tackle.

They can do that by subscribing on Spotify, YouTube, Apple or any player of their choice. And if you have any sales and marketing questions, you can bring them to me. You can call you, get an SMS or WhatsApp me on 08064662140. Now today on the podcast, I would like us to do another listener question and this one is from Mimi who called from Galademoa. And the question is going to touch on how to determine capital outlay when you're a start up.

So let me repeat, how to determine your capital outlay as a start up. Now, when we say start up, I mean the older, much more traditional meaning of the word, which just means that you want to start an enterprise, therefore you're a start up and not necessarily that you have to be involved in tech or anything digital or you know, the fancy ideas that we are used to these days. Then when we say capital, we just mean any amount of money that you have to allocate or you have to invest to get your business off the ground or that you need to keep your business running, you know, every day,

every week, every month. So we mean by capital and then of course I will say capital outlay. By outlay, we mean how you're going to distribute these resources. Now the reason why we're tackling this question today and the reason why this these kinds of questions are important for most of us is because a lot of us are trying to start our businesses and we have limited capital. We don't have tons of money. So we're often left to try and decide where is the best place to put this money to start the business.

Should I put it here or should I put it there? Should I pay for the shop or should I buy this equipment? Should I pay for marketing or should I pay for staff? Should I pay for, should I subscribe to this or should I subscribe to that? So we're always having to make these kinds of choices and starting up our businesses because so excuse me, we're always having to make these choices because money is scarce. And so we have to determine how we're going to allocate these scarce resources.

So now, like I said, this is a listener question from Mimi in Galadimawa. She's a Baker, and she has limited funds. And so when she called in on the radio show, the question was whether to spend the little capital she had to upgrade and buy a mobile phone so that they can help with content and social media. And of course, for those of us who came from the event space, because I used to be a wedding photographer, these sorts of things are very, very important.

So maybe if you own a brick making business, for instance, you know, whether you're on social media or not might not be the, the, the deal breaker. But for those of us who used to do photography, catering, excuse me, baking, all these sorts of things, then yeah, having a nice one would help just to make sure that you have content, you're available on social media and those sorts of things. So for Mimi, the question was should I buy the phone or should I buy new baking equipment?

Now of course, as usual, I wanted to chat some more in WhatsApp, but she didn't follow up the conversation. So, and I can't remember what the answer I gave over on the air. But I looked at the question, some of these questions that I've tackled in the past, and I realised that we can explore it some more and explore some principles that might help other people who are in a similar situation. Now, after giving this thing much more thought, you know, you are in business, you have limited funds, you're a Baker,

you want to know whether you should put the money in the phone or put it in baking equipment. I decided to come up with a much more principled approach for trying to solve this problem. And the principle that we're going to look at today is revenue generation, of course, which is absolutely essential to those of us who look at ourselves as salespeople. Because the whole point of being in business or the whole point of being, yeah, the whole point of being in business or trying to have a side hustle or whatever is we are trying to produce something so that we can sell something and then get some revenue.

So when it comes to determining how you are going to spread this money and you're in a cash crunch, you should be looking at putting the money where it is going to allow you to produce something first that you can now sell later on. Because if you can produce and then you can sell and you can get revenue, then you can use the revenue to reinvest in the business and then also use the revenue to flex. So that's the whole idea.

Revenue generation is the first principle. So now looking at that with this frame of mind, now how are we going to tackle Mimi's question? There's an argument to be made that you should buy new equipment because new equipment is going to help you with production capacity. Because people like Mimi who've been baking, you've been in the game for a while. It is not uncommon that you know you started off with one oven that was a gift from Mumsy or gift from your tutor or gift from a family member or gift from a benefactor or whatever.

But essentially you start off with a small oven and you're trying to grow your sales, and then after a while you're limited to production capacity and it's something I've seen first hand by a family member who also happens to be a Baker. So you start off with one oven and in the beginning it's OK when you bake maybe 2 cakes a day, but eventually business picks up, you start getting more orders and maybe you need to start baking like 5 cakes a day.

But The thing is, your trusted oven is too small, so you're now limited by production capacity. You might need to get new equipment. Sometimes it's a matter of quality and consistency because the old oven that you have is, you know, you're all faithful. You've been using that oven for like 6-7 years and is now beginning to get some problems. So maybe in the middle of the oven, it bakes well, at the back of the oven, it's too hot, at the front of the oven is not hot enough.

