SMSVOLT is a free sms service project I developed in my spare time. If you have not seen the site already it is at www.smsvolt.com. It would be localized using sub-domains such as ng.smsvolt.com for Nigeria gh.smsvolt.com for Ghana and cm.smsvolt.com for Cameroon.

I have done the research to test the viability of SMS based marketing in WEST AFRICA, or at-least in Nigeria, and I was amazed by the results. Over a period of 4 weeks, the system had sent SMS to about 12,000 unique people and sent out about 19,229 SMS messages. Now the question lies on how this could generate revenues.

This model would be supported by advertisement as a signature to the free SMS SENT OUT.

How does this work?
Well its simple, the system allows the sending of messages in 120 characters, which allows Text Ads 40 – 200 characters advertisement embedded. What this means is advertisers can opt to advertise as a signature or an additional message sent out to the recipient.

Penetration Model
I intend to build widgets for blogs and websites so that people visiting other blogs and websites can be able to send out messages to the system using the free services. I also intend to have a mobile version of the site together with a commercial discounted bulk SMS services, discounted by the signature ads.

Looking for partners.

I invested in the initial advertisement and test campaign budget together with the development of the platform that would enable this model, and would continue to support the model with all the software and feature enhancement necessary to penetrate the market.
I need 3 partners that would be able to run this as a business in Ghana, Cameroon and Nigeria and I would support the concept through my web software and services etc.

The Partners would have to share the cost of the initial SMS Campaign and marketing cost, and also would be responsible for whatever it takes to acquire the customer base necessary to make this project a reality.

I am willing to take 40% stake, so the partnership would be on a 60:40 ratio for each country, which I think is quiet a fair ratio considering the roles the partners would be playing.

What I need in a Partner?

1. Initiative – The partner should be able to acquire and support sales and payment logistics on his own without my help.

2. Honesty – The partner should be honest and straightforward about how he intends to market and acquire customers.

3. Business Experience – The partner should have done business in the past, or currently and would have time to do this effectively and sincerely with the necessary commitments required to make it a successful partnership.

4. Performance – I need a hard working partner, as the partnership agreement would be dissolved if the partner does not perform.

Do you need a more in-depth detail on this business proposal? Shoot me an email or comment here and I would get in touch with you.

I thought thrice, and I am still thinking about what I am about to do right now whilst I type this. I am about to tell, the never told Nairahost story, but its something a lot of African start-ups can learn from. I do hope I don’t end up making my partners very unhappy about what I am about to do.

This would be a series, a story about an African start-up that began with only $100 dollars in capital, without financial backing, without access to possible loans, that grew from 2 customers to more than 3,000++ paying customers, without marketing and hosted about 8,000 domains across many servers at a data-centre in the US.

This would reveal mistakes we made, such as undercharging for our services, how we burnt through cash through strategies we introduced without an indepth analysis on what we were getting ourselves into and how we did not have a marketing budget, and also how we reinvested our own hard earned cash to keep the business afloat, when things went really bad. This would also be about How I gave away equity to raise funding to keep the business afloat, how bringing in new partners have helped the business, and what we are doing today that would change our financial books in the upcoming quarter etc.

This would be also a story on how we generated about 6 figures in USD in revenues a year, lost a lot to currency devaluation, business expenses and managed a very challenging customer base together with foreign service providers who would kick us out because of our customer base.

This would be a story of lessons I learnt through the journey, and challenges we faced and how you can develop your business to mitigate yourself from the kind of problems we ran into. I would go into details on our day to day experience, current, past and our future goals, visions and target.

This is a teaser post of the Nairahost story, so watch out for part 2, where I would strip Nairahost naked, as never done before.

This was conceptualized by me on a bored Saturday morning; it is a crazy idea but well who knows it could be feasible.

So I have been reading quiet a lot on the economics of money creation backed by items of intrinsic value such as gold, and the more I read, the more I realize that the dynamics that creates such value is tied around perception, and trust. This is what created the basis of my crazy complex idea of a creation of a global bureau de change of digital currencies backed by each Franchisors funding with a digital clearing-house powered by a community of rated commission based volunteers in every country and state across the globe.

Taking a glimpse at online payment methods such as paypal, moneybookers, libertyreserve along with many other methods of online payments that are backed by either the founder’s funding or models in developing countries or third world countries, a sub-market or rather a black market with millions of dollars in turnover on a yearly basis currently exist. This is a market where digital exchanges occur using other networks such as interbank transfer, monetary transfer or other digital currency to facilitate private exchanges of this digital currencies. This model is supported by local exchangers who facilitate easy withdrawals, easy conversion of local currencies to digital currencies to enable these methods of payment or gateways in the respective uncovered markets.This is alarming cos this by default goes against the policies of this exchangers yet this exchanges still occur at a risk of the exchanger loosing their accounts with paypal for example.

