A Profitable Order Does Not Make A Profitable Business

Every order can make money and the business can still lose money that month. Most Nigerian founders have never checked.

Take a grocery delivery business in Lagos. The average order is forty-three thousand Naira. The goods cost thirty-five thousand. Delivery costs two thousand. That leaves six thousand Naira on every order.

Say the business does fifty orders a day. That is one thousand five hundred orders in a month. At six thousand Naira each, those orders bring in nine million Naira.

Now the bills. They come every month whether anybody orders or not. Warehouse rent. Wages for the people inside it. Riders on salary. Customer support. Marketing. Say those bills come to twelve million Naira a month. Whether the business does fifty orders a day or five, that twelve million still has to be paid.

The orders brought in nine million. The bills took out twelve million. That leaves the business three million Naira short at the end of the month, even though every order made money.

Founders miss this because of where the two numbers sit. Six thousand Naira sits on one order, right in front of the founder. Twelve million sits across the whole business for the whole month, far away from any single order, so nobody puts it next to the six thousand.

So the founder plans from the six thousand. He opens a second delivery area because the orders are making money. He puts on more riders because the orders are making money. The orders go up a little, maybe sixty a day, but the bills went up by more. The business is further behind than it was before it expanded.

Here is the calculation. Add up all the business expenses that come every month, whether an order comes or not. Divide it by the number of orders that came. Every order has to carry a share of those bills, and any order that does not cover its share is losing money for the business.

Then there is the other answer, which is to stop owning the warehouse and the riders. Rent the space you need instead of paying for a whole warehouse. Riders are paid for each delivery they make. The cost only shows up when an order does, so a business doing fifty orders a day can carry it. Owning it works at volume, and the volume has to come first.

Nigeria's digital economy is built by businesses that can carry what they own. A founder who reads profitable orders as proof his business is working is checking what one order made and never checking what the month cost.