Posted by: Martin | December 4, 2011

Naysayers tentatively proven wrong

Still failing to find the catch

When starting out with the taxi project I thought the budgeted numbers looked too good to be true and wondered where the catch was.

Now I have three month of data and it looks like naysayers are (tentatively) proven wrong, as I’ve not encountered any show-stopping catch.  The only major surprise to the downside was custom costs at Abidjan port to bring in the car turning out to be more than twice the budgeted figure. Even with that, the projected internal rate of return for the taxi investment, with a conservative estimate of the taxi running for only two years, and having no residual value at the two year point, is still a fantastic 65%.

Having naysayers (or dream killers as Ismael Coulibaly calls them) can actually be pretty good for one’s motivation. It jolts you out of complacency, makes you take a careful look at the downside, and spurs you to put in extra effort to prove them wrong. For the chicken farming project I have so far only gotten positive response. I’m almost wishing someone comes along and says it’s never going to work / it can’t be done / they have never seen anyone make any money out of a chicken breeding /that I’m going to lose all the invested money.

How long will it last?

With the taxi I have actually had a surprise to the upside as well; the repair and service costs have been much lower than expected. The car bought originally for 450€ was in pretty bad shape, and it’s been patched up progressively during its first months of running in Abidjan without any significant impact on the profits.  The thing is, everybody in the taxi business are using Toyotas and especially Toyota Corollas, so spare parts can be found in abundance keeping costs low.  And as always in the Ivory Coast labour costs are low.

Given that the taxi is continuously serviced and repaired, I’m starting to hope/think that it can last more than two years. Beside avoiding accidents, I guess it’s up to the Toyota engine and well, here I trust that the Japanese know what they are doing.  If it lasts three years the internal rate of return jumps up to 90%, and for four years, it’s above 100%.

Ok, sometimes the Japanese don't know what they are doing


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