In some countries in Asia like Malaysia, Indonesia, Singapore or even in Africa like Ghana, Cameroon, Nigeria, there exist a form of a community of approved exchangers with a moderator that provides a sense of security through taking identities of the exchangers and providing a badge to this exchangers to assure interested buyers and sellers.

So looking at all this artificial black markets created by needs of the stakeholders in this respective markets, there is a huge global market for a digital currency backed by communities and interlinked by local forms of payments such as internet banking, mobile virtual accounts etc.

The Idea
Establishing a community of global citizens with a platform that enables Open Payment backed by a very functional portal with Web Services together with a clearinghouse that is backed and supported by franchisee’s across the globe.
Each Master Franchisee enrolls in their respective location via supporting the system through the amount of money they are able to back the system with.

In each state there would be a corporation otherwise known as a Master Franchisee who is also an investor in the system, who would manage the clearinghouse and be responsible in taking care of local disputes and manage the sub franchisees legal matters etc.
This entire model would work on a social networking platform that would be managed by a trustee of elected Master Franchisee from each country across the globe.

The open payment system would be developed by open source developers ground up with an integrated marketplace for modular services. The core would be open-source, but the add-on services would be an income source for other contributors across the globe.
The core would facilitate the exchange, gateway and the necessary pillar to enable other systems and services to embed into it.

How would Monetary Exchange Occur?
This system would work in two ways through the Payment Gateway system and through the Community Social Portal. This is done first through loading the e-account with funding through any available franchisees in each state via whatever local pre-existing gateway available, such as interbank transfers, credit cards, mobile payments etc

Visiting a shop or a portal that accepts the open payment gateway and using the balance for the transaction.
Withdrawing and loading of the system is handled by local Franchisee with variable transaction fees based on services rendered.

The beauty about this open payment system is with time; the value of the digital currency could fluctuate based on demand and supply together with the availability of many franchisees and virtual bureau de change. The members of the community of the system would be able to build other sub services that depend on the Open Payment system, through the usage of the Developer Tools and APIs etc to facilitate the local exchange and global network of exchange etc.

The code base of the open payment system would be open-source but would encourage a modular add-on services, which would be protected by the developer using standard encryption enabled by the core of the system.

Who would make a living out of this?

Security Franchisee – Local security experts who charge for monitoring local transactions, verifications, legal matters and reselling their integrated module services to other franchisees across the globe.

Cross Border Franchisee – Local facilitator services of cross border monetary transfer that facilitate clearing house exchange of money from country to country, through either having foreign bank accounts to support foreign trades or have an easy method of transferring money across the border.

Merchants – Merchants that accept money using this system at zero transaction cost.
Exchange Franchisee – Local exchangers that provide local funding and withdrawals through available local gateways etc.

Entrepreneurs – Local entrepreneurs that can create a business around this system to enhance its functionality

The Big Picture
Picture a global open market of digital currency exchangers where you and I can earn from through providing funds to back it like forex trading, and also products and services without bank hiccups and high transaction fees?

Picture a global open market of digital currency, which is supported and managed by you and I without government intervention?

Picture a global open market of digital currency, which supports cross border trading by your investment and your time?

Picture a global open market where you can transfer money to anybody anywhere across the globe within a few seconds.

Picture a global open market of digital currency managed, and supported by you. You pay for the nodes you use, you contribute your codes to the repository that enhances the functionalities and you support your local market through ensuring that every player is verified and all transactions are monitored.

Picture a global open market that has credit ratings, and even credits to facilitate transactions?

Is this a great idea? Or an Idea that sounds nice theoretically but impractical? Or is this a Utopia Payment Idea?

I believe this system is possible through crowd sourcing and a sound franchise and network marketing model and could be polished, as this is just an abstract of the idea. Any Takers?

Please Contribute through your comments.

Mobile payments are the most discussed biz opportunity in Africa and a few mobile carriers that have the capability to deploy it have earned amazing revenues, in the tunes of 100s of millions of dollars added to their balance sheet each quarter, the likes of Safricom and even MTN Mobile Money.

