In this economy, revising your plan may be the last bastion of business

For any business to turn a profit and be seen as a good investment, it must bring in more money than it costs to produce goods or create services. FILE PHOTO | SHUTTERSTOCK    

By MBUGUA NJIHIA More by this Author

For any business to turn a profit and be seen as a good investment, it must bring in more money than it costs to produce goods or create services. It seems straightforward, Business 101.

The reality is not so. In the start-up world, decades focused on blind growth metrics by owners of capital to their portfolio companies have led to skewed motivations.

Growth at all costs has seen founders and their teams plump up specific metrics leveraged to raise funds. Early investors keep a keen eye on these as they offer an opportunity for a good return on the next raise.

In established companies, corporate friction stands in the way of innovative thinking. Strategies that have been in play for years are difficult to change.

Especially so, where there is nothing to measure against, whether from a peer in the same sector or an adjacent vertical that may share similar consumer profiles.

The world over, there is increased pressure on factors of production across physical goods and services. Inflation and runaway taxation have affected the supply of capital and consumer purchasing power. 

While economic downturns are viewed by some to increase investments, we are witnessing cutbacks. Organisations are shedding weight, letting go of staff, collapsing departments, and merging roles and functions.

The last bastion of business continuity is to rejig business models and pricing strategies. This plays out in Twitter's takeover by eccentric billionaire entrepreneur Elon Musk.

He came in with the standard staff rationalisation move, quickly followed by reducing a reported $60 million burn on user authentication and running monetisation experiments, the most visible one being Twitter Blue, ‘an opt-in paid monthly subscription that adds a blue checkmark to your account and offers early access to select new features’.

At a time where a common boardroom question is ‘where has this been done before’ industry peers seemed to have been waiting for a first-mover.

Some, like Meta, have followed with their own premium subscription badge offering, sure to have some takers across their billion-plus user universe.

Another angle is layering. It works best when a business has assets that are under-optimised. A start-up could have gone through a growth spurt but must now hunker down and deliver on profits. A large organisation may be hurt by increased competition, the cost of business, or a depressed consumer purse.

We see fintech pivot into super app ambitions as the race to zero transaction costs heats up, financial service providers training and hiring for new wealth management and bancassurance opportunities.

Whatever your industry, remember that business models are pliable. Fashion them to suit your market situation.

Njihia is the head of business at Safiri Express | www.mbuguanjihia.com | Twitter: @mbuguanjihia