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Sfofr module 3 online

  1. Module 3. Business Growth & Expanding Operations
  2. 2 1. Sustainability before growth, understanding the cost base of the business 1. Authentic purpose Every company needs to pin down "why we do what we do,” in other words, they must establish a ‘mission.’ In order to achieve sustainable success, companies must repeatedly re- examine their sense of purpose and make sure the organisation serves it well. An authentic and inspiring purpose allows for: • A constant, consistent sense of focus • A strong emotional engagement both within the company and with its customers • Continuous, pragmatic innovation
  3. 3 Unique Selling Proposition • Sales and marketing experts often talk about "unique selling propositions," or "USP," which in simple terms means ‘what sets your business apart from the others’ • When a business has a clear vision, it's easier to create great products. • Ray Kroc, founder of McDonalds once said ‘we provide food that customers love, day after day after day. People just want more of it’. That was the businesses’ authentic purpose.
  4. 4 2. A Powerful Brand The surest road to product failure is to try to be all things to all people. • To create a scalable business, you have to understand how crucial it is to build brand equity and emotional connections with customers. It's those attachments that link customers to your products and will keep them returning to you. Building a brand is about developing and sustaining those relationships over time.
  5. 5 Here are some basic rules to connect, shape, influence, and lead with your products and brands: 1. Choose your target audience. As aforementioned, the surest road to product failure is to try to be all things to all people. 2. Connect with the public. Make your audience feel an emotional attachment to your brand that's grounded in confidence in your products. Connecting, shaping, influencing and leading
  6. 6 3. Inspire your customers. A simple, inspirational message is far more influential than one that tries to highlight too many product features. 4. No marketing plan can rescue a brand identity which isn't fully formed. But if you don’t have that kind of budget, then create some great interesting social media content using a funny or heart- warming back story to create awareness among target customers.
  7. 7 Partnership and Collaboration • Doing everything for your self can be tempting in the beginning when funds are scarce and ambition is at its peak. • Taking on more than you can handle, especially in areas where you lack experience, can be damaging. • In the era of the global freelance economy, it’s not difficult to find talented expertise, but you have to know where to find it.
  8. 8 • There are now dozens of websites and online marketplaces which provide resources from design, development, sales, legal services, and banking. • The best part is that you can try small projects at low investments. • The trick is knowing exactly what you want and putting it into an understandable format for the contractor to be able to understand what you need from them.
  9. 9 Customer retention • Getting new customers can cost you many times more than retaining current ones. • In fact, a 2% increase in returning customers can have the same effect as decreasing a company’s costs by 10%. • The average business in the U.K. loses around 50% of its customer base every five years. • So you see why it’s so important to have the combination of great food and amazing customer service, as one without the other is rarely sustainable.
  10. 10 Networks • A business network is a collective of similar businesses and individuals who talk to each other and pass on business intelligence. • A network can develop around a product. In the U.K., the issue of the safety of medium or undercooked burgers came to the forefront of the Food Standards Agency which is the National Regulator in the UK. • Networks can also be created by your customers around the type of product that you are producing. Such a network could exist around such things as artisan beers, or great pizza, if this occurs it’s vital that you become an active participant. Alternatively networks can be created by you as the ‘expert’ in your field or product offering.
  11. 11 Return sales Creating a unique product and brand isn’t enough. • It takes repeatable sales processes to create a scalable business. • It’s one thing to set up a one man band business and be making enough money to survive, it’s another thing to design and implement processes which can be successfully deployed again and again on an even greater scale.
  12. 12 Case study: Creating a scalable business • Consider the Ray Kroc (McDonalds) success story as a class exercise and write up individual ways that they could create a repeatable business model. us/about-us/our-history.html
  13. 13 Scalable sales model You've created a scalable sales model when: • New staff can be added and quickly trained to work at the same output rate as the owner • You have a sales can be consistently forecast. • Customers get the right products in the right price at the right time. • You have created a repeatable model
  14. 14 Flexible Adaptable Leadership • To continue growing, business owners need to get people around them who are experts in their field. • For instance if you need to acquire high street locations you need a good property agent whom you can trust to get you the best deal in a location which appeals to your demographic.
  15. 15 • Since a company's needs change at each stage, your team need to evolve at the same pace. That requires introspection, self-awareness, and a keen sense of strategy—both in the short and long term. • The most sustainable way to create value is to continually invest in your teams capabilities.
