Recently my friend started a business of selling hardware to government offices. I know he is good in sales, he has a proven track record while we were working together at a local company.
However, being good in sales does not mean being a good entrepreneur. A few months after he started his business he ran into the problem of not enough rolling capital to buy from supplier.
You see, this is how he does business; he takes "Request For Quotation" from clients, then source for the products from a pool of suppliers. He earmarked the cheapest suppliers and mark up the price for some percentages, and pass the "Quotation" back to the clients. The clients then gives him a "Purchase Order" where he will then contact the earmarked suppliers to purchase said item. He will then pay for and receive the product, deliver it to his client, and receive payment, and voila! a sale.
The problem my friend is having now is that although he received a "Purchase Order", he does not have sufficient cash or credit to buy the product from supplier. If he wait too long the client will get frustrated and cancel the purchase, which had happened several times. This problem is causing him many sleepless nights currently.
So, if you are just starting up a shop, make sure that you have sufficient rolling capital to run your business. Instead of spending it all on rent, furniture, and buying office equipment, keep at least enough money for you to run your business at least for half a year.
Tuesday, March 23, 2010
Monday, November 2, 2009
Procrastination and how to beat it
Sometimes, you feel like taking time off to relieve stress or whatever. This is a good thing. However, sometimes when you take time off work you kinda fall into a rut and are unable to get back on track again. This is a bad thing. It's called procratination.
Have you ever feel so burned out working on a project that just the thought of going back to do it again fills you with dread? Well, not really dread hah hah. More like apathy. You keep looking and looking at the project and finally abandons it.
So how do we avoid this situation? Well, there are two ways to go about it. Inspiration, and desperation.
Inspiration
Why would someone feel general malaise about their project. The depressive feelings most probably came from the fact that a person has worked on a project for a year and has not received any rewards or compensation out of it yet. This is due to the fact that humans suffer from the instant gratification syndrome. I just made that up but, yeah this is the crux of the matter.
So how do we inspire these people? Have people look at the project and say how good it is and how much money it will make when it is completed. Say stuff like only 30% more to go and you're a billionaire even though there's more than 50% to work on. Look at other companies who has done similar project and convince the procrastinator he/she will be one of them after they completed the last 30%. Keep filling the procrastinator with small rewards to ease their hunger for instant gratification.
Desperation
On the other spectrum are people whose ego are so huge they verges on apathy. They think they can do anything, even finish the last 50% of a project anytime that they actually let it languish than finishing it. How do we deal with these people? Pure mental shock. We need to jar their minds to make them understand their situation. Threaten to throw them out of their homes, cut off their supply of entertainment, etc. Tell them that all they get to eat is a loaf of bread and water everyday until they finish their project and make money out of it.
And there you have it, 2 ways to beat procrastination, the dreaded mind killer. You will burn your dread!
Have you ever feel so burned out working on a project that just the thought of going back to do it again fills you with dread? Well, not really dread hah hah. More like apathy. You keep looking and looking at the project and finally abandons it.
So how do we avoid this situation? Well, there are two ways to go about it. Inspiration, and desperation.
Inspiration
Why would someone feel general malaise about their project. The depressive feelings most probably came from the fact that a person has worked on a project for a year and has not received any rewards or compensation out of it yet. This is due to the fact that humans suffer from the instant gratification syndrome. I just made that up but, yeah this is the crux of the matter.
So how do we inspire these people? Have people look at the project and say how good it is and how much money it will make when it is completed. Say stuff like only 30% more to go and you're a billionaire even though there's more than 50% to work on. Look at other companies who has done similar project and convince the procrastinator he/she will be one of them after they completed the last 30%. Keep filling the procrastinator with small rewards to ease their hunger for instant gratification.
Desperation
On the other spectrum are people whose ego are so huge they verges on apathy. They think they can do anything, even finish the last 50% of a project anytime that they actually let it languish than finishing it. How do we deal with these people? Pure mental shock. We need to jar their minds to make them understand their situation. Threaten to throw them out of their homes, cut off their supply of entertainment, etc. Tell them that all they get to eat is a loaf of bread and water everyday until they finish their project and make money out of it.
