My 12-year old daughter has just completed an EMS (Economic Management Science) project for Grade 7, which involved setting up a business, compiling a business plan, doing market research, selecting products to sell, taking out loans (albeit from my back pocket), marketing and selling their wares over two days at break and at a night market on Friday night.
I know I sound like an old dodger, but how I wish we were all exposed to this kind of thinking “when we were young”. At 12 years old, she has already experienced first-hand what so many of my middle-aged clients are grappling with today.
Her group had successes in certain areas and fell short in others resulting in an average profit, and she is quick to point out what she would do differently the next time around. The lessons learned from this ultra-mini business can be applied to businesses of all sizes, because the basic fundamentals of every business are the same.
So here’s what she learned…
“All those months of planning and budgeting for 2 days of work”
Yes. If you fail to plan, you plan to fail. Sometimes the planning process takes longer than the actual job at hand. The plan not only outlined what they were selling, but included targets, budgets, projected profits, and lists and lists of actions that needed to be implemented before they could open their doors to their target markets. So many businesses I work with are simply winging it from day to day and going through the motions. Do you have a plan?
“Team members who are passengers on the bus drag you down”
It’s got to be everyone’s worst memory of school – group work. Why? Because you are forced to work with people who don’t necessarily have the same ethos as you, the same goals, the same drive, the same ideas, and work ethic. The biggest complaint in the grade was about team members who were not pulling their weight, and who came along for the ride. Sound familiar? You see, without the right team on board, who are all fully committed to a common goal, you will not achieve success. As a grown-up business owner, you are no longer forced to work with people that don’t meet your standards. Select your staff carefully. More than anything, make sure you share the same values.
“It’s not easy to make money”
Welcome to the real world. People work incredibly hard to make their own money, so it stands to reason that they won’t part with it easily if they do not perceive value.
“You’ve got to spend money to make money”
Once the product costs were compiled, the kids had big eyes… as did the parents who had to “loan” the money to the budding entrepreneurs to buy the products! But the reality is that the team who had the most expenses, made the most profit. When you start viewing your expenses as an investment, it changes your mindset. Ask yourself, what return will I get from this expense? From your rent and telephone account to materials, marketing, salaries and training, every expense should contribute towards making the business money.
“There are so many factors to consider when pricing products”
A common mistake that many small business owners make is to put a simple mark up on the cost price and then they wonder why they are not profitable. So the kids learned that you can’t just take the cost of the Butter Chicken Curry ingredients and put a mark up on it. Why? Because you need to serve it in a bowl, with a fork, garnished with coriander… and all those additional costs need to be included in the product cost. What about the site rental and trestle table hire from the school? Where will those costs be covered? In fact, they got off lightly, because in the real world, they would also need to factor in the cost of the labour to cook it, the electricity, the equipment required to prepared it, and the petrol it cost to deliver it to their retail stall. Are you factoring in all the costs to your product or service pricing?
“Different products for different target markets”
China Mall toys, silly games, and junk food was the order of the day during break at school. But at the night market, the little entrepreneurs cleverly targeted the parents with more disposable income by offering the likes of Curry and Rice and Nespresso coffee. They also offered a free delivery service to the members of the local soccer club down the road to extend their target market to people who were unable to attend the night market. Do you target your offerings for your market? Is there something for everyone? What untapped markets can you venture into?
“It’s not what you sell. It’s how you sell it”
The little business group learned very quickly that you are more successful at selling the ‘benefit’ than the product. Chocolate brownie sales were slow, and they were worried that they were going to have lots of perishable stock left over. At the Friday night market, they packaged the brownies in batches of 6, ideal for the freezer “for those unexpected guests.”. They ran out. Instead of selling little gimmicky plant seed pots, they sold “perfect stocking fillers” for birthday gifts. It wasn’t so much the coffee that was sold, but the novelty of having a genuine Nespresso coffee at a school function! Think about what you sell… forget the product or service, and think about what your customers are really getting.
The future generation will be far better equipped for business ownership than we were. But until then, it’s up to our generation to put them through school and tertiary education, so we had better learn with them, pull up our socks and increase our grades!