  16. 16 Challenges to growth 1. Spreading yourself too thinly: • Most of us spend too much time multi-tasking, working in the business but not on the business. If you want to get big then you need to start thinking small. • You achieve success not by working more but working less. Simply put, trying to do too much doesn’t work. • When you go as small as possible, you’ll be focusing on one thing. Your ultimate dream is possible and you must never lose sight of that -- if you prioritise everything and put your time and focus on the most important thing.
  17. 17 • Colonel Harland David Sanders[a] (September 9, 1890 – December 16, 1980) was an American businessman, best known for founding fast food chicken restaurant chain Kentucky Fried Chicken (now known as KFC) and later acting as the company's brand ambassador and symbol. His name and image are still symbols of the company.
  18. 18 Focus • Many small businesses go off track because the owner loses track of the big picture and gets bogged down in the detail and ends up trying to multitask their way to their goals. • Therefore, if anything goes on that list it must be qualified by asking the question: “What’s the one thing I can do that will either alleviate the most should dos or make everything else easier or unnecessary?”
  19. 19 How to remain focused You need to ask yourself a lot of questions and dig deep for the answers to identify the one true thing. • The key to “living by priority and for productivity” is by doing something they call “time blocking.” For the best results, block off your time in the morning -- for four straight hours. • In the end, the people who go on to produce extraordinary results, work fewer hours. Time blocking makes it possible. • The reality is that everyone needs a ‘to do’ list but it should only contain must dos and not should dos.
  20. 20 Working on the business rather than working in it Managing the workforce, impact on personal / family life • Most small business owners and managers spend virtually all of their time working in their business. • This makes sense in the beginning because that is the essence of the business and there are limited resources available, but the problems arise when they want the business to grow, or when they want to be able to take some time off.
  21. 21 • As all available time is spent working in the business, they often neglect essential activities such as strategic planning, marketing, identifying new opportunities and dealing with the financial aspects of the business, whereas the key is to find the right balance.
  22. 22 Ensuring quality Another reason why business owners find themselves working within the business is that they feel they do it best! However, this problem can be overcome in a number of ways: 1) Recruiting – You have to hire the right people for the right jobs. You need committed people who are wage earners and not entrepreneurs. 2) Training –Spend the time and effort properly training your team and the benefits will come back to you. That isn’t to say that you should reveal all of your trade secrets - ‘keep something back’ from staff, thereby minimizing the possibility of their concepts being copied. 3) Standard Setting – Ensure that you have clear standards of quality and service and that you communicate them to your team.
  23. 23 4) Rewards and recognition – If you are not rewarding your team equitably or recognising them for a job well done, then it is unlikely that they will be striving to give you their best possible performance. “But isn’t it just quicker and easier if I do it myself?” I hear you ask! Delegation is probably the hardest thing to learn for a business trying to grow. The solution here is simple – you need to spend time training your staff so that you feel confident that you can assign tasks and responsibilities.
  24. 24 ‘But I have to be here just incase’ This usually means “just in case I have to make a decision”. 1. The solution here is to have clear guidelines as to what decisions you are comfortable with the team making on your behalf and what decisions they cannot make. 2. Have guidelines agreed in writing and be consistent. If you find that someone makes a different decision to the one you would have made, deal with it calmly and professionally.
  25. 25 “Whenever I am away, there is always an issue!” • The solution to this problem is to monitor and identify the issues and resolve them long term rather than on a day- to-day basis while you are working in the business.
  26. 26 “The staff think I’m ‘bunking off’ when I’m not here.” • Working on the business does not mean that you have to work on the premises, although in some instances it might have to be the case due to space or layout. You just need to let everyone know what you are doing and why.
  27. 27 Work and life balance • There is no right or wrong when it comes to Work Like balance as it depends on your particular business and the vision for it; it’s most certainly not ‘one size fits all.’ For example, a business owner who wants to expand so they have multiple locations. • This type of situation can have a massive impact on personal or family life, including health and well-being.
  28. 28 What to do? • Unfortunately there is no stock answer for this other than common sense - there are times when a growing business demands a lot, if not all of our time, but that should not become the norm. • A week or two of intense effort must be balanced off with some ’me’ or ‘family time’ otherwise you risk losing things that in the long run are more important than business!
  29. 29 Brand development The Brand is one of an organisation’s most valuable assets. With brands like Apple valued at $98.3 billion, Google at $93.3 billion, and Coca Cola at $79.2 billion, it’s understandable why building and protecting a brand is a high priority not just for the big players but for a small business which is looking to expand.
