Feargal Quinn: 'Why take a leap into the unknown when you can serve up second cafe business?'
Q: I run a busy cafe which is profitable and I have no borrowings against it. I wanted your opinion on whether I should start supplying shops and supermarkets.
A: Your query is very similar to one I received a few years ago. A successful cafe owner wanted to set up a business supplying baked goods to the corporate sector in that instance.
My advice at the time was as follows: you run a successful business, with relative ease; you understand all of the dynamics of running the cafe and there are few challenges that might arise that you wouldn't know how to solve.
You will have to think carefully about why you would now want to get into a sector that you know nothing about, that will potentially stretch the capabilities of your current business and will probably make no money for the first two years. Of course, there is always the potential that you would ultimately make a lot of money out of third-party supply. That is, potentially, the only motivation for looking at this.
On balance, I would say that if you want to increase revenue and profitability, you might be better off to look at running a second cafe in a different location.
This should be relatively easy for you to replicate once you have documented all the procedures and best practices, and would avoid the stress of having to learn your route to market into the retail sector. I would really want to understand more about your current business, the size of your production facility, etc to give you full advice. But my initial reaction would be that there is more to be gained out of your current business, rather than going into a new business at this point in your journey.
Q: My husband and I run an early-stage, but successful tour coach company. We are conscious we need to be looking ahead to guarantee future success; what must we be thinking about?
A: I always enjoy reading about successful young companies. I have no doubt that your initial success hasn't come about by accident, and you're doing things that are helping you to stand out from the crowd.
High on my list of priorities for you is funding. If your success continues, and if you potentially have to invest in more coaches, etc, you need to be thinking now about where funding will come from.
I have no doubt you might have taken some borrowings on board already, and you need to plan with your accountant and plot out the speed of growth, including funding needs and sources at each stage.
I also always suggest that it is good to have a look at your own skills at a time like this. What skills are absent in the business and can you or your husband upskill over the next year or so? This may take the form of simple courses, e-learning and degree programmes. The objective is that you broaden your own thought process through upskilling and education to benefit the business.
My last recommendation is one that I am seeing in an increasing amount of small- to medium-sized companies lately. It is the setting up of a voluntary, or advisory board which would agree to guide the business over the next 12 months and provide insight.
For example, if you decided that the business was weak at marketing, and perhaps not sufficiently skilled in the financial areas, you would seek to identify a number of senior business executives in the marketplace who would agree to voluntarily give their time at two or three meetings a year. This advisory board would have no legitimate power in your business, but would act as mentors and challenge the current business direction.
You would meet no more than two or three times in the year as part of structured meetings. The benefits to be gained from this are enormous and it is only when you hear an entrepreneur who has put this step into place in their business talking about how it has influenced change, that you really appreciate its significance.
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