Sunday, May 26, 2024

The best source of finance for your business? Your customer

By Chris Odongo - CEO, WYLDE International

Co-Op post

It’s quite fascinating to observe numerous business owners grumbling about the lack of financing as a major barrier to their growth.

They often criticize banks and governments, accusing them of neglecting small enterprises and being stingy with credit. However, they overlook a crucial financing source that’s right under their noses—their customers.

A Paying Customer Validates Your Business Model
Receiving cash from a customer is like striking gold. Not only does it confirm that your business is on the right track by providing needed products or services, but it also indicates market demand.

If your products and services aren’t compelling enough to open wallets, it’s a clear sign that what you’re selling may not be as valuable as you think.

Entrepreneurs should prioritize securing paying customers who are remarkably candid in their feedback—continuing to pay as long as they see value or stopping when they don’t.

A Paying Customer Encourages Profitability
Here’s something interesting: paying customers naturally push your business towards profitability. How? By demanding your services at a price that leaves room for profit.

Whether they’re haggling over prices or you’re slashing them to make a sale, it forces you to tweak your cost structure to meet their price points.

Sometimes, you might even discover that you can charge more by offering more value, leading to an expansion of your offerings. Smart entrepreneurs never leave money on the table.

Help! I earn Sh. 88,000 net salary but debts leave me with Sh. 6,000 only

A Paying Customer Drives Referrals
In my experience, I’ve noted that growing businesses thrive on referrals. Here’s the scoop: solid referrals generally come from satisfied, paying customers.

Just like the old school proverb says, “Birds of a feather flock together.” Serve one happy customer well, and they’re likely to introduce you to others who will value and pay for your services just as generously.

Happy costumes are the best influencers.

A Paying Customer Signals Growth Opportunities
For businesses eyeing expansion, paying customers in new regions is golden. Before you leap into a new market, ask yourself: Are there potential customers there who would pay for what I offer?

Focusing on delivering value to paying customers in new areas can guide your business toward sound expansion decisions.

A Paying Customer Attracts Investors
The buzzword among investors? Traction. And nothing spells traction like a roster of paying customers.

Investors are drawn to businesses that not only have a solid business model but also demonstrate profitability per customer—a concept known as unit economics.

To sum up, while there are numerous reasons to focus on your paying customers, the bottom line remains: the day you run out of paying customers is the day your business starts giving nokia and kodak vibes(i.e. you are going out of business vibes).

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