let’s see how to grow your business. But before that let me tell you,
Here i am considering that, your business is running on autopilot mode.
And have made a sustainable model, that mean your business would keep on running.
It won’t decline, your product is good and people liked your service as well.
If all these factors are satisfy, then only we can go on growth expansion.
and is this blog i am going to explain about this topics-
Here the very first way is Bootstrapping.
Now, what does Bootstrapping mean?
The amount of profit we are earning is being reinvested back into the business.
let’s suppose our business is running well from last one year.
And we generate 1 lakh rupees a month of profit.
That 1 lakh of profit we reinvest into our business.
Now, the question is at what speed our business can grow?
According to this , per month 1 lakh rupees of growth rate. right?
Not faster than this.our growth rate is significantly lower when our business is Bootstrapping.
We are not able to grow at a very high speed.
Bootstrapping is really grate at the time when your business is on the pilot mode,
And when the business model is not sustained.
When you actually don’t know whether your product is good or not.
But, when you realize that people liked your products and services and everything is great,
Then, Bootstrapping is not that viable, it’s not that much effective.
And we have to look to expansion plans outside it.
Second way is Debt Raising.
Debt Raising means borrowing funds from the market.
Here i can borrow money from bank, from my relatives or any one else.
Now, when you take a loan, you have to give a specific return in the form of interest.
Now, let’s suppose you have to give a 10% interest on whatever amount you have borrowed.
For example, if you have a crore of loan, you would be have to give a 10% of that as interest in a year.
its mean 10 lakhs in a year.
If your operating profit, means the profit which you get from the business.
It is at least 1.5 times more than the amount taken as loan.
This means if i have to pay like 10,00,000 as interest amount.
And i am getting 15 lakhs of profit that is sustainable, means it is recurring.
There is no risk involved at the time of when problem appears.
Then only i will do,If that is less then i won’t do it.
Let me tell you what generally happens, if i talk about CCD’s failure,
They worked upon too much debt,
There are many business ideas that work upon debt, they keep on taking the loan.
If the overall profit margin that comes is,
Lets suppose,7% okay, then if you take a loan on 10% interest,
Then, every year you have to bear an additional 3% loss, right?
Here, that is why so many businesses flop every year.
you now, debt raising is really a very effective way of growing.
But, when our operating profit is high.
If i am operating on 50% or 10%, then i can always raise debt and grow my Business.
Always remember the amount of fund you are bringing.
You have to always keep them
Liquid form means, for example, what CCD people did,
They took a huge loan from the market, and they bought a property,
Now, if they require money their will be problem arrives like
They spent all that money in buildings, and it’s difficult to sell building overnight.
3rd, one of the very important factor is there should be cash flow in our business.
Cash-flow means there is flow of cash inside and outside.
There are many businesses in starting they think,
Like we are a startup, we will operate in losses,
Ultimately They all are doomed.
You know, CCD is one of the biggest examples of this same thing.
Next thing is the Franchise model.
Franchising and licensing, two things i would explain,
When would i do a franchise?
Suppose, i am restaurant business, or any service provider business,
Where my business model is ready and all the SOP’s are set everything from.
How i would give the product to how a certain thing would be prepared is all ready.
Now, i would go to a person and ave to explain him that,
“i am a brand”, and i do all this thing which is all set,
And i have one propose is that,” would you like to be my business partner.
And for that you just have to pay certain amount of money.”
Now, here you have to provide all the labour just like the MacDonald do.
If we take an example of MacDonald.
If you wanna take a franchise of MacDonald,
So, you have to pay some royalty fees.
Suppose you gave 50 lakhs, then constructed the whole things,
And you know all the team members provided by MacDonald itself.
They provide team members that means people who are trained internally by them.
Then they have set their operating operating procedures.
Like, how a certain thing would be prepared,
At what temperature and for how long.
And they are also taking a certain amount of commission on every sale.
Next, there is licensing, means if there is some product that i have patented or licensed,
In India you can register you company from Udhyog adhar
Something that no one can copy.
Or lets take ,some medicine or formula i made and
Now, i want to grow that,so i have to go to the factory who can make that product. right?
and if they use your process and it help to increase there efficiency and decrease there cost.
Then defiantly people want your process.
And then you can charge a fee yearly for your process.
Another option is Equity Raising, the thing that is going on these days,
Now, raising funds is not that easy it used to be.
Because 70-80% of people have other idea in their minds how actually have raising fund.
This is the reason behind why funds are not released?
So, lets come on the point that,
how would funding help?
Lets understand this, it is not like that you won’t get funding at the present time.
If your business idea is great, the business is profitable, marketing is going on, and management is good,
And then if yo go to ask for funding, you would get it.
but you know to be honest, i don’t wanna go on the funding path.
Let me tell you the reason behind this is,
My equity would go.Equity ,means Like,
I am 100% owner of my company right now, okay?
I can run my company according to my rules, my ideas, i can change any things anytime.
But, if i bring a partner, i would have to listen to him,
Because he has given a lot of money,right?
So, this is the reason i personally don’t like funding.
Here, i am going to take a really big example of franchising.
Recently,i went to an event and in the aircraft,
I met a person. He shared a one idea with me, and then i added my idea as well,
And we prepared a one franchise model.
Let me clear you everything in detail,
See, Normally, we started our business and then become a brand,
And after that distribute it’s franchise, right?
But our idea is, we will reverse this whole posses.
What we actually want to do is, we will open an outlet,
Run it for a month, and then we will Do the marketing,
Standardize the test, Good sales, ready the standard operating procedure,okay?
And ready it totally and give its franchise to someone else. clear?
Let me explain you with the example, suppose
There is my Pizza shop, and i market it very well and people know about my shop,
Because of my pizza’s test and services, okay?
Now, my sales is ready right?
And now, interesting thing is, see my running cost of 2 months is 8 lakhs.
Now, i will ask someone to become a partner of my pizza shop in 10 lakhs.
And i would charge only 20% on each sales as a profit.
And clear them that all the employees would be provided by myself, okay?
so, i got 10 lakhs, and now, i can set up an another pizza shop.
I hope all this things are very clear to you, now making it more easy, all you have to do is.
First of all, take a one sheet of paper
And you have to write it down that “What is your gross margin“?
Means at what margin you operate?
Then thing about the leverage. Open up your mind on leverage.
And 3rd you have to focus on “How much funds are required“?
Suppose if you have one store and you want to open another one then “How much money require for that”?
4th you have to decide the mode of rising the funds.
Like debt, equity, whatever you feel like,
I already told about the pros an cons of them all.
And lastly, you have to decide, your timelines and deadlines.
Now, carefully solve this.
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