Trade secrets of small business


Trade secrets of small business is my personal researching finding on how a small business model works. This article aims to show what are the key principles one should remember while venturing a small business. This research suggests reader to look deeper into the art of running a small business.

We all would have thought of running our own business at one point or the other. The dreams of making our living with freedom, independence to decide, develop strategy are attractive factors to mention a few. Of course, it comes with a price. The risk associated with business is a big stake. I was fascinated few years ago to understand what go into the success of small businesses. Although my job is satisfying, well paying and working for a good boss, there was something still attracting me to explore the possibility and scope of small businesses. I started to explore the business model and what are the trade secrets for their continued success. It was an insightful experience. I began to do the research with several tea stalls over remote locations of Bangalore. Trust me, the competition and the challenges are far more than one can imagine. Most of the shops were just making little profit which was just hand to mouth situation and there were some who exited within 3 or 4 years. And there were some who succeeded over the years. There is for sure a pattern, few tricks and unique models to ensure success. We will study the success formula through one of the successful tea shops I did my research on.

Rajappa Tea Stall

There is a tea stall located in Chandapura - Anekal road, Bangalore. It was started in 2007 and at that time there were only farmers and farm workers, who before leaving for work take tea from the shop. The shop usually opens at 5 am and was selling tea and biscuits. The shop is owned and managed by Rajappa and is supported by his wife Kavita. They work in shifts to make sure their 3 daughters and a son get the best they could offer. Their business soon started to gain profits and grow consistently. Their business started to flourish dramatically with the opening of a new engineering college in the year 2008. Rajappa was exceedingly happy with the news. He sold some of his ancestor property to expand his business. And it was a shock to see three more shops opened in a span of two months. And suddenly they faced a competition. As college began operational, lot of students started taking tea and most of them asked for cigarettes. So cigarettes and tea began to sell well. Then there was a demand for soft drinks. Rajappa and Kavita were excited that their business was giving great financial support for their family even though the competition was getting intense. Understanding the demand, they reinvested their entire profits into the business.
Soon there was lot of other requirements as several families, fast food centers and schools emerged. As the demands started to increase waveringly, Rajappa was unsure of how much of stock should he maintain. It was clear to him that cash flow is important for the business to sustain in the long run. From weekly stock maintenance, he began to purchase on daily basis. It was helping him to balance cash flow and stocks. The demand for soft drinks went high and the need for a bigger refrigerator was felt by Rajappa. Although the suppliers were offering free refrigerator for small shops, Rajappa declined it and invested his money on high volume refrigerator which would satisfy his business demand. Thanks to EMI options, Rajappa really established a concrete platform ahead of his competitors. There were two other shops which opened but were unable to sustain and closed in the same year.

Trade secrets of Rajappa

Rajappa's trade secret was simple and clear –Focus on what customer wants, Keep the cash flow, maintain stocks on daily basis and be aware of the environmental changes. He was circumspective of any significant changes around the shop. He was keen on gathering information like when are the semester breaks where the business goes slow, which new course is being started and how many more would join, increasing new families and so on. On an average, he makes a sale of Rs.5000-6000/-, of which he claims a profit of Rs.1200/- a day.

From my research findings I am convinced that the success factors are: Focus on customer demands and their preferences, Cash flow is extremely important for small business, Sensitivity to environmental and demographic changes, Adaptability to new situations, Reinvestment into business and consistent upgrade, risk taking attitude, stock maintenance and staying calm through the turbulence. These are some of the essentials for running a successful business which one has to remember in establishing a business.


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Comments

Author: Kailash Kumar24 Apr 2016 Member Level: Platinum   Points : 3

Perhaps the single most important factor for success in any business is the creation of customer base i.e. growth in demand. In the case cited by the author, opening of a college in the neighborhood became the key to transform the scenario. Most of the small businesses fail because the naive entrepreneurs fail to differentiate between the daily turn over and the actual profit margin. A collection Rs 1,000 at the end of the day may mean a profit of only Rs. 100. Moreover with a view to ensure further growth in business at least a part of the profit margin is required to be reinvested in the business enterprises. In most cases of failed small businesses, the entrepreneurs generally end up eating away even the capital money.

Author: K Mohan25 Apr 2016 Member Level: Platinum   Points : 4

What I personally observed is that one must have farsighted attitude and take risk in starting any business and the results would be greater than expected. In my colony one Marwadi has opened a Kirana shop 10 years back. He took two shutters and started in a small way. I questioned him why he has taken a shop inside as he won't get the business. For that he replied that he do not want to get highlighted by opening shop on the main road and he in fact want to cater to the needs of colony residents inside. Moreover the two shutters are vacant since many months and the owner gave for rent at throw away rate and that became blessing in disguise for him. Today he is the only Kirana store supplying to 5000 house holds in the area at wholesale rates and also giving free door delivery. Surely people are impressed with his business tactic and are supporting him. He has purchased the present shops, the adjacent building and now proposes to construct a mall nearby. That is the catch.



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