The question now lies on how this models even with their cumbersome paper trails and a local kiosk for remittance; happen to be extremely successful. Take for instance the solution of MTN Mobile Money. According to Mambe a friend in Cameroon, the process of sending and receiving payments entails

1. Sender Sending an SMS to MTN instructing release of payment to Recipient
2. MTN Sending an SMS to the Recipient
3. Recipient Visits Service Centre and Shows them the SMS
4. Recipient Fills up a Paper Form with his Signature
5. Service Centre Releases Payments to Recipient

The amazing reality about this process is, its considered easy and simple with all the hassles of travelling to the centres, filling up the forms and signing etc.

The question that I have to adopters of this Mobile payment solution in Africa is

1. What makes this different from normal interbank transfer? Is it the SMS notifications? Is it the availability of Service Centres across the nation?

2. How is this different from Interbank or Intrabank money transfers or even Internet Banking?

3. What is the dispersion of Mobile Service Centres across the average Africa nation in general?

4. Are traditional banking solutions really that bad, that any alternative convenient solution around would be easily adopted?

5. What’s the average cost of receiving and sending money via this Mobile payment solutions?

I am asking all this questions because I believe a mobile payment solution should address a lot of problems such as

1. Micro-payments:- I should be able to go to the barber shop or even the neighbourhood stall, or the cinema or even pay my cab fee with just my mobile phone without any paper trail etc.

2. Transaction cost:- The cost of using the mobile payment solution should be as low as 1% of the transaction.

3. Paper Trails :- Paper trails should not exist, mobile payments should be 100% electronic; sms based receipts, reusable balance at the shop next door, a wallet for every single transaction I do so I would only need to use the service centre facility, if and only if I need the cash for services that require cash. This services that even require cash should be engulfed by this solution with time.

4. Convenience and Access to Services :- I should not have to travel to the nearest Service Centre to check my balance or even Remit Payments.

5. Ease of use :- My grandma, should be able to understand how it works and how to use it effectively without hours of explanation and training. Graphical illustrations should do just great in not more than 3 Easy Steps. 1. CLICK 2.Type 3. SEND

I would appreciate if users of this solution in Africa, provide commentaries to further clarify my confusion or no confusion at all.

You ran out of ideas and then you thought well why not just clone twitter, so you call it a local name, and you design a beautiful interface and then you call it your new startup? Believe it or not, whether you hear it from me or you hear it from your folks, you have got it all wrong and you are wasting your resources time and money, but then again you might have made enough localized traffic for google to send you a check every month that is worth your time.

Twitter by default is a “Complicated” service that it takes a little bit of explanation to understand, what makes twitter an amazing relevant service is its global coverage of live thoughts, expressions or even irrelevant “twarts” or tweets, if you call it that, in realtime and in a well organized stream based on who you want to read or rather listen too. So creating a new Twitter, that blasts the webspace with a new source of localized thoughts is just irrelevant. I get tired listening to my village folks, I don’t know about you.

I can say for myself that I am very happy with Twitter, together with my aggregator of localized content. But another Twitter clone for my village people? I don’t think so, but your village people might love it anyway, and I could be wrong.

Yes many have tried and many have failed miserably, and many would try again and many would fail, and the race would never end, until someone figures it out.

Running a remittance or payment system goes beyond just developing a platform that enables exchange between one party to another, it requires understanding and having the necessary skill set, model and the financial backing.
Why are developers in Africa failing at developing an adoptable Internet payment gateway?

1. Lack of Finance and Accounting Background or Counsel

2. Lack of financial Capital to support their model

3. Over complicated and over bloated solution

4. Relying on traditional banking channels to facilitate account funding

5. No Proper company structure to support business model

6. Lack of Support or modules for popular shopping carts and billing systems

7. Lack of resolution system or proper support system embedded into payment gateway

8. Lack of developer tools and documentation to enable developers develop portable modules that could be embedded at devices and shopping carts

9. Cost barrier to entry or very high transaction cost.

10. Complicated withdrawal systems

11. Lack of communication channel for feedbacks during development cycle with potential customers.

12. Lack of sound business model and plan to support the solution

13. Copying other payment modules blindly and lack of proper research and feasibility study.

Do you want to solve this problem? I have a very comprehensive module that would solve this effectively. Watch out for it in my future post entitled, An Effective Payment Gateway Solution for Africa.

Most African start-ups are solo projects and that is exactly why many fail and those that don’t never grow through infancy. The reality is that there is this belief that by not fostering partnership in their business, they protect their interests against the risk of the co-partner defrauding the business.

I find this quiet disturbing because an entrepreneur is supposed to throw out such mentality when starting a business as the business itself could fail, on its own without the need of a co-partner doing anything, and such mentality in-fact exposes a business to various liabilities and risk.