Now in that case, you cannot guarantee a certain level of quality or consistency all through when you're trying to bake multiple cakes at a time. And so it might be necessary to upgrade and get new equipment. Then of course, efficiency. Some of these things are gas powered. I hear that the electric electrical powered ovens, I have not seen any yet and I would like to meet any Nigerian Baker who truly bakes off of electrical ovens because you know now as per how never can be, I would really be curious to see how that works.

So for the gas powered ones, you know, not all of them have the same level of efficiency and of course newer and newer models come out every year and they are much more efficient with gas. So that can be a thing. Your trusty oven is maybe 10 years old and maybe you're using lots of gas, but if you had a newer model, you'll be able to use less gas and produce more. But overall, these are the kind of things that will determine the cost effectiveness of the equipment that you have at the moment.

If you happen to be in Mimi's case and you're wondering should I upgrade to a new oven or to a larger oven for baking, then on the other hand, the argument for the smartphone is also kind of convincing because if you have a correct smartphone, then brand building is going to be easier. Getting audio, getting video, getting photos, getting whatever is going to be a whole lot easier. And then there are lots of business people in Abuja,

surprisingly, who still run businesses and they only use analogue smartphones. But sorry, analogue phones, not smartphones, who just goes to show that you can build a successful business without being on social media. But The thing is, when you're ready to take that leap, sometimes in fact, you would make sense for you to have a smartphone. So a smartphone easy for brand building and then also easy for you to manage your socials because trying to manage your socials from a laptop can be tedious.

It means that every single time you want to upload on Instagram or moderate on Instagram moderation that is responding to comments or things like that, you have to go on open your laptop and that can be a hassle. But then if you have a correct smartphone, managing your socials will be, you can do that easier. Then of course, it also facilitates customer interaction because now you can have WhatsApp, you can interact with people on WhatsApp, you can respond to people in the DMS, in the direct messages from Instagram or LinkedIn or wherever.

So there can be an argument for the smartphone, but of course, remember what it is that we said that revenue generation should be our first port of call. We should be spending the money in the way that would allow us to produce and to sell first so that we can get some revenue. So in the source, in the case of Mimi, if she's able to outsource baking, because there are some bakers who that is that model. Basically what they do is they're the ones that have the Instagram handle, they're the ones that do the posting and the everything, and they're the ones who take the order, but the person who does the actual baking is someone else.

For those of you who are involved in the fashion space, you, you, you guys already know this kind of business model. I mean, the fact that people are calling you and placing the order through you and you're the one that is doing the measurement. It doesn't necessarily mean you're the one who is cutting and sewing and cutting and joining and doing everything and doing all the embroidery and all of that. So it's a business model that has been used quite well, excuse me, that has been used quite well in other spaces.

And maybe those of you in baking, you know, it's something that you guys can try. So if Mimi is willing to try that kind of business model and she can outsource the baking, then buying the phone first will be a step towards revenue generation because it would allow her to sell and get orders. So that'll be a step in the right direction. But then if it's also a question that the old equipment seems to be going on OK, the old equipment seems to be working,

then revenue generation is not going to be a problem. That's if you don't have problems with production capacity, quality, efficiency and all those other things. Then she can continue using the old equipment and then buy the phone. But then if the old equipment has limited capacity and has problems, then it might make more sense to just go ahead and buy the new equipment and then after making some money by the mobile phone later.

So I'm hoping that using Mimi as an example, being able to illustrate how this particular principal revenue generation should for most people anyway, especially at the start up level, determine where it is that you're shifting your money. So if you're about to start a business, you're low on cash, you're using your savings or somebody has given you some money and and you know their decisions that have to be made. Just remember that revenue generation should be your guiding principle.

Spend this money in a place that would allow you to produce something so that you not have something to sell and then get revenue because that's the whole point of us being in business in the 1st place. So since this is a particularly noisy environment, I think I'll just stop here. So that's it for today basically. Remember, if you'd love to connect, you can call, you can SMS, you can WhatsApp me on 08064662140. Thank you very much for your time and attention.

I will catch you next time. Same place in your headphones or in your speakers.