“If you win, we all win” this is what a dear friend and colleague recently said to me, he said that I was one of them and there was no way that they’d let me go under without trying to help me.
These words made a remarkable impression on me, and I started thinking about how that spirit of collaboration could really be what is needed for small businesses to grow.
I thought how many business owners have outstanding ideas, all they want to do is honour that idea and nobly go about growing that one idea to its fullest potential. Very few get there because they need cash flows to ensure that the business lives. How many times do you hear that cash flow is the life blood of the business?
I began understanding that in order to do this, there needs to be cooperation with other businesses, this keeps the cash trickling in at the most basic level.
A supply chain is a group of businesses which are all involved in the moving of a product from one state to the other, either from raw material state to finished product state etc.
What makes businesses efficient is the efficiency of their supply chains. From the producer of its raw materials right up to the person who delivers their goods to the end-user, efficiency in ensuring costs are contained, quality is upheld and time is minimised are the 3 main things they all are equally responsible for.
Very often this level of efficiency is what’s missing from small businesses and likely not to be realised until they reach their maturity. However I believe start-ups are where this kind of social arbitrage is most needed and likely to help each business in the chain succeed.
Let’s look at a bakery for example.
The baker’s processes are geared toward ensuring that customer orders are satisfied at 100% quality and zero defects. The bakery owner would wake early each morning to knead the dough for each delicacy, set the oven temperatures and ensure that the truck is loaded on time so it arrives on time at the client site.
The bakery owner is pleased with himself and finds that defects are 40% and quality is between 60% and 80%. He’s had his customers for years and is very happy with his existing processes and supply chain.
However, let’s imagine we reduced the waste by using baking mix instead, the accuracy of the mix ensures each delicacy is made to specification, with next to zero room for errors (with translate to waste).
If he procured the mix from the manufacturer, he can get it at a better rate and because he now has historic data of his order quantities, he further able to order just what he will use.
Then we look at the number of staff, this can also be reduced with the use of baking kits as let’s assume before he had specialists who headed each type of delicacy, which would make his overheads go down further.
Once wastage is reduced, the process becomes more efficient, let’s say efficiency increases to 80%. To further make his business efficient, we can look at how he could piggy-back his deliveries with those of nearby bakeries so he doesn’t have to bear all the costs of transportation. Remember that hiring a truck would cost you the forward and return legs even though your return leg was with an empty truck.
Ideally, he could negotiate with other bakeries on pooling resources and ensuring that they target bigger baking contracts and get lower prices from their suppliers. Jointly they can increase their revenue as well as work at higher efficiency rates.
This is just one aspect of increasing efficiencies for small businesses, for more information on how and what to do, contact RareRabbit at rarerabbit@mvemve.com.
About RareRabbit:
RareRabbit is a consulting company that remodels small businesses to function optimally and productively.