And there you have it, 2 ways to beat procrastination, the dreaded mind killer. You will burn your dread!
Sunday, November 1, 2009
Life is a Gamble. So is Business
Life is a gamble of Win and Lose. How's that you ask? Well you live (Win) or you die (Lose). You ate something good for lunch (Win) or you ate crap for lunch (Die). Et Cetera.
Well, business too is a sort of gamble. You can either succeed spectacularly (Win) or fail miserably (Lose). The thing is, nobody can predict whether a business can fail or succeed. However, there are some things that a person can do to increase the chances of succeeding (or prolong the inevitable heh heh).
Things to do to increase chance of success:
1) Research
Before starting a business, you need to do your SWOT analysis. You also need to know what you are selling, and actually sell what you intend to sell. That means you know what your market is, and what your market wants.
2) Prepare Team
When you start a business, never ever start it alone. You will not have the manpower to do anything on time. However if you start your business with a lot of people, things will get messy and ugly very, very fast. So pick a small group, something like 3-5 for a start up business.
3) Monitor Execution/Communication
Communication is key to success. If your team does not communicate well, you know the rest. Making sure that the team does communicate is important and must be done early.
There are more things that a person can do to ensure their business will succeed. It is not limited to what I have just presented. Indeed, different people will have different ideas of what is important to their business.
Well, business too is a sort of gamble. You can either succeed spectacularly (Win) or fail miserably (Lose). The thing is, nobody can predict whether a business can fail or succeed. However, there are some things that a person can do to increase the chances of succeeding (or prolong the inevitable heh heh).
Things to do to increase chance of success:
1) Research
Before starting a business, you need to do your SWOT analysis. You also need to know what you are selling, and actually sell what you intend to sell. That means you know what your market is, and what your market wants.
2) Prepare Team
When you start a business, never ever start it alone. You will not have the manpower to do anything on time. However if you start your business with a lot of people, things will get messy and ugly very, very fast. So pick a small group, something like 3-5 for a start up business.
3) Monitor Execution/Communication
Communication is key to success. If your team does not communicate well, you know the rest. Making sure that the team does communicate is important and must be done early.
There are more things that a person can do to ensure their business will succeed. It is not limited to what I have just presented. Indeed, different people will have different ideas of what is important to their business.
Sunday, October 4, 2009
Internet Entrepreneur
How to be an internet entrepreneur? Simple: start a business selling stuff on the internet! What can you sell? Either goods or services.
If you are starting a website hoping to make money off it, you need to know your revenue stream. If you build a website without any idea of monetization, you can rest assure that you will burn lots of money before realizing the error of your ways. This is exactly what happened to a lot of internet companies during the dot com bust.
It is not as simple as
1) Build website
2) ???????
3) Profit!
First you need to know what you are selling. Are you selling a product or are you selling some services? Products could include cds, e-books, shirts, pets, swags, etc. Services are a little tricky; you can host a service where people can meet and have meetings online, or a service that keeps track of customers, or an online inventory system that helps you buy stuff when you're running low on them.
Directly selling your products or services is just one way to make money. Another way of making money online is through advertising and affiliate programs. GoogleAds have reportedly paid out as much as a few hundred thousand to a lucky chap.
Thats the easy part though. The hard part is building traffic to your website. The more people know about your site, the bigger your chances of having some of these potential customer buy what you have to offer. You definitely need to work on you SEO aka Search Engine Optimization to make sure your site shows up when people look for stuff.
Even if you followed all the steps, success is not guaranteed. That doesn't mean you have to give up though. You need to keep working on your SEO, products, etc.
But what if you keep working on it for several years, tweaking your SEO, updated your products/services and are still losing money instead? Know your limits; some business are just not ready yet. Try going into other venture and come back to the ones you failed another time.
