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Should You Start A VTU Business? 5 Things To Consider

by Linda Onyinyechukwu

December 11, 2020 1

A VTU business (also known as Virtual Top Up) is a business where you act as a vendor and top up people airtime without them having to buy a recharge card. It involves a vendor or the business owner digitally crediting the phone directly. We are all familiar with the method of recharging our phones with a scratch card and USSD code. For example, MTN users recharge their phones using the code *555*XXXXXX*#. Running a VTU business means that you recharge for your customers through digital means. There are no hassles over card or USSD code. The customer will receive a direct alert telling him his phone has been recharged

Asides from airtime, payments of various kinds of subscription services also fall under VTU business. Examples of these include PHCN bills, along with DSTV, GoTV, and Startimes subscription packages. The VTU business scene in Nigeria has a booming capacity. For more context, consider that in Nigeria today, there are approximately 184 million active mobile lines as of December 2019. The average sim card user recharges about N2000 per month, and that is about N260 billion spent on airtime nationwide in a month.

On every complete VTU transaction to a client, you end up getting 5% – 10% of the amount sold as your interest. This means that if you sell 1000 naira top-up to 10 clients a day, you will make a profit of 500naira – 5000naira daily, 3,500naira weekly and 15,500 naira monthly. The truth is simple; we can’t go a day without touching our phones – making calls, texting, chatting or browsing. You can start a VTU business with as little as 5000 naira with the returns rolling in daily. Regardless of this, though, these are some of the factors you should consider before you commit:

1. Location

One of the most important things needed to start practically every business is a good location, especially a VTU business. For a small business such as this, it is better to have your own shop. The fixed physical location of your business should be conducive for the development of your business activity. People should know where you are when they need your service.

To be successful in the VTU business in Nigeria, one has to place one’s business location near a promising and lively area. Look for a reasonably-populated area that is easily accessible. Choose a location that will let you save money on electricity, water, taxes, and transportation. You can even look for a location that can get you the occasional subsidies from the government. Make sure the location fits well within your budget and offers scope for expansion. An ideal location would be one that complements your business in the best possible way.

2. Competition

The VTU business scene in Nigeria is inundated already, so before you commit, you need to factor in the closeness of your competitors. In the Nigerian VTU business scene, your proximity to your competitors can make or break your business. If there are too many competitors, you might have to fight for a few customers. But again, you don’t want to pitch your tent too far away from your target customers. 

You want to find the right balance. If you want to set up your business in a populous area, there are chances that the area already has similar businesses. If you sell to a niche market and many businesses are selling the same product, it may not be advisable to open shop near the competition. Healthy competition is great for every business, but if you can help it, pitch your business tent away from your competitors, target your customers and do your best to cater to them exclusively.

3. How much and when should you pay yourself

You need to consider when you should pay yourself and how much because in the VTU business, the lines between profit and business capital are more blurred than ever. There is always temptation to reinvest your earnings into your small business but to do that; you need to know when you can afford to pay yourself. 

The more money you invest in the business, the faster it will grow. If the business is profitable quickly, you will need to determine how much to reinvest and whether you or your partners should begin paying yourselves from the profits. If you do not pay yourself enough to cover your expenses, your personal finances might suffer greatly. Finding the right balance is crucial here, and you need to consider this thoroughly.

4. Estimate Your Costs In Full

Once you start to develop your VTU business idea, calculate how much it will cost. Estimating your start-up costs is one of the critical things to consider when starting a new business. You will have to assess the total cost that is required to set up and run your business successfully.

Also, you will have to take into account the inventory that you need to maintain, the credit that you can extend to your customers and the supplier’s credit that you can get. You need to factor in every business expense necessary to launch and operate. Think of the most educated number you possibly can. Then, take whatever you think that amount is and triple it because you are bound to experience unexpected costs of running a business around every corner. It’s better to be over-prepared than short on funds when bills start to roll in.

5. Your Publicity Plan

Many small business owners face the challenge of publicity or mastering the art of selling their services to the customers. In the already saturated VTU business, this can prove even more daunting because it is intimidating to share your business with the world, especially when you’re new. Here’s the thing though, if you’re worried what people will think about your VTU business, you need to get over it before you open shop. If you can’t convince consumers to buy from you and support your business, it will be difficult for you to make any money. 

Understand that you can’t afford to be shy here. Be ready to speak confidently about your business, even if it makes you uncomfortable. Devise a plan for advertising on social media and factor in a proper website shortly after you begin. As a new business owner, you will need to market and network constantly. From networking with clients to negotiating supplier payment terms, you must be able to communicate.

Conclusion

In recent years, the internet has grown tremendously into a bank stream of business opportunities. The more we advance as a society, the more relevant small businesses like the VTU will be. Starting up a VTU business in Nigeria is relatively easy, but if you fail to consider the factors listed above, you might find things tougher than expected. Understand that there is no such thing as being over-prepared when setting up a business. The more prepared you are, the quicker you can boost your financial strength.