The story of Innocents
Written by Balloon Ghana Fellow Perdie Alder
When we have a business idea, how often do we test the idea before jumping in and investing all our time / effort / resources into it? It’s easy to get excited and enthusiastic, but one of Balloon’s biggest lessons is to test test test before you throw yourself into your business.
During the 6 week process, about 4 weeks is dedicated to testing out business ideas, and the ‘pitching’ (which is what the entrepreneurs need to go through to get investment) is where the entrepreneurs have an opportunity to show what they have learnt through the testing process, and how this has affected the businesses they have (ideally for the better).
Test with affordable loss
One of our entrepreneurs, Innocents (a student start up) had a bit of a setback at first when he discovered someone on campus was already doing his original business idea. He is so motivated though, that he really quickly came up with a new idea which he presented to us; making and selling coconut oil. He’d already mapped out the business and who his customer segments would be, which meant we just needed to get started. On the first day, we met at around 1pm, and hit one of the hostels. We were starting small so he only bought 10 coconuts, and 10 bottles to put them in (this was his ‘affordable loss’), and made 8 bottles of coconut oil. He originally said we could sell them for 3 Cedi (it cost him 2.5 to produce). We decide to test at 3.5 Cedi, and thought we could negotiate from there. We sold all the bottles within an hour, and people were buying at 3.50. Initial profit was about 1 Cedi per bottle.
Because it seemed so easy to sell at 3.50, we then decided to start trying to cut the cost of his resources, and the easiest way to do this was a) negotiate on the price of coconuts b) get smaller / cheaper bottles and sell at the same price. 3 days later, and I get a text from Innocent’s saying he’s sold 27 of the smaller bottles for 3.50, increasing his profit to 1 Cedi 50p per bottle.
Innocents then learnt that certain coconuts produce more oil than others, which was affecting his profit margins, but he figured out which coconuts are better, and negotiated the cost of these from 1 Cedi to 80 pesewas, before making his next batch (which he sold either to those who’d already bought previously, or to their friends). His profit increased to 1 Cedi 70p per bottle.
Finally, after requests from his customers, Innocents starting producing larger quantities of oil, marketing them purely as cooking oil and selling them for 20 Cedi (making 7 Cedi profit per time). Although the profit margin per sale was less, he was happy that the time taken was reduced, and we’ve decided to try selling these larger containers for 25 next time.
Innocents started this whole business with an initial investment of 15 Cedi, and some simple kitchen equipment (a blender, a sieve and spoon). He’ll pitch for equipment that will make it a lot quicker and more efficient to produce coconut oil, and for some marketing for his bottles so he can try his next test; selling to trade.
Read other stories about Perdie’s experience in Ghana on her own blog here.