Aliko Dangote: A Small, Steady Start
Welcome to our second lesson about the world’s billionaires and their lessons on success.
We began our tour of some less-heard-of billionaires yesterday with Isabel dos Santos and her income-generating strategy. Today, we will stay on the west coast of Africa, but move a bit north to the country of Nigeria to learn about our next billionaire.
Aliko Dangote: The Power of a Small, Steady Start
In 2018, Aliko Dangote was declared Africa’s richest man, with a wealth of $14.1 billion. Today his wealth is $8.3 billion, and he’s still Africa’s richest man.
Both numbers though are a far cry from what he started with:
A mere $3,000, which he borrowed from his uncle in 1977.
With this small amount of money, he paid to import rice from Thailand and sugar from Brazil, then sold them in his home village in Nigeria. He managed to pay the loan back in 3 months.
Aliko’s direct, small start kept him thinking about exactly how his purchases translated to the product he sold. Rather than buying from middlemen, he bought directly from producers, allowing him to profit fully on the markup.
As his profits grew, he took his strategy to a higher level: instead of buying imports, he built a plant where he produced his own goods, such as pasta, salt, flour, and sugar. He thus cut out even more middlemen, such as customs officers and foreign producers.
Fortune favored him in that, 20 years into growing his commodities business, he was awarded a state-owned cement company. Good luck aside, Aliko catapulted himself to success by applying the same business model he had learned from his small startup endeavor: he used the company’s overhead, and his own personal money, to build cement plants. He thus cut out all middlemen in an operation whose annual revenues soared beyond $100,000,000, meaning his own annual profit was also in excess of $100,000,000.
And he didn’t stop there. With his grassroots approach, he used profits to expand his cement company, which was to prove a true powerhouse.
Now, his company, Dangote Cement, which he still owns 85% of, produces more than 40 million metric tonnes of cement per year and operates in ten African countries. It is the largest cement company on the continent.
Aliko’s model of success can be appreciated on yet a higher level:
Whereas most large business owners end up with 10% or less of their company after giving slices away to investors, Aliko invested his profits in his own company to keep it running. In total, he has invested $6.5 billion of his net wealth in the company. Even in 2020, his spending strategy remains the same, with plans to spend $60,000,000 on a plant in nearby Togo.
Because of how he has approached his business, even under an extreme market contraction such as that swept over the second quarter of 2020 due to Covid-19 shutdowns, Aliko’s business has, quite literally, proven to be a cement house that is shaken, but not blown down.
Aliko’s Billionaire Lesson
The lesson we can learn from Aliko Dangote is best summarized in words he shared in an Al Jazeera interview:
“We do not keep money in the bank. We fully invest whatever we have and keep on investing.”
This advice applies to anyone, not just a small business startup. As we learned from Isabel dos Santos in the last lesson, a large sum of money can become a money generator. But Aliko’s lesson shows that a smaller sum can be just as effective.
If you receive $3,000 unexpectedly before you go out and buy a new TV, consider that with that same amount of money, and his wise investment strategy, Aliko Dangote was able to achieve 26,000% growth over some 40 years.
You can apply this lesson with a chunk of your annual savings. Instead of paying for stocks or paying an investment broker, invest some time and energy in understanding how a new business works, and see if you can put your money to work. Many small startups begin with partnerships between entrepreneurs who understand their market and an investor who trusts them. If you come to the table with the same mindset as Aliko Dangote, then you can be sure to have a say on how to shrink costs, and thus make your money grow and grow.
And if you’re a small business owner already, you’ve got an advantage, because you understand where your costs come from. Adopt Aliko’s wisdom and always ask, how can you reduce costs?
If you own a publishing company, for example, use profits to make your own ink and make your own paper. Cut out the middleman more and more, and that middle will be all yours to grow and grow, which means you can offer more jobs, and better pay for those jobs.
Stay tuned for our next billionaire, which will take us to the far east, to China!
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