Starting a business

[Houses4Rent]

Yes and no again. I was just generally referring to your "I was on the phone with this customer who will never buy from me, just cost me X Rands."
I do not know whether you were referring to a sales/marketing call or a call regards product specifications. Now all manufacture, some just do service like me.

[adrianh]

Knowing the actual hourly running cost of your company really makes you look at things differently, a meeting here, a phone call there, and all of a sudden you start thinking that this is now being unproductive, whilst I was on the phone with this customer who will never buy from me, just cost me X Rands. You start evaluating every action, to see if what you are about to do is going to cover that cost. Once you get this right, you will see basic improvements on your profit line, off course you must make sure about the collection of your money.

It also fine tunes the way you do business, it makes you sell more aggressively too, and many times takes out the emotional urge to give a discount because the customer asked.

I agree with all that you say. Our income is directly proportional to our productivity and our productivity is derived from our ability to focus single-mindedly on thee appropriate task. I find that I am able to focus single-mindedly on almost anything if I am not disturbed or create my own disturbances with things like phone calls, email etc. I realized this morning that my problem does not lie in being able to create products or to solve problems, but rather in poor selection a which problems to solve. I find it truly amazing how simple it is to improve my current position purely by changing my mind set. My mind set has always been to solve every problem and to create lots and lots of products. This is the change that starts now:

I know which are my most to least profitable products in terms of time taken to manufacture vs profit.

Working from the most profitable - make certain that the best people are enable to manufacture that product as efficiently and fast as possible.
- The line above is the crux of the problem - My most unreliable member of staff manufactures this product and he does so inefficiently. Although he does have methods that allow him to build fairly fast given the constraints that he has, the constrains should be removed. I can think of numerous improvements in the design of parts and assembly methods that would dramatically reduce manufacturing time.

That product will now become my primary product and as such I will set up a clearly documented workflow so that the staff are able to follow a clearly set out plan (manufacturing manual + quality assurance) and targets.

I will do the same with all the products from most profitable to least profitable and I think that what will happen is that the 80% of products that waste 80% of the time are going to get dumped to be replaced with very high profit, low labour cut and pack laser cut products.

Damn.....it's taken me a lifetime to see that being able to solve almost any problem is practically worthless if one continually chooses to solve inappropriately chosen problems.

[Justloadit]

The question here is "why are the those products least profitable?"

Are you attempting to get market share, and have dropped your mark up to do so?

Are you competing with other suppliers into the market, and if so, what is the advantage of attempting to compete, or is their a future plan in whcih investment into this line by virtue of equipment can make the cost lower, so by selling at the current price you are in fact buying market share.

Are you simply selling this product, because currently that is all you can offer in the market place, and it is paying your bills?

Are you simply continuing an old line and helping customers.

Depending on the real reason, then change the selling price to make it more profitable, or simply discontinue the product. I have had to make this difficult decision, but it was for the future of the company. Continuing on that path would be disastrous.

[adrianh]

There are two reasons that the products are not profitable enough:

1. They are not by their very nature.
2. Our manufacturing methods are not efficient enough.

[Justloadit]

1. They are not by their very nature.

Then why are you manufacturing this item?

2. Our manufacturing methods are not efficient enough.

Fair enough, then you are manufacturing with a purpose, to get volume so that you can invest into ways to manufacture at a better cost price.

I often do this. But only where I can see that there will be an improvement on cost if I can get a decent market share which means number of units per month. This usually transpires where the investment into a tool/mold or other asset will improve the cost of the manufactured item. I have recently done this, with a fountain light. I first calculated the cost of manufacture as if I had the tool, but used a rubber mold to cast the units. I have now invested in an injection molded tool, which saves me about 20 minutes per unit in labour. I have another product in which I am doing the same, but need to get to a 1000 units a month before the tool investment will make a huge difference.

[adrianh]

I have recently done this, with a fountain light. I first calculated the cost of manufacture as if I had the tool, but used a rubber mold to cast the units. I have now invested in an injection molded tool, which saves me about 20 minutes per unit in labour. I have another product in which I am doing the same, but need to get to a 1000 units a month before the tool investment will make a huge difference.

Interesting. I was very heavily involved with pool lighting a couple of years back. I spent a huge amount of time on Aimflow lights. I had PCB's made and we cast them into Aimflow balls. It got to a point where every man and dog got into it and there was no money in it any longer.

I include some of the drawings that I did at the time.


Of course I got seriously carried away with the drawings.


