Small profit, quick return

Morris Mpala, MoB capital Limited
THE above expression is borrowed from my commerce text book during days at secondary school. It was the principle on which retailers ran on. It was based on moving volumes through lower margins and my school teacher Mr Norman Kwami was so passionate about it.

This is basic commerce (and trade), which talked about moving goods from producer to consumers, which talked about the chain of production, which talked about basic principles of trade and we were amazed at the way Mr Kwami eloquently preached. On the other hand we wondered who listens to this man especially those in business in this small mining town like Hwange then Whange. He abbreviated the concept as SPQR.

In life or commerce in general it seems the more complicated we get the less knowledgeable we become. If such crucial principles are found in elementary textbooks then what are tertiary textbooks teaching. It is true that MBAs can’t run companies but basic principles do.

Fast forward to 2016. I wish Mr Kwami can tell us about small profit quick return to the nation at large. We business people are seeking unrealistic and unsustainable margins at the expense of volume of sales and it has left us with constant migraine attacks that haven’t even spared policy makers either.

Is it because we are producing less than we want, then compensate by maintaining ridiculous margins? Do we have so many inefficiencies and are recouping expenses incurred through nonsensically priced goods? Or it is just financial ignorance. We just don’t know what we are doing and therefore can be forgiven for our economical transgressions even though they cause wider socio-economic gnashing of teeth. Whatever it is it has confused the retailing arena and left consumers bamboozled.

The concept of pricing in order to move stock quickly has eluded us since the hyper inflation bug infected us. The idea of higher stock turns is nonexistent as we aggressively pursue higher and at times unrealistic margins.

We want to sell less and meet our targets but isn’t that extortionate in nature? The gradual making of profits in a sustainable manner is no longer there. The wisdom of moving volumes to make a profit over a period of time is not there. Patience as a virtue in sustaining operations isn’t cultivated.

Am thinking probably Buy Zimbabwe campaign should be reducing margins campaign and naturally customers will buy local if the price is right.

Short term pain for long term gain isn’t the mantra anymore.

We are no longer the patient lot and that is coming at a huge cost. It’s the reason our goods are not competitive at all on the global market forgoing all other factors that come with the pricing matrix. We want huge margins that are not based on research and development or market based.

Let’s borrow some acumen from plantations owner, vineyard renderers, farmers etc the patience they have before harvest comes. It could be painful but it is sustainable. Let’s copy from termites, which store food now for the next season. These economic actors look beyond today. We do appreciate the costing structures as at now are not that favorable but bold steps need to be taken to address our current anomalies. Our pricing model leaves one wondering as to what empirical evidence do they follow or it’s just thumb sucking to cover our existing and or future debt/ financial obligations. In most cases the irony is these obligations are just liabilities that don’t generate revenues.

Will this lead us to financial freedom or take us back to dark ages of when barter trade was so popular. Where do we find a financial doctor to prescribe financial antibiotics to cleanse our systems of profiteering? Is it because customers don’t have options or substitutes thus in some instances they are just price takers.

Be careful that monopoly might come to an abrupt end when options are suddenly availed to your clientele. We are appealing to business to embrace the new business model of survival, which is small profit quick returns and forget about the past financial shenanigans. It’s in their best interest given customers are genuinely pressed for excess cash resources. In such instances we now appeal to the inner soul of business actors to have integrity and avail cost effective but sustainable pricing. Imports prevail because customers are bargain hunters as at current.

If it’s cheap they will buy regardless of whether the products satisfy their strategic needs. At times cheap is very expensive but for a client with no excess income the mantra is tomorrow will take care of itself more over it might not even come so why bother about it. I am appealing to the man in the mirror to change his pricing ways. I am appealing to the man in the mirror to have a strategic mind. I am appealing to that man in the mirror to see the bigger picture. Finally am asking the man in the mirror to seek change urgently for a better economic environment because the man in the mirror is the stumbling block in our financial freedom war fare.

Change begins with the man in the mirror and it’s about me, you and us.

We can’t talk about internal devaluation without including the principal of small profit quick returns. Woe unto those that chase unreasonable margins for they shall never see the sales volumes they anticipate or the customers they think they are chasing. But blessed is a business that pursues small profit for theirs is a big customer base and longevity in business. Am no financial prophet but some things seem naturally more logical. Of late small (margins) is the new big in business.

IF YOU LIVE IN BYO PLEASE CONSERVE WATER

IF YOU LIVE IN ZIMBABWE PLEASE USE ELECTRICITY SPARINGLY: SOS (SWITCH OFF SWITCHES)

IF YOU LIVE ON PLANET EARTH PLEASE PRESERVE THE ENVIRONMENT

Morris Mpala is the managing director of MoB Capital Limited, a Bulawayo headquartered micro-finance institution with footprint across the country.