Keep it simple!

We use big words in business but the bottom-line remains that a business exists to make money. A plane is a plane. We have single engine planes that fly and we also have the Airbus A380 aircraft. They more or less have the same functions but only differ in terms of capacity, efficiency and impact.

I know small “unstructured” businesses that make more money than large businesses. In any case, the focus of any business is not so much about the sales volumes made annually. There are businesses that generate turnover worth hundreds of millions of dollars every year but the net profit remaining negative. We also have businesses that generate turnover of far less value annually and still declare a reasonable net profit. These are also in business and only vary in the degree of impact.

The secret of enterprise is to keep it simple. In fact, the secret of success in life is to keep it simple. Winners always keep their processes simple but meticulously and smartly arranged. Those that sing and get Grammy Awards keep it simple. Football players that earn recognition follow systems while keeping the tactics simple. Their methods are easy to understand not only for those who are involved in the execution of the function but for those that judge.

The more complicated and sophisticated the business, the more difficult it becomes for its own employees to be efficient and productive. In certain cases, employees spend as much time learning new processes churned out every year as they spend on actual work.

Simplicity in business requires the entrepreneur to keep focused on the business model. The first things you do when you get into business are to work out and determine your business model. It is about deciding the kind of business you want to be involved in and how you will manage it. Whatever business you do, from selling chicken to running a huge manufacturing company, have a business model. You should ask yourself questions such as, “how is my company going to create value?” Business is about creating value. Even if you are in the trading business, you are creating value by offering transport, packaging, storage and education for the final client.

One businessman asked me, “Mr. Kanyama, I have an opportunity to deliver foodstuffs to government institutions. I came to ask you the best model. Should I acquire machinery to process the food before I deliver, trade or I become an agent to a food manufacturer?”

All models would create value for him but with various degrees, capacities and risks. The manufacturing model would deliver value but very risky business in that he would commit capital, especially machinery, and then fail to sell as anticipated. The trading model was good in that he would create value by sourcing supplies using his money and transport to deliver at good margins. But he needed a strong overdraft facility with a bank to constantly deliver because government departments do not pay on time. The agency model meant selling on behalf of the manufacturer who assumed the risk of sales but margins for the businessman would be on commission, therefore very small.

In other words, a business model is about how one creates, delivers and captures value while at the same time avoiding distractive structures and processes. It does not matter how small your business is. What matters is to have a simple and clear model that describes your purpose, offering strategies, infrastructure, organizational structures, trading practices and operational processes and policies.

This sentence makes business appear a complicated undertaking. However, taken simply, every business should have a simple purpose. Capital Fisheries run by Mr. Damien Roberts (though now understood to have relocated to South Africa), for instance, exists to sell fish. This fish must always be fresh and sold in the most hygienic manner. The strategy includes sourcing fish from the most efficient global sources such as Alaska and distributed mainly on wholesale basis.
The infrastructure is about having the right competences and capabilities that are trained and skilled in the fish business. The organizational structure is such that there are lines of authority in the company. The managing director, accountants and other operational staff should each be answerable to someone. The trading practices are about having effective channels of distributing fish, mainly through supermarkets. Finally, the company has operational processes and policies that help their suppliers, transporters, employees and distribution channels understand how the company handles money, products and people.

These are basics for a sound business. The business is kept simple or focused on its mandate but at the same time standing on firm simple structures. As the years unfold, the business will become highly reputable in what it is good at.

         

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