Why should you have a partner in your start-up?

1. Start-up Cost Burden - Starting a business is expensive, and costs a considerable amount of money to begin, if you have a partner, this financial burden is divided so is your exposure to the risk of the business which is reduced proportionately.

2. Specialization – Your co-partner might have certain skills that complements your business model, so would you, collaborating in a partnership construct ensures that this unique contribution creates high quality products and services.

3. Backup-Runner :- What happens when you get sick? What happens when you are on holiday? What happens when you have emergencies or Gets hit by a truck? Who would handle the business and services ? Having a partner fixes that perfectly.

4. Growth Limitation - A solo run business’s growth is extremely limited. You can only do as much as a one man army. Look around you for small businesses that are more than 5 years old, and yet they are still in the same size and shape as they were before. Wonder why?

5. Accountability - If you are running a solo startup you are only accountable to yourself, hence there is high chance that you would be very indisciplined financially.

How do you form an effective partnership in Africa with or without an African?

How do you structure your partnership, so that everybody contributes effectively?

How do you structure your partnership to avoid conflicts?

I would answer this and much more in my next post titled, Forming a bulletproof business partnership in Africa.

A lot of services and products are expensive in Africa, not because the founders are not interested in the big market share. The problem lies in the cost of doing so. This post was inspired by a post on ICTWorks titled “Why African Internet Bandwidth Prices Are Still High“, in which the author drilled down on archaic business models in Africa. The excerpt is as follows

The second factor which I consider to be even more important is what I refer to as an archaic business model and business mindset. Telecommunication companies such as Internet Service Providers (ISPs) in Africa overwhelmingly rely on a small base of customers that they charge high prices. These customers (banks, large companies, multi-nationals, -collectively dubbed the “corporates,” large educational institutions, government agencies, development agencies and NGOs and a tiny number of high net worth individuals) need connectivity and are willing to pay these high prices.

This mindset still pervades the ISPs and thats why prices are still high as they “need to recoup their investments” from a small customer base. But this business model is flawed: there are millions of individual customers and small business that also need connectivity but cannot afford to pay the current high prices.

The success of mobile phone companies has taught us (and any ISP that is awake) that communication services are not the preserve of the rich and powerful. Unfortunately, the typical African ISP is unable to shift to a “large customer base, low margins” business model: drop the prices and attract a lot more customers. This is the main cause of recurring high prices.

Why are businesses in Africa locked into high margin models?

1. Cost of Capital – In a country like Nigeria, the cost of getting a loan from the bank which requires a collateral such as real estate is 25%. This loans are not upfront and they are usually what you can term credit lines or overdrafts.

2. Cost of Business Operations – The running cost of a business in a place like Nigeria is very high, because people rely on generators to power their business. A medium size business of about 10 employees spends around 500USD a month to power their business using generators, factor that to big corporations, i.e the ISPs

3. Rental Commitments- The average rental in a place like Nigeria requires 2-3 years deposit. A good business location for a small sized business would cost about 8,000 USD a year, that is about 16,000USD to 24,000 USD of the business capital tied down to rent alone.

There are much more factors that attribute to the reality of why businesses in Africa need to do all they can to ensure that their businesses reach critical mass. Unfortunately, it turns out that the archaic models work, hence the adoption.

This is just an illustration of just a little of what medium sized business in Lagos are exposed too, multiply that by a hundred or even a thousand to get the picture of what big businesses like the ISPs in Nigeria are exposed too.

So you have been following the trend of dotcom startups burning through hundreds and thousands and millions of dollars on their business to generate and force their business model or no plan into a viable one, and you are thinking you could do the same?

The reality is most startups have no chance at all. A chance that is to earn the privilege of playing with many business models with a boatload of external financing.

Don’t get me wrong, the concept of maintaining critical mass using longtail strategies is a well thought out strategy to tapping a massive market and monetizing it, but the reality is, it defies the laws of what a startup business should be about, and most ordinary startup going that way, would fail miserably without the required external boatload of finances to back such models lifeline.

What should a startup business be about to a young entrepreneur with no chance of funding?

1. It should be about a great product and service that its stakeholders are willing to pay for , from inception.

2. It should be about a structured business plan or a model you have developed, not about an idea that creates traffic and you hope that someday, you would turn it around into a business, and thereby make enough money through advertisement to sustain it.

3. It should be about a problem or an ingenious creation of a market for a solution you have created.

4. It should make money if its a business, and the revenue generated should be seeing profits within 12 months if you are bootstrapping, or at-least within 2 years, if you have the capital to support it.

