alexa How much money do you need for your idea to take off? - Daily Nation

How much money do you need for your idea to take off?

Saturday January 18 2020

social media influencer

To be an able social media influencer, you need creativity to create fresh content, photography and videography skills, and personality. ILLUSTRATION | NATION MEDIA GROUP  

BETT KINYATTI
By BETT KINYATTI
More by this Author

Our beloved newspaper here – the Daily Nation – is notorious for running such sensational headers as “How I started my business with only Sh5, 00”.

I imagine it is a rite of passage for editors. No one of them should wrap up their career without penning such a header. (Have you written such a header yet, Phyllis? Fret not, your day is coming.)

I usually roll my eyes at such headers because, while they are true, they are not accurate: yes, you can start your business with only Sh5,000 - but this largely depends on the type of business idea you hold in your hands. Here are some categories:

Capital-intensive idea

This is a business idea that requires a high capital outlay in ready cash. Most times it is to acquire an asset that will produce goods or provide services to your target market.

The cost of capital is the cost of purchasing that asset plus acquiring the technical expertise to operate it.

Advertisement

A ready example is buying a taxi for Uber. Almost everyone I bumped to in Nairobi circa 2016 had an Uber plying the streets of this town.

Most Ubers were gently used second-hand Toyotas that cost above Sh650,000. Then apply for the necessary licences, hire a driver, have them trained and inducted, then the rubber hits the road. Average net returns per month were Sh50,000.

Another business that falls here is events business for weddings.

You have to invest close to Sh1 million in trendy tents, chairs, decor and other event accessories. Folk looking to get married fork out at least Sh300,000 for your services.

Another example is machinery for drilling boreholes. A fully-equipped rig costs about Sh20 million.

A team of certified geologists and casual labourers do the groundwork. Clients are charged between Sh1.5 to Sh2 million to drill a borehole.

Labour-intensive idea

This is what we call sweat equity. A business idea that, to execute, requires more brawn than brain.

The brawn is for the labour, the heavy lifting of delivery. The brains go to nailing down and marketing to your target audience.

Most businesses that fall here fit the buy-sell model for merchandise – a large percentage of your capital goes into purchasing inventory that you will mark up. Most of such businesses are nowadays run online.

Depending on the value of your minimum initial inventory, your starting capital can be as little as Sh1,000 to as much as Sh500,000.

It also depends on whether you are sourcing from say, Gikomba market or from Turkey. And the shelf life of your inventory.

Businesses that fall here are wholesalers, retailers and suppliers of consumables – clothes, shoes, jewellery, makeup, underwear, electronics, beddings, towels, cutlery, crockery, stationery, just-cut meat, fresh fruits and vegetables... it is an inexhaustive list with a varying rate of return.

Skills-intensive idea

Here, you set up a business that offers services based on a technical skill you have mastered.

Such businesses are commonly – and vaguely – referred to as consultancies and brokerage firms. “I‘m a property consultant”, or, “I’m an investment broker.” Err, what exactly is that about, Mike?

The starting capital of such businesses is not a large cash outlay. This is because the proprietor has years of experience tied like a belt around his waist, plus university degrees and professional certifications to boot.

He has also earned his stripes in the industry. What is the market rate of all that?

All a chap like this needs is a laptop, website, cell phone, internet connectivity and he is open for business. Never mind a desk, or a personal assistant.

Consultancy businesses that fall here include financial services such as tax consultation, trading in foreign exchange, asset management....

There is specialised training in tech services such as coding and troubleshooting. Alternatively you can be a marketer, public relations expert or a smooth-talking broker.

Social media-intensive idea

Social media influencers fall here. Regular folk who partner with brands to make us buy products we know we do not need yet find ourselves unable to live without.

Influencers seem to launch their businesses with nothing but a camera in their hands but remember, they have taken years to build an online community that trusts them, one they can engage with.

There is also their creativity to create fresh content, photography and videography skills, and personality.

Not forgetting their authenticity and vulnerability with their audience. Traits you cannot put a price tag on.

Bett Kinyatti is a certified accountant with ACCA and a former financial auditor

Advertisement