  30. 30 Why is a brand so important? • A brand is far more than its outward representation - it is a set of recognisable factors which bring a customer back time after time. • A strong brand can impact your business in many ways. • It can help you charge more than your competitors • Attract new customers
  31. 31 • Protect a business during economic downturns • They create reservoirs of goodwill that can help in times of crises • Make you appear bigger than you really are • Watch this short clip on why your brand is more important than your product: •
  32. 32 Who do you trust? • Consumers tend to favour and develop a high degree of loyalty to brands they know and trust. • This requires establishing and communicating a brand promise and building a customer experience that upholds the promise consistently at every stage of the purchase cycle.
  33. 33 • Trust comes with confidence defined by the brand: quality, experience, service and innovation. • It’s not just personal experience which shapes the consumer’s trust and expectations that a brand will deliver. • Strong brands create evangelists who are not shy about sharing their stories, particularly with the advent of social media and these types of customer endorsements are invaluable when it comes to building trust in your brand.
  34. 34 The importance of recognition • As the result of social media, the public are becoming more and more familiar with branding to which they’re consistently exposed, both overtly and subliminally. When people are familiar with brands, they are more inclined to favour them – provided that they have a positive experience or review of that brand.
  35. 35 • The brand colours, logo and name need to be consistent and easily recognized in order to create a comfort and confidence in your product or service. It should also help differentiate the brand from the increasing number of competitors in a crowded marketplace. • Above and beyond the visual image, there’s a broader and more important matter at stake when it comes to a brand. It involves a reputation, or perceptions of everything the brand represents, conveying a sense of the kind of company that stands behind it. A number of factors and activities can help achieve this over time.
  36. 36 • On one hand, there are the practical actions which a business may follow. These include internal practices and policies, like employment and advancement of minorities and women or cultural nuances, like family friendly policies. They also include how associates on the front lines deal with customers, from their responsiveness at the purchase point to their helpfulness resolving complaints. Such policies should always be consistent with the brand and the company mission. • It’s also important to note that customers increasingly pay attention to a company’s altruistic endeavours and charitable contributions; both of which should also be aligned with the brand strategy.
  37. 37 Manufacturing options • “That’s the greatest sauce I have ever eaten! You should consider marketing it.” • Have you ever had a friend, customer or relative tell you that a special sauce or food that you are selling as a caterer is so good that you should be selling it in a supermarket? • You may be surprised to find that making the move from making food and selling it on market on the day (in other words being a caterer) to becoming a manufacturer is not as simple as it may sound. • Like any small business, food enterprises require careful planning, dedication, and skilled management to be successful.
  38. 38 Competition • Competition is intense in the food business. Having a product accepted by a major grocery chain or nationwide food establishment is extremely difficult.
  39. 39 Premises/location • In the initial planning stages, you should check the planning regulations to determine if you can carry out • your food business in the chosen geographic location. Local planning regulations may restrict the kinds of businesses allowed or prohibit food businesses entirely. • Planning regulations should involve consulting your local authority before making any decisions. • Do not make any plans until you are satisfied that your business will fall within the bounds of the current planning class or zone.
  40. 40 Options It is unlikely at this stage that you will be building a new facility due to the potential costs such a venture would incur, so the other options are: • Renting a suitable food production facility. • Renting a suitable shared food production facility. • Modifying an existing building
  41. 41 • After modifying or converting an existing building you must advise your local environmental health department who will then schedule a physical inspection. We strongly advise however, that you get them involved at the planning stage as this can save a lot of wasted effort and cost! • It is unlikely that enforcement inspectors will approve home kitchens for medium to large scale production of food that is to be sold through another party.
  42. 42 Important factors to consider • All foods prepared at any location and offered for sale to consumers for distribution to retailers fall under the responsibility of the local health department (who are responsible for regulating and enforcing food safety as it pertains to food processing, handling, storage, and sale). • Consider waste management when planning as this may require the implementation of different strategies.
  43. 43 Labour • Always include a labour cost, even if you do not intend to pay yourself a salary. This is a good business practice that will help establish a fair price. • One way to estimate labour cost is to divide the profit by hours spent. For example, if it takes 50 hours of labour to produce £1000 of profit, the labour cost is £2 per hour.
  44. 44 Labour costs • Another way to establish labour cost is to decide what your time is worth. You may think your time is worth £2 per hour or maybe £20. • Labour cost is more than preparation time. A certain amount of time will be required for developing the business, transportation, purchasing, and record keeping. If others will be working as well (family members for delivery, for example), include their labour costs also. Will they work as quickly or as efficiently as you do?