My Aimflow ball had 2 pcb's stacked on top of one another. The top one carried the leds and their smd resistors and the lower board carried a 7809 and a bridge rectifier. The balls were able to take a lot of mechanical and electrical abuse. We banged them against walls and the nice thing was the they could be wired up back to front no problem.


You'll recognize this lot I'm sure.


I also made a collar fountain light. I honestly can't remember how we made the base but I clearly remember not making a pcb but rather drilling a bit of Perspex and encasing it in resin.


I never got round to making these but the drawing was a lot of fun because I did it in such a way that I could animate the color change.


We made a couple of waterblades but achieving laminar flow turned out to be rather problematic

[adrianh]

I did a set of fountain lights for a hotel in Cape Town.







I suppose my biggest downfall has always been waaaaay too much creativity and drive to solve technical problems and close to zero management.

[Justloadit]

Great pics and drawings. I am simply doing a simple circular core of LEDs encased in resin, much like what you did for the hotel. Nothing fancy, as that is what is selling at the moment. If there is a demand for other stuff I may look into it.

[adrianh]

The market is saturated with the other stuff and there are so many companies in the game undercutting one another. There is one product that has merit and that is a light orb. It is a ball that floats on the surface of the pool with leds at the bottom shining down and and a solar panel at the top.

[Justloadit]

Sounds great, however the cost of tooling is going to be very high. Another point we need to consider is the size of our local market. I can not see us exporting this, as the Chinese manufacturers will have us for breakfast, as soon as any decent number of sales start, we just do not have the staff to make it cost effective.

[adrianh]

There are two untapped led applications where you could make money. I've never seen anything for the applications. I'll PM you some info.

[Justloadit]

Thanks Adrian, appreciate your input

[ians]

Woke up this morning to find everything in the black, for some of us this is regarded as quite an achievement especially when everything is already covered, material, labour etc. but that's not the good news. The good news is I have a little extra to use as capital to fund my first mass production of goods on Monday and the orders have already started and I haven't even contacted 99 % of my potential market. Best I get that bank account opened soon 😉

[HermanS]

Once again I am getting in on the back end of the conversation, and decided to rather reply to the original thread, "Starting your own business".

I got home one night, about a month before my daughter's birth, only to find a rather upset wife... (what did I do?) After prompting a bit she informed me in tears that she was retrenched (again? second time in three years). Due to procedural unfairness in the process and the help of a labour lawyer, she did not come off too badly. But still - retrenchment from a senior position (read MBA graduate) with no apparent reason, one month before the birth of you second child.

That is unethical and in principal cruel to say the least. Therefore I make my point that employers are partly to blame for the state of the workforce and the aggression they feel towards employers. Please get me when I say that I do not agree with the aggressive nonsensical strikes we have every day. That is detrimental to the economy, which we can not afford. I am also of opinion that the ridiculous demands for salary increases fuels our inflation, and does not increase the spending power of the people.

I am also of opinion that the unions is simply running a business and is in it for the money only. They rule by fear, and is mostly in use by the ruling party as their own voice to get their message to the masses. It has always been a very clever tool by the ANC to get their message across. But this point for a different discussion.

After the retrenchment, I decided to venture on my own, I could not live with the retrenchment cycle any longer - when will my turn be, and when will my wife's next on be?

As we did not have an amazing plan, almost zero money to do what we want to, and not enough technical know how to do something amazing we agreed to go the franchise route. It allowed us to search through various tried and tested formulas, and find the most suitable business for us to get into. It also fell midway between our personalities, with her being very risk averse and me being very risk prone.

Some people will not call it entrepreneurship, but it will at least allow me to go and make my own money - mostly on my own terms. I think it is a great way of getting out of the employment cycle, with calculated risk. The system (in most cases), has worked for other people. Therefore only you can mess it up, or make it work for you.

SA Franchise Warehouse (www.safw.co.za) has also started an initiative where to will assist to facilitate funding for certain pre-approved franchises, if you have limited capital available to buy your franchise.

Franchising may not be the most creative way to start a business, but if you have been thinking about it, I urge you - do it! I will be launching my franchise early January 2015, in a place where I always wanted to live but could never find a job there.

I all honesty - I am quietly sh****ng myself. 30 November 2014 is my last paycheck - I have two small children and a lot to loose. But my excitement is also big - I will do my own thing, on my terms, and provide an income to other people.

[Justloadit]

I wish you the best of success.

Your point

Therefore I make my point that employers are partly to blame for the state of the workforce and the aggression they feel towards employers.

I wish to say this, as an employer,

"They made me like this"

There are good employees and there are bad employees, unfortunately just as employers, they are all painted with the same brush.