The perils of a small business (1st part of so many to come)

I wrote about starting your own business, and i always try to walk the talk as much as i can, so i like to inform you that i did start my own business, and I like to share you my initial experience of having a business.

I fully expected that a new business would be a grueling matter, yet it is only when the shit really hit the fan that you realize that it is indeed shit you’re tasting.

What was my business model?

Very simple, we (me and a couple of friend from an ex-employer) opened a stall at a employee cafetaria in the building of this ex-employer.

We got a captive market (the employee of the building), our capex is low (each of us invested US$150), we thought that our fixed cost is relatively low (our rent is a percentage of our revenue), and 2 of the partner worked in that building

Why do we want to do this?

At the beginning, each of the partner declare their intention to do this. Me (chance to learn how it feels to start a business at low cost of entry and maybe even to get some money), girl partner (wanna make money), boy partner (wanna make money)

But the real reason was revealed later on after the business is run

me (wanna make money and how to duplicate this business in other buildings), girl partner (wanna use the male partner to work on the business while she can also enjoy the profit while doing nothing, citing her gender as an excuse for laziness), boy partner (wanna use the business as testing ground to open a new channel for his mom’s catering business)

My strategy

My strategy was simple, provide higher value products than the competitor (more meat for the same price or same meat for lower price).

I understand that the three of us has minimal ability in cooking great food, so we target office buildings since the market is more concerned with speed and price rather than quality (we’ll be butchered if we started in a shopping center)

And being a new player also forces us to drive sales (and thus cover our fixed cost). The easiest way to do this is by doing the above strategy. Yeah, our margin would hurt, but at least we would still have a margin.

A price war threat exist, but minimal, since i plan to release the goods at similar price to competitors. And existing competitor would find it difficult to lower their price (since their existing price is already well known for some time to the market).

Key assumptions of a successful business model for this specific endeavor

Sales achieve a certain level (35 portions are sold each day)

Each portion contains specified amount of ingredients (to control COGS and maintain value for customer)

Strict cost control, all cost are to be understood, budgeted, and monitored. Due to the scale of the business, this is quite feasible

What happened?

We had a terrible first week, to be expected. A pretty good second week. In week 3 the owner of the canteen opened a buffet right in front of the entrance door, thus cutting all existing tenants in terms of speed and price (the customer can buy item per item, this small portion of vegetable, this one piece of boiled egg, etc, while tenant are obligated to sell package of food). Our sales was slaugtered. In week 4, we decide to close

Why do i decide to close the business

In general, it’s because i decide that i have enough in doing business with these guys, and it’s time to close this one, stem the bleeding, and spare my capital for another business experiment.

Key learning

1. If the partner needs to be active in the business, then have a partner than is willing to fucking work. During our 2-3 month preparation, the girl partner was so excited about having her own business, to have money from this business bla bla bla. But right after we start doing the first step to implement to do this business, i saw a glimpse of her super laziness.

We were shopping for capital goods for our business and we are doing this in an air conditioned mall in Jakarta (a very hot and humid city). We need to move to a traditional market to shop for another type of goods (which is available at much better prices in the traditional market). And for the good last part of this purchasing process, that girl complains about how tired she is, she is sweating, the air is hot, why do we need to travel to another place, bla bla bla. I was like, “what the fuck? we are not even starting yet, and this girl already complains this much”.

So we get to the traditional market, that place is inconvenient, we were buying a stove, a gas tank and plenty of other stuff. I was carrying the stove and the gas tank, and i asked her to carry the other stuff, and what did she say? she use the gender card “Oh, you know what, you’re a man, and i’m a girl, so, what do i need to lift that stuff? it’s heavy” and there i was, carrying a double stove with both my hands, and having a gas tank dangling from 4 numbed fingers on my right hand, in the middle of Jakarta hot humid air and this “i wanna have lots of money” stupid fucker wanna use the gender card as if i’m her boyfriend or something.

Her laziness and excuses only gets worst.

We asked her to visit the boy partner house to do a test cook (the boy partner has extensive kitchen, the girl partner kitchen is barely used, she and her mom never cook), she complains that “oh i drive so far, and what did you guys do?”…and i sit there wondering “what about the time i went to your far faraway house to do a test cook? Did you complain”

We asked her to visit the cafeteria during lunch and afterwork (she work in that building, visiting the cateria takes 10 minutes top), she spread rumors that we forced her to visit the cafetaria seven times a day

We asked her to promote the business to her friends, she refused, she said “what would they say if they know that i need to open a food stall to get extra money?”

What did i do for this business? i develop the business, work with tenants, then handle finance and marketing

The boy partner? he manage all process from buying the ingredients to making sure the waste food gets thrown out properly

The girl partner? supposedly sales, but what can you expect from sales manager who’s embarrassed by the fact that she’s in the sales dept.

2. Have a partner that is honest with money, immediately dump any partner who shows the slightest symptom of not being honest with cash.