  45. 45 Transportation Consider the following questions: • Will you deliver your products? • Is a special vehicle necessary? • Will you need equipment to keep foods at recommended temperatures while in transit? E.g. Some foods need to be kept cold during delivery. Let’s use the example of ice cream. Ice cream must be kept frozen at all times or the quality of the product is lost. Therefore, if you plan to sell ice cream, you must purchase, rent, or lease a refrigerated vehicle to transport it.
  46. 46 Insurance • Insurance helps safeguard your business against losses from fire, illness, and injury, it is unlikely that a normal catering insurance policy will apply once you branch out into manufacturing rather than catering. • Talk with your insurance agent about your business needs making absolutely sure that he understands your business, to do so it is wise to put everything in writing, then there can be no doubt that you gave them all the facts
  47. 47 Other expenses Although not all the following expenses are applicable to your business in the beginning, they may become significant as the business grows: • Overhead for kitchen, equipment, and delivery vehicle • Utilities (fuel) used in food preparation • Licenses required by local, or national governments • Record keeping and required sales reports • Customers who do not pay
  48. 48 • Accounting or legal fees • Excess production (leftovers), pilferage, returns, and “mistakes” • Advertising and promotion; postage and telephone • Kitchen modifications • Interest • Rent If you have major initial expenses, such as building a kitchen or buying appliances, ask an accountant to establish a monthly figure to include in expenses.
  49. 49 Setting prices for products • The price of a product can make the difference between success and failure. Good prices make customers think they are getting their money’s worth and make you think you are getting a fair return on your investment of time and money.
  50. 50 How much can you charge? • Consider comparable commercial products. • Prices should reflect all fixed and variable expenses in the business and provide what you consider a reasonable profit. • Prices should be competitive. If your product offers a service or is better quality than your competitors, don’t be afraid to charge more.
  51. 51 Cost-based pricing • This method uses unit costs of ingredients, expenses, and labour to determine the price. Here’s an example. • You have fixed expenses of £xxx per month; you plan to work 5 days each week, or 32 hours • Your ingredient cost is £xxx per product; and you can make xx products an hour • How much should you charge per product?#
  52. 52 Cost-based pricing • Step 1: Figure the productive working hours (total hours spent in actually making the product). Seven hours of the 32 are spent in bookkeeping, shopping, and delivery, so they are not productive hours. Therefore, your total productive hours per month are 25 (32 – 7 = 25). • Step 2: Figure expenses per hour. Divide the monthly fixed expenses by the productive working hours in 1 month (£xxx ÷ 25 hours = £xx fixed expenses per hour). • Step 3: Figure ingredient cost per hour. Multiply the ingredient cost of one loaf by the, number of products you can make in an hour
  53. 53 • Step 4: Set labour cost. In this example, you decide you are willing to work for £xx per hour. • Step 5: Add your totals:Fixed expenses +Ingredients + Labour = Total per hour cost £ • Step 6: Divide the total per-hour cost by the number of loaves you can make per This is the minimum price that will cover your costs. Compare this price with that of similar products.
  54. 54 How to resolve problems relating to cost based pricing • Reduce ingredient cost • Reduce labour cost • Increase per hour production • Decrease expenses • Improve work methods, which may accomplish all four of the above • Reconsider the business venture
  55. 55 Percent food cost pricing • This quick method is used by many restaurants. It is based on the theory that food cost makes up about 40 percent of the price. To set a price, multiply the food cost by 2.5. • The 40 percent figure is just a guideline; it may not be a suitable if the cost of ingredients is low, the product requires a great deal of labour, or if the ingredients are so expensive that no one would pay 21⁄2 times the cost. • To get a price per person, divide that total by the number of people the food will serve.
  56. 56 Price list and policies Have a price sheet that is available to customers. On this sheet, list your basic policies. Post both prices and policies in your office as well. Some basic policies could include: • Minimum order size • Time needed to fill order • Delivery schedule • Advance payment and billing procedures • Returns • Cancellations • Price changes • Other rules you will follow
  57. 57 Estimating profits • To estimate profits, make a conservative estimate of the number of products you expect to sell during a certain time period (for example, 6 months.) Multiply that figure by the selling price per product.
  58. 58 Estimate expected total • For the same time period. Subtract this total from the total sales. The answer is the anticipated profit.
  59. 59 How does the anticipated profit figure compare with what you could make through other job opportunities? • What about the money you must invest in the business? Could that money earn a better rate of return elsewhere? If the anticipated profit figure is satisfactory to you, proceed with your business plan.
