"Blue Kiosk" Economics

According to US Small Business Administration approximately 80% of all US businesses are small businesses. It goes without saying that the largest economy in the world (although it’s wobbly right now) is driven largely by the small ice cream shops, the mom and pop retail stores, the little Chinese restaurants, the soul food restaurants, and the small start-ups in Silicon Valley etc.

It is safe to assume that the Ghanaian equivalent of a small business is your typical “Blue Kiosk” or “Trader”. They buy and sell. In most neighborhoods the Blue Kiosk sells Milo, Milk, groundnuts, Akpeteshie etc.

Have you noticed that most small businesses in Ghana think in terms of Revenue and not Profit Margins? Let me explain:

Assume a Blue Kiosk owners buys “Ideal Milk” from a wholesaler for 2.00 GHC each. She sells it at a retail price of 2.20 GHC. I am convinced that the typical Blue Kiosk owner in Ghana thinks she just made 2.20 GHC all her personal expenses for the week will be paid for with this money.

In fact she only made 0.20 GHC (20 Pesewas). It’s even less than 0.20 GHC when you consider the time value of money i.e. the time between buying from the wholesaler and when she finally sells the product. If Blue Kiosk Owner is to live on 1.00 GHC per day she has to sell 5 tins of “Ideal Milk” everyday. To make 2.20 GHC she has to sell 11 tins of “Ideal Milk”.

Unfortunately, not only blue kiosk owners think like this. It runs through our culture. It’s also the building contract who gets a contract and the first thing he buys is a Mercedes Benz. If he really considered his financial obligation i.e. kids school fees, electricity and water bills, 30% bank interest rates, living expenses etc Mr. Contractor will quickly realize that not only can he not afford a Mercedes Benz he can’t afford a car at all. Have you ever wondered what kind of profit margins the street vendors make? Me too. Why are they still there on the streets when there are so many other business opportunities that have better profit margins? The answer is simple. When they sell an apple they can see cash in hand.

I look forward to the day when a University of Ghana Business School graduate with a Bsc. Admin (first class) will start a “Blue Kiosk”. Expand to 5 Blue Kiosks take over a whole neighborhood and hopefully become Ghana’s home grown Sam Walton (Wal-Mart) instead of sitting around waiting for an opportunity to work in the bank as a teller. That will be the beginning of a new day in Ghana.