If you are starting a website hoping to make money off it, you need to know your revenue stream. If you build a website without any idea of monetization, you can rest assure that you will burn lots of money before realizing the error of your ways. This is exactly what happened to a lot of internet companies during the dot com bust.
It is not as simple as
1) Build website
2) ???????
3) Profit!
First you need to know what you are selling. Are you selling a product or are you selling some services? Products could include cds, e-books, shirts, pets, swags, etc. Services are a little tricky; you can host a service where people can meet and have meetings online, or a service that keeps track of customers, or an online inventory system that helps you buy stuff when you're running low on them.
Directly selling your products or services is just one way to make money. Another way of making money online is through advertising and affiliate programs. GoogleAds have reportedly paid out as much as a few hundred thousand to a lucky chap.
Thats the easy part though. The hard part is building traffic to your website. The more people know about your site, the bigger your chances of having some of these potential customer buy what you have to offer. You definitely need to work on you SEO aka Search Engine Optimization to make sure your site shows up when people look for stuff.
Even if you followed all the steps, success is not guaranteed. That doesn't mean you have to give up though. You need to keep working on your SEO, products, etc.
But what if you keep working on it for several years, tweaking your SEO, updated your products/services and are still losing money instead? Know your limits; some business are just not ready yet. Try going into other venture and come back to the ones you failed another time.
Tuesday, September 15, 2009
Starting A Business : Providing Goods vs Providing Services
When I started my IT business in November 2007, I used the bootstrap method to fund my way into providing IT Consulting services to my customers. It was a very effective method; I kept cost down and don't have to worry about production in the normal sense. On April 2008, I partnered with another person to start an aquaculture business with him providing the technology and I providing funding and management. We decided to go with bootstrap method to fund our way because if it worked for my IT business, it will definitely work for a low tech business of rearing fish. We even got a couple of other partners; one a silent partner who provides small bootstrap funding while the other partner joined so we can utilize his sales and marketing skill. It was a huge mistake.
The operation was so small that production could not supply enough fishes to meet the demand. The other problem is that the rate of return was so low that most partners became disgruntled with the business. What happens next is clear; one of the partner quits and became a real estate agent while another partner slowly reduces his involvement and started his own door to door clothing sales business.
So what exactly went wrong?
Well, some business you simply just can't start bootstrap. Some business should be started big to take advantage of the economies of scales. If we had sought funding in the beginning, we would have been able to build bigger ponds, rear enough fish to meet the demand, and get returns that is high enough to keep everyone happy.
The other factor is the fact that these are two completely different type of business. The IT business is created to provide services while the aquaculture business is created to provide goods. Increasing the means of productions for a service based business does not necessarily mean an increase in revenue although it affects goods based business a lot. For example if I have been given a project work $50,000, buying 10 laptops and desktops will neither increase my revenue nor decrease my time spent working on it. However, the difference between having 10 ponds versus 100 ponds of fishes at harvesting is clear.
So there you have it, economies of scale and types of business - providing services vs providing goods. Next post I will talk about another reason business self-implode : Bad Partners.
The operation was so small that production could not supply enough fishes to meet the demand. The other problem is that the rate of return was so low that most partners became disgruntled with the business. What happens next is clear; one of the partner quits and became a real estate agent while another partner slowly reduces his involvement and started his own door to door clothing sales business.
So what exactly went wrong?
Well, some business you simply just can't start bootstrap. Some business should be started big to take advantage of the economies of scales. If we had sought funding in the beginning, we would have been able to build bigger ponds, rear enough fish to meet the demand, and get returns that is high enough to keep everyone happy.
The other factor is the fact that these are two completely different type of business. The IT business is created to provide services while the aquaculture business is created to provide goods. Increasing the means of productions for a service based business does not necessarily mean an increase in revenue although it affects goods based business a lot. For example if I have been given a project work $50,000, buying 10 laptops and desktops will neither increase my revenue nor decrease my time spent working on it. However, the difference between having 10 ponds versus 100 ponds of fishes at harvesting is clear.