  60. 60 Preparing your project Standardising Recipes • Standardised quantity recipes are necessary to ensure uniform product results and keep preparation costs steady. If the original recipe serves 12 and you want to serve 60, multiply all the ingredients by 5. • If the food no longer tastes right, continue to experiment. Brands of ingredients can make a difference too, so don’t change brands without testing the result. • Experiment with cost-cutting measures that don’t affect the final product. For example, discover the minimum amount of each ingredient that can be used without affecting quality. Arrange equipment for most efficient production, and streamline work methods as well.
  61. 61 The recipe should include the following: • Appropriate descriptive title • Size of servings in volume, weight, or size of pieces • Yield number of servings and/or volume or weight • Pan size needed, especially for baked or congealed items, or if important to the quality of the finished product or portion sizes What should a recipe include?
  62. 62 • Number of pans needed and whether glass or metal • Ingredients in order used and brand name • Type or form of ingredient, such as all-purpose flour, melted fat, finely chopped onions, etc. • Quantity of ingredients in both weight and volume • Clear, precise instructions for preparing and combining ingredients; cooking method, time, temperature, size or portion and method of service, as well as possible substitutions.
  63. 63 Packaging and labelling • It’s a fact that attractive products sell better. Attractiveness refers to both the appearance of the food and how it is packaged or displayed. Strive for innovative food arrangements. Prepare the product the way you want it to look, and take colour photographs. • Packaging also contributes to the attractiveness of a product, so choose a packaging method that enhances what you sell. Today’s customers are concerned about sanitation and safety; securely wrapped and sealed packages are vital if food is sold through retail outlets.
  64. 64 Product Labelling: All food and non-food items packaged by your business must be properly labelled before they are sold. This varies amongst countries within the EU so you must check the relevant legislation Nutrition Labelling: This does vary from EU countries so you must check the relevant legislation Allergen Labelling: This does vary from EU countries so you must check the relevant legislation Product labelling
  65. 65 Trademarks • Trademarks are distinctive names or symbols used by a company to distinguish its products from those produced by any other company. • The creation and use of a trademark is the first step to making it exclusively yours. • Registration Bodies vary from country to country • There is a charge for the registration and it gives you the legal rights to the trademark for 20 years. Weights and Measures • This too varies amongst countries within the EU so you must check the relevant legislation.
  66. 66 Keeping records • Obtaining written orders or contracts will make your food business seem more professional. If possible, get written orders or contracts from buyers, especially if you are producing for resale through retail outlets. Written orders help prevent errors and misunderstandings. The order form should have: • Space to write the price, order type, amount, time of delivery, last date order may be changed or cancelled, and payment schedule. If food is for resale, be sure the order form specifies the policy on return of unsold merchandise, especially if it is perishable. • Records tell you where you have been, where you are, and where you are going. Business experts say there is a close relationship between inadequate record keeping and business failures.
  67. 67 Franchising and licensing your concept • Licensing, also called a "business opportunity" and franchising are extremely similar and could have a major impact on your company. • Franchising means selling the rights to use a business model and trademark, whereas licensing lets a party use a trademark. • Whether you should license or franchise largely depends on how comfortable you feel running a business and if you want to avoid legislation in various countries. • The difference between franchising and licencing can be simplified by watching this video: •
  68. 68 Benefits of Licensing • Licenses are usually much lower cost than a franchise. • After the initial purchase of a licensing agreement, the licensee generally has no financial obligation to the licensing company other than purchasing products or using the trademark in accordance with the agreement, which may amount to annual or ongoing fees, but these are generally less than franchise costs.
  69. 69 Benefits of Franchising • Franchisers offer exclusive rights to a geographical territory to franchisees, while licensing companies usually offer no such protection to licensees. Most importantly, franchisers give support to their franchises, such as business management training and help in accessing financial assistance. Licensing companies typically offer little or no support services after the purchase of the license. • Franchise costs are usually multi-faceted comprising: • Signup fee • Premises and branding costs • Ongoing franchise fees • A percentage of sale and or restrictive purchasing agreements which will include a further profit element for the franchisor
  70. 70 Considerations • If you want to expand your business by letting other people copy your business model and use your trade name, licensing carries few federal legal restrictions. In many countries franchising your business is controlled by legal regulation. Expert Insight • In general, it is better to franchise than to license because franchises offer more well-known brand names and support, according to San Francisco franchise attorney Kevin B. Murphy. Also, licenses are usually just franchises attempting to skirt government regulation. If you are trying to expand your company, customers are usually more attracted to franchise agreements than to licenses.