How a Sou-Sou Helped Me Save Money So I Could Start a Business

A woman decorates cupcakes with icing.
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Editor’s note: This post was originally published in 2016.

Saving has always been a challenge for me. While I continuously applied the pay-yourself-first principle to my finances, I struggled to stick to my budget.

So when I wanted to start a cake-decorating business, I needed another way to cover my startup costs. I preferred not to take out a loan because of interest charges.

A co-worker suggested starting a sou-sou.

What’s that? you’re wondering. Well, read on.

What’s a Sou-Sou?

A sou-sou is a simple savings plan.

The West African tradition, which is also popular in the Caribbean, requires a group of people to contribute a fixed amount of money either weekly, bi-weekly or monthly to a group account, with one member responsible for collecting the cash.

The group holds a random draw to determine the order in which each person will receive their lump sum payment. However, once each person receives their cash, they still have to contribute until everyone gets paid.

A sou-sou could run for six months or up to a year — it all depends on how many people are in on it. Sou-sous continue until everyone receives a payout at least once.

How I Used a Sou-Sou to Start a Business

Curious about this unorthodox way to fund a new business? Here’s how I started a sou-sou to help me make enough money to get my cake-decorating business off the ground.

Determine How Much Cash You Need to Start Your Business

I created an inventory of supplies I’d need, then calculated the total cost of buying them. This helped me make sure I’d be able to get started once I received my payout.

Next, I looked for vendors and shopped around to find the best prices — then asked about a discount for buying in bulk. It never hurts to ask! This helped me save 20% of the original cost when I eventually bought everything.

Find Cash in Your Budget and Earn Extra Money

I needed to free up some money to go toward my sou-sou, so I decided to eliminate one bill from my monthly budget.

I compared my cable and internet bills to see which was costing me more, and then canceled my $50 per month cable service.

To earn extra cash, I sold cakes at community events at a reduced price. Consider how you could earn a few extra dollars a month to go toward your business.

Form a Group

Everyone in my department had previously been involved in a successful sou-sou, and since we were all working toward financial goals, it was easy for the team to get on board.

A total of 10 colleagues joined the sou-sou, but you can start one with any number of people. Ask co-workers, relatives and fellow church or gym members if they want in.

Choose a Cash Collector

We nominated my supervisor as cash collector and placed our money in a locked box in her office. Two people had to be present when money was deposited or paid out.

Since we all earned monthly salaries, we decided on a deadline for everyone to pay up.

My supervisor was also in the sou-sou. If the person collecting the cash isn’t in on it, they’re sometimes paid a percentage by each member. If my supervisor hadn’t been a member, she would’ve received 5% of our earnings for managing the sou-sou.

Decide on a Reasonable Contribution 

We considered our final objectives and unanimously decided on a realistic amount each person would pay.

With 10 members, we decided to each contribute $100 per month — meaning we’d each get a $1,000 payout.

A few members were unable to contribute the full amount, so they joined with another member to each contribute $50 per month. When their payout time came, each person received $500 — a 50% payout.

I decided to double my contributions and pay $200 a month, meaning I’d get two $1,000 payouts to help me fund my business.

Propose Accountability 

We suggested each person in the group be accountable to another member to make sure they spent their money toward their goals.

For example, I chose an accountability partner who would make sure I invested my $1,000 in my business and didn’t spend it on something else.

If I didn’t, I’d have to pay my partner 20% of my payout — a huge amount we chose to help motivate me to stick to my goal.

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How My Sou-Sou Worked Out

Our sou-sou began in January and I received my payout in May. Since I doubled my contributions, I received another payout in November, which I also put toward my business.

The group initiative was a huge part of my motivation, and everyone agreed that having the support of other members of the sou-sou was crucial to our success.

My choice to use a sou-sou rather than taking out a loan paid off. I didn’t owe the bank any money, and I saved $200 I would have paid in interest charges.

With the assistance of friends or family, saving money to start a business is possible. Making $100 or $200 contributions may not seem like much, but with time, it could be enough to get your business off the ground or help expand it without a loan.

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Kerry Mc Donald is a contributor to The Penny Hoarder