So there you have it, economies of scale and types of business - providing services vs providing goods. Next post I will talk about another reason business self-implode : Bad Partners.
Starting A Business : Bootstrap Start-Up
I started my IT consulting business 2 years ago. November 1st, 2007 to be exact. At that time I had very little savings so this business is basically a bootstrap start-up enterprise. This is ok because since I am providing a service and don't have to produce products on a daily basis, I don't need that much. This is perfect for me since I can work out of my home, I don't have to rent an office, pay for office utilities, and spend money to travel to and from the office. The living room became my office, the coffee table became my desk, and the sofa and chair became my cupboard and drawer.
Basically, the only business spending that I did was the land line (RM32) and internet connections (RM88). I also invested (RM3,000) into an aquaculture business. So for the first fiscal year my expenditure was (RM4,440). Now during that first year, I did 5 projects that generated (RM3,000) each and 4 projects that generated (RM4,000) each. Totaling all of them up gives me a first fiscal year revenue of (RM31,000).
All this means that at the end of the first fiscal year on 31 October 2008, I made a profit of (RM26,560). It may seem a lot, but break it down to monthly and I am only getting (RM2,213) per month. After paying for groceries, cable tv, petrol/fuel/gas, utilities, etc. all I am left is (RM200) to spend for fun.
For the second year starting in 1 November 2008, I setup a couple of website which cost (RM800). I also invested another (RM3,000) into the aquaculture business I started the year earlier. so my total expenditure was the same at (RM5,240). This year, I did 4 projects that generated (RM3,500) each and 6 projects that generated (RM4,000) each. This gives me a second year fiscal revenue of (RM38,000).
With second year ending 31 October 2009 profit of (RM32,760) which broken down monthly into (RM2,730), things seems to be getting a little bit better. I have accumulated (RM4,000) in savings around this time, but due to unforeseen circumstances I spent it all, and still owe my credit card (RM5,000) on top of it.
Third year... well, we will see. So there you have it. It's not glamorous, it isn't fun, it is a lot of work, but it is a damn dirt cheap of running a business. One thing though, this model of doing business does not apply to all types of business. I made the mistake of trying to apply this method to my aquaculture business. It was a disaster. Check out "Starting A Business : Providing Goods vs Providing Services" for a post mortem of both my start up business.
Basically, the only business spending that I did was the land line (RM32) and internet connections (RM88). I also invested (RM3,000) into an aquaculture business. So for the first fiscal year my expenditure was (RM4,440). Now during that first year, I did 5 projects that generated (RM3,000) each and 4 projects that generated (RM4,000) each. Totaling all of them up gives me a first fiscal year revenue of (RM31,000).
All this means that at the end of the first fiscal year on 31 October 2008, I made a profit of (RM26,560). It may seem a lot, but break it down to monthly and I am only getting (RM2,213) per month. After paying for groceries, cable tv, petrol/fuel/gas, utilities, etc. all I am left is (RM200) to spend for fun.
For the second year starting in 1 November 2008, I setup a couple of website which cost (RM800). I also invested another (RM3,000) into the aquaculture business I started the year earlier. so my total expenditure was the same at (RM5,240). This year, I did 4 projects that generated (RM3,500) each and 6 projects that generated (RM4,000) each. This gives me a second year fiscal revenue of (RM38,000).
With second year ending 31 October 2009 profit of (RM32,760) which broken down monthly into (RM2,730), things seems to be getting a little bit better. I have accumulated (RM4,000) in savings around this time, but due to unforeseen circumstances I spent it all, and still owe my credit card (RM5,000) on top of it.
Third year... well, we will see. So there you have it. It's not glamorous, it isn't fun, it is a lot of work, but it is a damn dirt cheap of running a business. One thing though, this model of doing business does not apply to all types of business. I made the mistake of trying to apply this method to my aquaculture business. It was a disaster. Check out "Starting A Business : Providing Goods vs Providing Services" for a post mortem of both my start up business.
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