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Keep Your Business model Simple!By Chibamba Kanyama on 5 Aug 2018
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. We have enterprises that generate turnover of close to five billion Kwacha every year but the net profit remains negative. We also have businesses that generate turnover of K500,000 annually and declare a net profit of K20, 000. These are 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. There are businesses that are better off simple and small. Others are better off large but with clear and non-complicated processes that are difficult for the business itself to handle.
The first things you do when you get into business are to workout 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: 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 outside Lusaka. 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 (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 and deliver at good margin. 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. In the case of ZAMBEEF, it is about growing the product, process it and then sell it. Growing sugarcane would just make the business model complicated and unprofitable.
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 exists to sell fish. This fish must always be fresh and sold in the most hygienic manner. The strategy (according to my assessment) may be about sourcing fish from the most efficient global sources such as Alaska and distributed mainly on wholesale basis.
The infrastructure is about having the right competencies 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, on the other hand, are about having effective channels of distributing fish, mainly through supermarkets. Finally, the company may have 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. You may now resolve that you will seek to manage your business in a very simple but structured way. I know large companies that are currently shading off unnecessary fat that may have accumulated in the structural layers of the organization. It may cost you something to downsize but worth the effort. It is a shame collapsing under the weight of your own sophistication! The secret is to always keep your business simple.Related Items
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