How do I scale my social enterprise idea without funds and large network or support at the moment?
1. Spend Less: No matter what you do, try to spend less. And how can you achieve this?
A. Use a free or cheap hosting platform: You are just starting, so start small but with a big vision. Go for a free or cheap plan with lesser storage and bandwidth. Don’t pay for premium email addresses. Rather use Zoho Mail (https://mail.zoho.com) to achieve that. With Zoho Mail, you can get firstname.lastname@example.org for free.
B. Get a tech co-founder: Don’t pay to build your MVP. That’s the worst mistake you can ever make because you may need to iterate or pivot with feedback. So get a technical co-founder, one who is willing to build your MVP and subsequently work on it to improve it without charging you. Your tech co-founder can have a stake in the company.
C. Use organic advertising or marketing methods: Don’t spend money on a paid ad. Adopt non-paid viral ad methods. Create content that can go viral. These days paid ads don’t convert. Especially on Facebook. Because we have “Free Facebook” which allows people to access Facebook with no valid data plan. Those people can’t click through your paid ad since they don’t have data, so you lose money when they click but can’t access your site. So they hardly convert, and when they do, they make your CAC go up and that reduces your profitability or break-even margin. Instead of using paid ads, create viral multimedia that people will share with friends, and can take your product farther.
D. Don’t get an office: It’s too expensive when starting out. Work out of a co-working space. That way you even get to meet more people that can add value to your startup.
2. Solve a problem: Make sure your startup is solving a problem and not just meeting a want. There is a difference between a ‘must-have’ and a ‘good-to-have’ startup. A must-have startup is something people can’t do without. While a good-to-have startup always have an alternative. People tend not to use good-to-have startups. We have laggards. People who hardly adjust to a new way of doing things. But when your startup is solving a validated problem, then to promote it will be easy because it will promote itself. I used the word ‘validated’ because some problem statements aren’t really problems. People just form a problem that doesn’t exist and call it a problem. You calling it a problem doesn’t mean others will see it as a problem. And if people cannot understand your value proposition, they will never use your startup. So you must validate your problem statement. Go out and talk to stakeholders and potential customers. Find out the current hacks. How are people going about things at the moment? Do they find the current hacks inconvenient, expensive, or time-consuming?
If people can live comfortably with the current hacks, then don’t venture into that field. Make sure that the current hacks are just a nightmare — that way, your solution will be in demand. Make sure your solution is actually solving the problem you’ve discovered. I have seen so many founder’s pitch deck with a validated problem statement, but with a solution that doesn’t adequately solve the problem. Make sure your solution solves your problem. You have to know who will use your product. Is it small business owners? If so, you need to go out and talk to them. You can give them a survey to fill, and infer conclusions based on the data received from the survey.
3. Know your numbers: This is the most important of all of them — in my opinion. You need to know your CAC, LTV, CAC:LTV, MRR. CAC is the cost to acquire a single customer. This can be calculated by finding the total marketing/sales cost divided by the number of customers acquired. You need to know your CAC, so you know if you’re making a profit or not. You only calculate the money incurred to acquire the customer. This also includes the salary for any marketing/sales personnel.
Your LTV is the total money a customer brings to you within a specified time (usually one year). You should know what CAC:LTV means. It’s simply the ratio of the CAC to LTV. It lets you know if your business is able to become profitable. If your CAC is 50 naira and your LTV is 500 naira, then your CAC:LTV is 1:10. This means that your company is capable of making 10 times in profit.
MRR is your monthly recurring revenue. That’s the amount you make every month on a recurring basis. You also need to know your Burn rate, your churn rate, and your runway. Your burn rate is the rate at which you’re burning through cash. You have to limit this one down. If your burn rate is too high, you are likely to shut down in little to no time. Your churn rate is the rate at which your customers are leaving you. You need to make sure your churn rate is small. If your churn rate is 50%, means you’re losing half of your customers every month. Nobody wants that.
Your runway is typically the time you’ll need to burn through all your available cash. You have to make your runway long as possible, by cutting your burn rate down. Breakeven is simply when you make as much money as you are spending. This is the thin line between profit and loss. When your business breaks even, then you’re on the right path to profitability.
4. Make sure your customers fund your business from Day 1: You have to ensure that your solution or product is so valuable that people are ready to pay for it from the day of launch. Start making money from Day 1. Charge your customers. You can start out with a 14-day free trial period for them to have a taste of what your platform is capable of. Then after the trial period, if they roll on, then you’re on the right path. If you fail to roll on, reach out to them, and find out why. We learn the best lessons from our most dissatisfied customers. So don’t take your dissatisfied customers less seriously. They are the ones with the key to your improvement.
5. Last, but not least, evaluate your expenses carefully: Make sure you know what you’re spending, and why you’re spending it. Don’t spend money because others are doing the same thing. People doing the same thing doesn’t make it right. Spend only when necessary. And when you spend, document it. Know your OpEx and your CapEx. Your OpEx is the operational expenses of your business. These are your recurring expenses. Know this at the hand of your palm. Your CapEx is your capital expenses. This typically happens once.