INTRODUCTION.
Many big family businesses in existence didn't just start big or just bloom from nowhere, there is a common trend in their growth. To start with, a proper system has to be in place, whether your business is big or small and what differs would be the components of that system. The primary reason for a business is to make money! We are going to look at ways in which a small backyard business can thrive. Our main objective on this blog is to assist that small backyard broiler chicken farmer but business tips offered in this article are universal in the growth of almost any small business.
That being said, let's move on to how you can make your business grow!
1. INVEST IN THE BUSINESS FIRST BEFORE YOU START REAPING OFF PROFITS.
Most people use small businesses as a means to attaining life goals e.g. boosting capital to build the family house, growing money to send children to varsity etc. The business has to be timed right to make it go through various cycles of profitability before we start taking some of the business proceeds to cover our life goals. There is a great risk that if we start taking money from the business during the start of the business, we may end up starving the business of the much-needed restocking capital and hence collapse it. We may end up not having that much needed continuous money supply to attain our life goals if we fail to manage the business in this way.
2. ESTABLISH A PROPER BUSINESS STRUCTURE / ORGANOGRAM.
Sounds pretty confusing right! Don't worry we are going to illustrate our point here using a simple example here.
Like in most families, a typical family business will mostly be run by the family members themselves at the start and additional non-family members get incorporated as the business grows. In our example, we use a typical family comprising of both parents and two children.
Dad is gainfully employed elsewhere. Dad will provide the much-needed capital to run the family business - we call him the "Investor". He will inject money into the business so that it grows and gets reimbursed his money with interest of course at the end of the investment period. Remember our earlier statement, that we form these family businesses so as to make the limited money we have to grow in order to meet some life goals. Therefore dad will now bring forward the accumulated money at the end of the investment period to cover those family goals. Please note, Dad is not entitled to a salary on the family business he will only get all his money back together with interest at the end of the investment period.
Mum is unemployed elsewhere save for the family business. Mum is in charge of the day to day running of the family business - we call mum the "Manager". Mum should be salaried as she is also a worker here (who said being employed only means being part of XYZ company). Please note the salary should be representative of the business earnings. For instance, the salary should be a fraction of the business profits - to avoid crippling the business. Most family businesses collapsed due to this, i.e excess expenditure over the business earnings (typically called the black man syndrome in the street language!).
Mum and Dad will periodically sit together to find ways to make the business grow or keep afloat. We collectively call them "Directors". From the description above, mum is an executive director since she is also responsible for running the family business on a day to day basis. Dad is a non-executive Director by virtue of him not being able to intervene in the day to day running of the business.
We introduce the children. John, the oldest child in the family, a varsity student. Mary, a high school teen girl. John and Mary should be taught critical life lessons as the family business is run. The most important lesson in this example is money just doesn't grow out of nowhere, you have to earn it. John and Mary would need to be incorporated in the family run business doing some chores outside their school time - (take note having your children do practical work at home is also part of schooling which is very helpful as they grow up). We will call John & Mary casual labourers. Their pocket money will be allocated based on the tasks they perform in the family run business - i.e they are on a payroll.
If you have domestic workers, incorporating them in the family run business is a good way of increasing their salaries at the same time their additional services outside their usual scope of work benefiting you! Hence there is no significant monetary loss here to you when you increase their salaries in this way - its a win win situation!
3. Have confidence in yourself.
The big question: If you don't believe in the vision you created yourself, who will? I was inspired by a friend the other day in his narration of how some serial entrepreneurs were selling their business plan to him so that he chips as the sole investor. These guys were just coming from a bad patch and had lost almost all they had but they remained with one crucial piece of their integrity - they still believed in their potential despite the bad omen that had befallen them. Despite the brilliance of their plan, my friend inquired of the fallback plan in order to safeguard his investment and there, the most confident answer came, ..."Failure is not an option we are in this to win, we have to win and we are going to find ways to win!". An unexpected answer isn't it? The long and short of the story is my friend invested his fortune in these guys, the friend even sold his car to boost his investment and today is enjoying the rewards of his decision.What would you also have done receiving such an answer from visionaries like these and oozing with confidence? This answer doesn't come from anyone, It comes from men & women of substance - those that have seen the highs and lows of business and remain resolute and steadfast in their visions. Confidence just doesn't come dear reader! Be willing to try, stand to those hard punches as you try. Don't throw the towel, go back to the drawing board, analyse your mistakes (yes mistakes, not failures! Failure doesn't exist to those devoted to business), rise from your previous mistakes with great zeal to win and victory is ultimately yours! You will see an invisible path as you remain resolute to your goals, which will only be seen by only a few like minded people. Be ready to defend your vision to those vision-less discouraging individuals but to save yourself energy, you must know when to ignore them. Take time to justify your vision to other focused individuals - there is a saying which loosely translated from my native language goes like "mountains pass each other mist" i.e only like minded people can encourage and advise each other.
