A women-led home-grown online business developed a platform for women entrepreneurs to earn money by leveraging their skills be it handmade products, event planning, videography, coaching, makeup and hairstyling services, among others. Here’s how the business started, how much it cost them, how they streamlined the operations and pivoted when faced with financial setbacks during the crisis to bring down operational expenses by up to 60 per cent and sustain the current low-cost backdrop.
Dubai: Amid the pandemic, several small and micro enterprises run by solopreneurs have been cash strapped. Dubai-based entrepreneur Armin Jamula too faced such a predicament. Here’s how she rode out the setback and survived by restructuring the business.
Back in 2017, Jamula (the major contributor) and her two business partners put together Dh367,000 ($100,000) from personal savings to start a women-focused entrepreneurship business known as ‘ItsHerWay’. Over the years since, they managed to branch out their core business into product and service streams through ‘ItsHerStore’ and ‘ItsHerSkill’.
However, as pandemic-induced cash tightening hurt most businesses in the region, Jamula looked for ways to adapt and keep the business running. The first point of transformation was to integrate both platforms, reducing the cost of managing two separate websites.
In addition, UAE-based government agencies such as Khalifa Fund and Dubai SME’s Business Incubation Centre also support start-ups and SMEs. It is advisable to seek funding from institutional investors only at a later stage.
How the platform reduced operating costs (OPEX)
“In the first quarter of 2020, our operating expenses (day-to-day expenses a company incurs, otherwise known as OPEX) were as high as Dh11,000-15,000 per month, excluding rent and salaries. It was financially challenging as revenues ran dry, almost zero for a few months in 2020,” Jamula explained.
“Integrating both the platforms towards the fourth quarter of 2020 reduced our OPEX by one-third. While there has been a churn (attrition) in vendors caused by pandemic related uncertainties, conscious efforts to reduce our OPEX has now afforded us a longer runway as a start-up.”
“These (conscious efforts) included negotiating a 30 per cent discount on license renewal cost of Dh36,700 annually ($10,000 per year) with flexible payment terms. Adopting a work from home policy helped us to significantly save on rent (which was almost Dh12,000 per month pre-pandemic). Now we use subscription-based office spaces across the UAE where our monthly cost does not exceed Dh3,600.
In addition, Jamula decided to shift to a SAAS-based model (Software-as-a-Service, where the software is licensed on a subscription basis) as the structure of the platform, integrating digital automation for back-office functions, customer relationship management and order fulfilment requirements. This helped her to save on manpower cost and ultimately reduced OPEX by almost 50-60 per cent.
How the platform managed cash flow
Post-pandemic, the platform charges its vendors Dh725 (including VAT) as one-time activation fee and 10 per cent commission per assignment. By doing so the platform has maintained its cash flow while also generating earnings for women entrepreneurs and diversifying their income streams in some cases. In fact, throughout last year the platform selectively waived off the activation fee if a woman entrepreneur met certain criteria.
“Having said that, membership is still our primary source of earning. While significant OPEX reduction over the past 18 months has helped us to sail through, I have had to inject personal funds into the business. There was also a point where I could not even pay salaries on time,” Jamula added.
While Jamula did not have to take a loan to cover costs of running the business, as advanced talks with an investor fell through towards the end of 2020, she had to pool in personal funds worth Dh60,000-70,000 to compensate.
Key takeaways: Here are some proven tips for start-ups to cost-effectively manage higher operating expenses amid crisis-like situations
Following are some proven tips from Jamula that start-ups and solopreneurs can use to manage their operating expenses if his or her business is faced with any crisis-like situation either now or in the future.
Business Cost-Cutting Tip #1: Find a mentor instead of a paid consultant to help guide your business
When an entrepreneur is starting out, it is advisable to find a mentor preferably in the same space who will guide them through every step. For instance, it is possible for an individual or an entity to license their business in the UAE for approximately Dh7,000-10,000 annually, if planned carefully. A mentor would be able to explain these processes keeping the entrepreneur’s best interest in mind over a consultant or a service provider who will charge a fee.
Business Cost-Cutting Tip #2: Opt for a flexi office or desk to save up on high costs of renting a permanent office space
The pandemic has shown that it is possible to work flexibly from home or anywhere else without having to rent a permanent office space. In fact, for start-ups and solopreneurs this is a great way to save on rent as flexi office/desk set up costs approximately Dh500 per month per person.
Business Cost-Cutting Tip #3: Review and revisit recurring costs such as subscriptions, alongside expenses for marketing and advertising your business
The key is to plan even the seemingly minor expenses, which can include subscriptions, social media marketing and advertising and revisit them every couple of months. These expenses can add up to even Dh3,500 per month. So, evaluation is a good way to keep such expenses under check.