Three (3) Way You are Losing Money in Airtime and Data business! And What to do about them.
It was built to be indestructible, and its second name was UNSINKABLE. It was the most technologically advanced ship when it set sail on the 10th of April 1912. Unfortunately, it sunk right in the middle of its maiden voyage. By now, you know what I'm talking about; the Titanic ship. Like the hidden iceberg that sunk the Titanic ship, hidden costs can sink an airtime and data business even before the owner knows it.
In my conversation with considerable airtime and data business owners, here are some hidden channels that many are losing money and what to do about them.
Bank Account Maintenance Charge
I have noticed that the account maintenance fee is the biggest culprit that is killing most airtime and data businesses. Do you know that if your average sale per day is about N275,000 and you are receiving all the funds with a business account with most of the commercial banks in Nigeria, you would have lost over N1,000,000 to account maintenance charges by year-end? E shock you?! Do the maths! The number quickly adds if your business does more than that per day.
The loss can quickly compound the matter if you have to move money between many accounts that charges account maintenance fees to pool funds into one account. Each of the banks will charge its fees. The costs can quickly add up.
Solution
Suppose you use a bank account that charges account maintenance fees, guy japa! Switch to a bank that is not charging account maintenance. If you must continue to use any bank that charges the account maintenance fees, always factor the costs into your expenses.
Many Fintech banks running on Microfinance Bank licences are not charging the account maintenance fees. I know Kuda and VBank (Na talk I just dey talk, do you own research). I am also aware of Providus Bank. Additionally, Providus Bank gives a monthly loyalty bonus calculated at the average bank balance for the month at the rate of 3% pa. You can shop for a bank that can help reduce or eliminate the losses.
Stamp Duty
All bank charges N50 stamp duty on all payments over N10,000, regardless of the account. It might seem like a small amount, but it quickly adds up too. If you have an average of 5 payments equal to or above 10,000 per day, you could lose close to N100,000 in a year to stamp duty. Remember that payment gateway providers are also mandated to charge this fee.
Solution
The first aspect is to account for the charges. Remember the saying, if it is important, measure it. Next, you can decide to pass the bill to your clients to reduce your exposure. Remember that your sales margin will dictate your exposure, whether you can absorb the charges or you would need to pass on the clients. If you have a paper-thin margin, you had better pass on the bill. Most businesses opt for bank accounts with good interest on their average bank balance. This interest can take care of the stamp duty charges.
Loss Leader Pricing Strategy
It is a common strategy to sell some airtime and data products at a loss with the hope of covering the loss from other products coupled with the loss leader. The business owner might also hope that their clients will generally buy the other products with a good margin from their business. A typical example is to have the airtime as a loss leader and with a mark-up on SME data to cover the losses. I have seen this terrible backfire.
Solution
Kindly note that this is not a case against creating a loss leader but a case for an excellent system to balance the loss. In a brick-and-mortar business, it is straightforward for the store to declare scarcity on the loss leaders. Since the consumers are already at the store, they have fewer options than to get the more expensive alternatives.
Similarly, when the strategy is not executed to perfection through conditional scarcity, an airtime and data business owner can quickly lose money when their client buys more of the loss leaders than the other marked-up products. In conclusion, shine your eye, get your system right and follow the money.
Conclusion
These are just a few channels I have noticed many airtime and data businesses are losing money and what to do about them. I hope you will find a few points to apply immediately to improve your business bottom line. Remember that our goal at HORLAR IT SOLUTIONS LIMITED is to see you succeed in your business endeavours. All the very best!
Eheen! One last thing, abeg no forget SMEVend o! MTN SME data at N218.90. Tell your friends. Help a brother. :)