I have often been nicknamed ITK;
that’s short for ‘I too know’. It
means someone who is supposed to be a storehouse of information. It’s not an
entirely positive word or even a compliment because it connotes some degree of
conceitedness. Whenever I am called ITK, I retort with some angry criticism
until I overdid it at an open day.
I accompanied a friend to visit
his daughter in elementary school. The pupils were all happy to see us and on
sighting us Titi, my friend’s daughter, ran towards him with open arms as he
gathered her in a tight embrace. She greeted me too with a beautiful grin and
handed me some mock paper money. I was about to thank her for the generosity
when her class teacher walked up and asked her to tell us how she made the
money.
Titi then started to explain how
she bought a packet of biscuits for N3 (Three Nigerian Naira) and sold it to
make a profit of N2; hence the N5 note she pressed into my palm. I didn’t know
when I made an objection to the word ‘profit’ she used. I said, “You cannot establish
profit until you have factored in overheads and other expenses”. The teacher shot
me this ‘Are-you-for-real?’ look and walked
off. My friend sighed in exasperation before saying, “ITK, would you be so kind
to take this class of seven-year olds in Financial Accounting?” And vowed to
never bring me for any open days ever! I didn’t snap with any retort; I was
actually embarrassed for myself.
But honestly, come to think of
it; many small business owners I’ve met don’t know what it means to make a
profit! They do not know how to calculate all the expenses they have incurred,
let alone ascertain their break-even point to determine whether they are making
a profit or loss. In Ibadan where I live, I see a paradox of unimaginable
proportions on a weekly basis. Farmers from the surrounding villages come to periphery
markets such as the Omi-Adio and Ijaiye markets with their harvest of
vegetables, pepper, tomatoes, maize and so on. They display their wares all
over the ground, underneath the makeshift stalls (there are no tables) for customers
to buy. Almost all the customers you’ll find there are the market women who
have properly structured stalls in the urban markets. They arrive by 6 a.m. and
if you get there at 8 a.m. you’ll be lucky to find any leftovers.
But, the absurdity is that the
items sold in the early hours by the farmers are resold by the market women,
with a markup of 50% to 100%, later in the day to customers like you and I. You
may be thinking this is warranted because of high transportation costs and
other market fees, but that is not the case. Once, I asked a market woman if
she thought her pricing was unfair and excessive. She replied, “No, we buy
cheaply from farmers and sell high to customers because we bear the risk if we don’t get to sell these highly
perishable items”. I saw the wisdom in her argument but decided to press a
little more by asking when last she encountered a loss from poor sales. She
grinned and said she couldn’t remember; I smiled back.
A few weeks later, I chanced on
one of the peasants from the periphery market and asked him if he was aware of
the price of his tomatoes, in an urban market barely 8 miles away. He said he
did. I asked if he was concerned that he was being shortchanged. He said I
should explain how that was. I was shocked! I explained that he had spent
months growing and tending his farm and after harvesting, he sells it for
peanuts to someone who makes a kill on it for merely sitting in her stall for
ten hours. He then laughed at me and replied that the seeds he planted were
from last year’s harvest, the land he farmed was an inheritance and the farm
hands were his family members. All these he explained were at no cost to him,
so why should he overprice his harvest? The he continued that he had been
adequately compensated. I was mute.
If he couldn’t see seeds as one
of the variable costs and his farm hands as a labour cost to be factored into
the price, how was I going to convey the concept of risk/loss of his harvest to
him? Other associated costs of preliminary processing, storage and transporting
the harvest from the farm to the market (even though it’s mostly on foot) are
not even considered in the pricing strategy. They say ignorance is bliss, but
it is also the reason that our rural farmers remain indigent. I have seen retailers
who arbitrarily fix prices without factoring for shop rent, labour, electricity
and market levies. I have seen workers in innovative businesses from the
fashion industry to even carpentry who discount their creative and intellectual
content and never take it into account in pricing. It’s as though this group
mistakes intangibility for insignificance.
Speaking of charging for intellectual
content, I once worked with an engineer who told me that, “People are supposed
to pay for what they don’t know”. There was a machine that was faulty in a
factory and the in-house engineer had been battling to fix it for weeks. My
employer was called in to look over the machine and give his recommendation. He
went there and carefully checked all the components and discovered that there
was a blown fuse. The in-house engineer had tested the same fuse but did not
discover that it had broken because he had incorrectly positioned the probes of
his multimeter. My boss went to the electronics shop and purchased a fuse for N50
and replaced the faulty one; but while sending the invoice he billed the
company N112, 050. “Sir,” I almost screamed, “this is outrageous!” He quietly replied,
“The N112, 000 is for the know-how. How do you think I afford your salary?” I
am yet to fully reconcile with his argument but he is one man who knew the
value of what he knew.
If you are in business or you are
about to start one, let’s be clear from the onset that you are in it for profit
and not for charity. You need to consider all the costs that have gone into the
process of providing the goods and services and make provision for them in your
pricing before you can ever talk of making a profit.
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