The girl partner shows signs of dishonesty with money even before we started shopping for stuff. It started to show when i was doing the first test cook in her house. I bought all the ingredients, with my money, we cook it in her house, i have a bowl of the resulting food, i left a whole pot of the food in her house, and she didn’t even ask “how much does this cost? do you wanna share?”…this is a sign ladies and gentlemen, a sign. At the time i just shut up, i don’t wanna sound to stingy, i just thought, “hm…if i’m in her position, i would’ve at least, at least for courtesy sake, ask”

The three of us we went shopping a couple of times, several times we went to buy food and drinks for ourselves, and each time the money didn’t come from her pocket, she didn’t bother to ask, “hey, what’s my share?”..more signs…after a couple of this, i start to think “hey, are we your dad or boyfriend or something”

I should have kick her out before we start the business. The signs are quite clear in indicating that this girl cannot be trusted with money, instead we let her join our business.

We even let her be the treasurer for our business. That’s our mistake

Here problems becomes prominent.

Each of us need to provide US$150 in cash as capital advance. Since she is the treasurer, the two male partner provide her with cash, and we trust her to provide a similar amount in cash into the cash pool…how foolish we are.

I handle the books, and she hold the cash, i thought this is a good way to ensure that i don’t embezzle the money, since the cash is in someone else’s hand.

2 weeks into the business, she claims that we are running out of cash, “i thought, that can’t be right, my books shows that we still have cash even if we paid all obligations to the next month”

I ask her to submit the rest of the cash to me, the male partner agree, she then submit the amount she claims to be true in her own calculation.

The books and the cash mismatched, i track the flow of cash, this indicates that the girl partner has not submitted her full share of capital.

I ask the boy and girl partner, “is there any expense that you have paid, that i am not aware of?”, i was playing it nice, giving some wiggle room if she want to lie and say “oh yes, i forgot about this”. I already decide to throw her out at the time, i was just want to let her safe some face.

Her reply? “no, all listed expense is there”…i feel insulted, insulted, i had all the receipts, i know how to count and calculate, and this girl lie to my face as if i cannot do simple calculation.

I showed her the flow of cash, it clearly indicates she fell short on her obligation. Her response? “um…i’m sure i have fulfilled my share” she dodge this for 30 minutes more, moving back and forth in the spreadsheet, trying to find a gap to which she can explain the mismatched fund”

I stopped pressing her, doing so would only jeopardize whatever facade of good relationship we have, she is obviously intent on lying, even when the numbers are written black and white in front of her eyes.

I was and still impressed by her stupidity…i mean..you can embezzle cash when you hold the book, since you control the audit trail. She, she try to embezzle cash when she doesn’t hold the book. How do you explain that? Wouldn’t the book keeper knows, knows, how much cash is supposed to be available? It’s like, finding someone so stupid he/she actually believe that everyone else is a stupid as they are

3. Ensure that the original strategy is implemented, otherwise you don’t know whether failure is caused by the wrong strategy or bad implementation

Our original strategy is to sell product with equal quality at lower price. No, it’s no sophisticated, but i think it will work, especially for us since we are newcomers in the field.

What happen is, we are selling product with equal quality at Higher price, therein lies a reason for doom. The male partner decide to cut the amount of ingredients being used, the female partner decide to increase the price, I decide to maintain both the amount of ingredients and the price, 2 to 1, I lost.

And after 2nd week, our sales is so below expectation, i’m having a difficult time selling the notion that we need to go back to our original strategy.

4. Even when your partner is honest, make sure other parties involve with them are honest.

I mentioned about the boy partner’s mom having a catering business right?

Now, the boy is honest, but the mom is not, and we ran our kitchen in his house.

So each time I ask the bill for ingredients, I always gets prices that are 15-20% higher than the market price. I was confused, didn’t she know that i just need to ask my mom about these prices?

It amazes me how evil intention makes someone lose his or her logic.

The fact that each time I went to the boy’s house for test cook, his mom spoke about Christian values and virtues. Puhlesss, this is another bullshit Christian who talk but not walk, at least, at least, don’t speak about Christianity if you live your life the other way around.

5. Watch your suppliers, they can easily move up the value chain and eat your business

Our stall is located in a cafetaria owned by someone else, and if there’s a mistake on my part, it’s that i didn’t enforce a “non-competing” clausul in our contract, or with this specific cafetaria a “no-killing-your-own-renters” clausul.

on the 2nd week, the owner come to me and said that he’s thinking to made some change to speed up the payment process.

on the 3rd week, i discover that he did made a change, which was good, for him.

He installed a buffet table right in front of the door to the cafeteria. So instead of buying food from us, the customer are now presented with a buffet right up, with food price that are totally customized with the amount of food they getting.

We’re we hit by location, by convenience, by pricing mechanism, and that, sealed the deal for me.

I had no intention of continuing any business with the female partner and now our booth is undercut by the cafeteria owner. I decide it’s time to start fresh at another place.


One Response

  1. […] See the original post: The perils of a small business (1st part of so many to come) […]

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