5. Lastly I am presuming you have no chance of getting external funding and all you have is your idea and the big market out there, which is relevant to about 95-98% of startups out there.

Reality Check
This is the reality for 95-98% of ideas out there.

1. You are not funded by an Angel Investor or a VC

2. You dont have 100,000 USD, 1M USD or even 50,000 USD to burn

3. You are just an ordinary business trying to create an enterprise that is profitable and sustainable.

4. You have spotted a great market and a need and have developed a solution to cater for it.

5. You dont have all the time and money in the world to play with before you discover how to monetize it

You are not faceboook, Twitter or Google!

This post is about you the entrepreneur not making money in your online business because you believe that money making does not involve spending money. This is also for you if you are considering starting an online business and you are scared that they you might not have enough or could possibly run out of cash if you start spending your savings in the business, before you even gain your first customer.

I am sure you have heard stories of entrepreneur’s who started online businesses with nothing and yet made millions? Well don’t let them sell you that PR gimmick, because if you follow their footsteps, you would definitely have a better chance winning the lotteries to actually gaining enough customers to pay for your operating cost!! That’s right.

So the question is are you really interested in starting an online business and making money?
If the answer is in the affirmative. Well the good news is you are now actually ready to run a successful online business. I would like to dissect through what you need to do to run a successful online business but that would deviate from what this post is all about. The often neglected operating cost of running an online business to actually make money.

How much do you need?

I can’t tell you exactly how much you need, as the cost varies from one business to another, but I can tell you a few things you should develop your model around that cost money.

1. A domain name - This is the web name that carries your brand and points your customers to your web portal where your products and services are. This cost between 9USD – 25USD a year depending on where you register the domain at.

2. A web Hosting Account to host your internet business - This is the space where your website is located and where your customers come to, to buy your products or subscribe to your services. This cost between 12-100 USD a year.

3. A proper Customer Relationship management system – You need to develop a mailing system that has all your canned messages that properly covers everything there is to know about your product or services, and does that in a very systematic way streamlined with your business with functionalities such as automatic follow up and synchronizes properly with your billing system. You might need a developer for this and this would cost you between 200-500 USD to develop altogether with the billing software custom built for your business needs.

You could consider going for most of the complex open-source or even Software-as-a-service solution out there instead of developing one to cater for your business, but I would tell you this. You have a better chance in differentiating your business through developing one that wraps around your business delivery needs and your expected target customer expectations and needs.

4. Marketing Campaigns. There are a lot of ways to actually market your business. There are cheaper methods and there are very expensive methods. This primarily depends on your market target and how you intend to convert that market target.

You would need to ask yourself a question on the profitability of your business. Assuming each customer brings you a net of 5 dollars, how much are you willing to give back to that customer? This is otherwise known as the customer acquisition cost. Would you be comfortable with giving back 10% of your net? Well that would be 50 cents each back to your customer, and no don’t give discounts on sales just yet. Your product has not yet gained value. Spend it on gaining traffic. Advertisement would be a good start.

So if for your first month, your target is to acquire 10 customers, you would need to find a way to spend 5 dollars to achieve at-least 10% of that target, which is just 1 customer , thereby increasing your acquisition cost to 100% of your net, which is a break even value. Now you need to continuously iterate the process till you make profits from your conversions.

What should you do if you run out of cash?
Remodel your business, its not about your product or services, there would always be a market for it, it all depends on how you lock the sale or convert the customer. Ask yourself this questions

1. Why am I not converting customers? If I converted, how many? And at what cost? Perhaps this would involve Re-adjusting the pricing of your product and services?

2. Is my products or services not good enough? Perhaps this would involve going back to the lab?

3. What are my competitors doing? Am I doing it any different, and yes every business has a competitor, don’t say you dont have one. Is my differentiation harming my business?

4. Approach your target customers indirectly through using mediums such as forums, emails. I would personally recommend Startups.com, they have a great community of season entrepreneurs. Tell them your story and ask them politely whether your product is right or not right for them and why. Jot down all the feedbacks and rework your business to fit into the constructive points.

5. Brainstorm with friends with business experience and go through your entire model diligently.

Lastly borrow x 2 of the money you need to get the business back on its feet, from friends, family and give it another shot. If you get it wrong again, go through steps 1 to 5 again. There is a very low chance that you would get it wrong the third time, if you do, then definitely that business is not for you to sell. Move to another business or well get a job and have a staggered structure to repay back your debts

Starting and running a business be it online or offline is extremely risky, do it we caution, with a define path, structured model, a clear strategy and an exit strategy, if things go wrong.