4. Avoid debts on starting up.
As people, we go through various phases of reality and it is normal - sometimes we daydream, sometimes we fantasise, sometimes we make wishes, sometimes we see illusions and the list go on and on. As any individual starts a business, it is usually based on expectations and not driven by experience. A lot can happen when you are positioned this way as an inexperienced someone in business - you may lose all your investment, you may not reach your intended returns, you may fail to attract those intended customers. In short, anything can happen in business which makes you incur losses and hence make you fail to pay back the debt obtained on starting the business. Have you ever heard the term debt is good and debt is bad? Debt is good for well-established businesses, they actually have ratios they term debt equity ratios they calculate in order to maximise profits using "cheap money". However, on starting up, based on the many uncertainties we have pointed out, you may find yourself unable to pay off the debt. As you advance in business you will reach a point when your business is now mature for debt. As a guide, we advise you take the route outlined above where you get yourself an angel investor ( family member or close friend to loan you money for starting a business and it should be a small amount for that matter). If you can be disciplined enough to pay off that angel investor his or her investment with interest, then you have the potential to borrow elsewhere. We also recommend you to start small in business - a dollar is enough to start a multi-million dollar business - (sounds like I'm pulling your leg right? Buy yourself a pack of freezits for a dollar (20 per pack) sell them all and you already have an extra dollar after you have sold them for 10 Cents each). Return all money to the business and buy more packs with all proceeds and continue like that after the 8th purchase your dollar business is already worth $128!).
5. Business requires sacrifice.
You have to walk away from your comfort zone in order to prosper in business. Refrain yourself from those unnecessary luxuries now and make your money grow, and only thereafter can you indulge yourself with all those luxuries without any pain - you will comfortably maintain that lifestyle then.
This is basically the "money working for you concept" found in the rich people vocabulary. You have to invest the little money you have to make money work for you, not you toiling all the while for money, i.e working for money (quite a simple lesson which is complicated by the middle class and the poor in society - it means what it means don't try to complicate it please!)
6. Make bulk purchases where possible.
Goods purchased in bulk usually have a discounted price. Be careful though of tying your capital in stock i.e the cash tied in capital principle - broken down as those excess business goods you have which drained your entire capital and preventing you from moving forward in making those other much-needed business transactions. You can also "kill two birds with one stone" - buy in bulk those business inputs you need at discounted prices and sell some to fellow businesses who require smaller quantities at a profit of course! You would have avoided tying your capital in stock here as well as creating an additional revenue channel for yourself.
For the fellow small-scale chicken farmer, we give an example of a common product known as stress pack. A 100 gramme sachet costs about $2. During periods when your chicken are subjected to high stresses e.g in very hot weather, you may need about 5 of these sachets i.e 500 grammes per batch of 100 birds. It would be wiser to buy a 1 Kg container of this stress pack which costs about $14 bringing down the cost per 100 gramme portion to about $1.40 as compared to the $2 price for the individual sachet!
7. Proper record keeping.
In any business, there is a need to know all the channels which drained your money and those channels which brought you money. In our theme of making your business grow, you can only grow if you can fully account for these aforementioned money channels i.e all receipts and all expenditures. As an emphasis, you can only improve "if and only if" you know your current position! It is therefore important to have a good logging system for all critical business activities.
8. Draft a budget for each period of operation.
A budget is simply a statement of expenses and revenues generated by the business. In order to grow or to at least remain in business, you need to have a budget for each operating period. In my own terms, a budget is a road-map for a business. The operating period depends on you, whether you want it to be weekly, monthly, quarterly etc. We recommend an operating period of a month.
Why budgeting?
- A budget shows you all the expenses you will incur in advance ( Don't forget to put a margin for overheads, those expenses you can't directly predict and budget for before they occur, for example, lunch bought whilst waiting for a delayed delivery of your business wares). In essence, a budget makes it easier to plan for your business.
9. Diversify
As your business proceeds increase, set aside a portion for diversifying - i.e start investing in another business line. e.g after making significant money selling freezits , start selling muffins for instance (Just thinking that many of us are busy yelling we are unemployed, we need jobs but do you know the muffins you bake in your house may be sold to someone else. The main theme here is that there is an option of being self-employed!). Many businesses which used to perform well just went through a rough phase and never recovered. Some businesses are seasonal as well. This encourages us "not to put all our eggs in one basket". A portfolio of different businesses minimizes your business risks.
10. Start with those perceived silly business ideas to learn crucial business lessons.
Don't underestimate business options i.e don't categorise businesses as some for the learned or categorise for whatever reason. Some learned person may do everyone else's business line but what counts is are you using your learnedness to make it grow! or does it show those are advanced business principles being used! (CHECKOUT THE BONUS POINT BELOW). Small businesses have the advantage of helping you learn the real business concepts at a low risk. They groom you to be able to handle those bigger, higher capital businesses. Just starting big has the greatest risk of making a big fall as well!
11. Be a reader for your continued self-development.
There is a saying that "Leaders are readers". You have to walk away from the limited knowledge group (where all lies are fabricated) to the advanced knowledge group (where real progress is made) for you to yield success. Get me right - I'm not saying get a PHD all any advanced school certificate you can get. All I'm saying is find any article you can to make yourself more knowledgeable in your line of business or just to be wiser in business. Reading (or listening or viewing) the news every day is a good initiative as a business person. More emphasis has to be put towards the business segment of the news for you to be more wiser in business. The general social issues on the news may also hint you towards a business idea!
12. Bonus point
You may learn as much as you can possibly do, up to PHD level, for instance, trying to get that dream job or for whatever reason but for as long as you are not using that knowledge to enrich yourself, your education hasn't started working for you but working for others instead. Have that side business to work for you and watch it grow using all those sophisticated concepts you learnt - this is life's practical lesson now. We know you have all those tonnes of theory already, just put them to good use now!
Remember the garbage in garbage out rule! these tools we have outlined to you entirely depend on your practice i.e your dedication to proper record keeping etc.
Adios, till we meet again in the next article!
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