Cash flow & unit economics
Posted: Thu Oct 15, 2026 2:06 pm
The Reason Most Nigerian Businesses Die Even When They Make Profit
Many business owners in Nigeria think business is about profit. It is not. Business is about *cash flow*. You can be making profit on paper and still close shop because there is no cash in hand to run next day. Unit economics is what tells you if each single sale is actually helping you or killing you slowly.
Let’s break it down with your own electronics and foodstuffs business.
1. Unit Economics - Check One Piece Before You Check Whole Shop
Unit economics answers: If I sell ONE charger, ONE smoked fish, ONE bottle of crayfish, how much do I REALLY make after all costs?
Most people calculate wrongly. They do: Selling Price minus Buying Price = Profit. That is lie.
True unit economics for ONE Oraimo power bank in PH:
- You buy: N18,000
- You sell: N25,000
- On paper profit: N7,000
But real calculation:
Selling Price: 25,000
Minus Cost of Product: 18,000
Minus Delivery/Transport share: 500 (bus from Lagos divided by pieces)
Minus Packaging/Nylon/Sticker: 200
Minus Data for marketing: 300 (your TikTok data divided)
Minus Dispatch rider commission if online: 500
Minus Shop rent share per day: 400
Minus If customer says "pay next week" and you wait: 0 interest lost
Real Profit = 25,000 - 19,900 = N5,100
If your real profit is negative, every time you sell you are digging your grave. Many people selling new electronics in Computer Village are doing this - they sell at N24,000 to beat competitor, but their true cost is N24,500. They sell plenty but they are running at loss.
Rule: If unit economics of ONE piece is not positive, don't sell 100 pieces. Fix it first.
2. Cash Flow - When Money Enter and When Money Go Out
Cash flow is about timing.
Example: You have 500k. You use 400k to buy 2 UK used freezers. Good profit - each will give you 60k profit. Unit economics is good.
But problem: Freezer may stay 3 weeks before buyer comes. For 3 weeks, you have ZERO cash. You cannot buy daily recharge cards, you cannot buy fuel, you cannot restock small chargers that give you daily cash. Customers come for charger, you say "no stock". You lose them.
Meanwhile, your friend used same 400k to buy 160 pieces of fast chargers. Each gives only 1,500 profit. Smaller unit economics. But he sells 10 daily. So every day N15,000 enters. In 10 days, he has turned his money once. In 30 days, he has done N450k profit and still has stock.
Your freezer finally sells after 21 days, you make 120k profit, but for 21 days you were broke, you borrowed to eat.
Who grew faster? The charger guy. Because his *cash flow cycle is 1 day*, yours is 21 days.
In Nigeria, survival depends on 3 cash flow rules:
a) Fast turnover first: Always keep 70% of your capital in products that sell in 1-7 days. Use only 30% for slow but big profit items.
b) Cash upfront: Avoid credit. In PH, "I will transfer later" kills cash flow. Collect cash or instant transfer before releasing goods. Even if you lose one sale, you protect your cash flow.
c) Separate your money: Have 3 accounts or 3 nylon bags: 1 for Capital (never touch), 1 for Profit (you can chop small), 1 for Emergency/Restock. When you mix all, you will chop capital thinking it is profit.
Final Lesson:
Unit economics tells you *IF* your business can ever be profitable. Cash flow tells you *WHEN* you will have money to stay alive until that profit comes.
Many business owners in Nigeria think business is about profit. It is not. Business is about *cash flow*. You can be making profit on paper and still close shop because there is no cash in hand to run next day. Unit economics is what tells you if each single sale is actually helping you or killing you slowly.
Let’s break it down with your own electronics and foodstuffs business.
1. Unit Economics - Check One Piece Before You Check Whole Shop
Unit economics answers: If I sell ONE charger, ONE smoked fish, ONE bottle of crayfish, how much do I REALLY make after all costs?
Most people calculate wrongly. They do: Selling Price minus Buying Price = Profit. That is lie.
True unit economics for ONE Oraimo power bank in PH:
- You buy: N18,000
- You sell: N25,000
- On paper profit: N7,000
But real calculation:
Selling Price: 25,000
Minus Cost of Product: 18,000
Minus Delivery/Transport share: 500 (bus from Lagos divided by pieces)
Minus Packaging/Nylon/Sticker: 200
Minus Data for marketing: 300 (your TikTok data divided)
Minus Dispatch rider commission if online: 500
Minus Shop rent share per day: 400
Minus If customer says "pay next week" and you wait: 0 interest lost
Real Profit = 25,000 - 19,900 = N5,100
If your real profit is negative, every time you sell you are digging your grave. Many people selling new electronics in Computer Village are doing this - they sell at N24,000 to beat competitor, but their true cost is N24,500. They sell plenty but they are running at loss.
Rule: If unit economics of ONE piece is not positive, don't sell 100 pieces. Fix it first.
2. Cash Flow - When Money Enter and When Money Go Out
Cash flow is about timing.
Example: You have 500k. You use 400k to buy 2 UK used freezers. Good profit - each will give you 60k profit. Unit economics is good.
But problem: Freezer may stay 3 weeks before buyer comes. For 3 weeks, you have ZERO cash. You cannot buy daily recharge cards, you cannot buy fuel, you cannot restock small chargers that give you daily cash. Customers come for charger, you say "no stock". You lose them.
Meanwhile, your friend used same 400k to buy 160 pieces of fast chargers. Each gives only 1,500 profit. Smaller unit economics. But he sells 10 daily. So every day N15,000 enters. In 10 days, he has turned his money once. In 30 days, he has done N450k profit and still has stock.
Your freezer finally sells after 21 days, you make 120k profit, but for 21 days you were broke, you borrowed to eat.
Who grew faster? The charger guy. Because his *cash flow cycle is 1 day*, yours is 21 days.
In Nigeria, survival depends on 3 cash flow rules:
a) Fast turnover first: Always keep 70% of your capital in products that sell in 1-7 days. Use only 30% for slow but big profit items.
b) Cash upfront: Avoid credit. In PH, "I will transfer later" kills cash flow. Collect cash or instant transfer before releasing goods. Even if you lose one sale, you protect your cash flow.
c) Separate your money: Have 3 accounts or 3 nylon bags: 1 for Capital (never touch), 1 for Profit (you can chop small), 1 for Emergency/Restock. When you mix all, you will chop capital thinking it is profit.
Final Lesson:
Unit economics tells you *IF* your business can ever be profitable. Cash flow tells you *WHEN* you will have money to stay alive until that profit comes.