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Do Not Over Complicate Your Business

Posted by on Dec 13, 2009 in Business Management | 11 comments

A few months ago, a friend of mine requested if I could help her nephew (an undergrad student from an Ivy league school) with his business practicum project that he was becoming frustrated with. Their business practicum’s goal was to produce and sell as many “uniquely different” T-Shirts as possible and she requested if I could just help him out a bit and get him back on track.

When we met, I asked him what the problem was and he said “well you see, my team mates do not want to shell out the capital that the group needs to produce the T-Shirts”. So I asked him how much capital he needed.  He said, “Well, we need 200,000 pesos…” I raised my hands to stop him in mid sentence and said: “Whoa, back up there a little bit, 200,000? Why do you need that much money to produce and sell T-Shirts?”

“Well sir, because to ‘market test’ and produce the shirts, we’ll have to purchase the machine to print on the shirts…”, “Who said that?” I asked. “My adviser” he replied, “Does your adviser have a business?”  He said, “No, but she’s been teaching this course for a while now, and she says that in order to know if your business venture will make money, you must learn how to do a break even analysis, and to do that, you must know the costs…”

“Okay”…I said, “…now I understand why your team mates are not willing to put up the capital. Well for one, you are asking for P200,000 and two, because it is not necessary. Let’s simplify things for you, forget the costs of the machine for a while, how much is the cost of a plain non-printed T-Shirt?”

He grabbed several spreadsheet print outs from his bag  and began searching for the costs of the T-Shirts.  Five minutes later he still could not give me an answer and said “Sorry sir, to get the costs, I have to reverse-engineer the calculations that I did…”  Needless to say, I was a bit surprised to hear that he had to “reverse-engineer” anything to come up with the costs because in my mind, to know the price of a T-Shirt, you simply have to ask the price from the supplier of the T-Shirt. Apparently, he did not do that but instead was taught to calculate costs based on some sort of theoretical model.

After a few more minutes of waiting, I said “Okay please listen for a moment, I’m going to estimate right now that the price of a plain white shirt is about P100 give or take, so to get you and your team started, you don’t need P200,000. All you need to do is to buy maybe 10 shirts x P100 = P 1,000 then add the cost of printing of whatever design you have. So I’ll assume that printing the design will be another P100 give or take, so with these top of mind estimates your initial costs will be about P2,000, not P200,000.”

“But 10 shirts only, that’s pretty small isn’t it?” he asked. “Well I said, since you are ‘market testing’ the shirts, you just need samples of the shirts initially. Then what you do is to get pre-orders and get a down payment for those orders from your customers. You can also sell the shirts immediately and produce more of them after, based on demand.  Once you get the down payment, you can then purchase the materials (shirts) needed to produce and deliver the T-shirts.”

“But how do we go about producing the T-shirts when we don’t have the machine to produce it” he asked.  I then answered, “there is no need for you to buy the printing machine yourselves to produce it, doing so would be ridiculous because this is just a project for you. Also, we are no longer in the Industrial age where you have to produce everything yourself.   We are at an age of outsourcing jobs to avoid huge capital investments.  You can simply outsource the printing of the shirts to a company that does that.”

“But Sir, what about the design and price of the T-shirts? We were taught that we have to have a unique design and that we should price it very low so that we can sell a lot of shirts.” I responded “If you can come up with a unique design that people want, then I do not recommend that you price it low, in fact quite the opposite, you should price it at a premium because of its uniqueness.”

“Listen,” I said to the student, “Business is simple.  It need not be based on theoretical mathematical models, nor does it have to be over analyzed and over complicated.”

Even though this story just involves a college business practicum, the common misconceptions about business is just as true with most start up businesses. A lot of times, people feel that if they are doing something “sophisticated” or with big capital, or with common phrase clichés, that they are doing it right. The fact is, Business is not complicated at all.  Just find the simplest way to make a profit. If it is simple, trust me, it is right.

 

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11 Comments

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  1. Alvin Degamo

    Hi Mark you inspire me with your stories would it cost me to be your friend =)

  2. markso

    Ha ha ha Alvin, if you got an email from me to view my blog, then you are already my friend. If you were just browsing and came upon my site by accident, then all you have to do is learn and comment whenever you can on any of my articles.

  3. randy

    Hi Mark, Your blog is very helpful. thanks. :-). I sent you an email re property investment seminar..

  4. Poloyzki

    Hi Mark!

    First and foremost, I would like to tell you that I have already read all of your articles from your blog (markso.wordpress.com) and I would like to say that “I really love your write-ups”. It really inspired & helped me a lot in many ways.

    I, for one, believe in zero capital to start-up a business. And, I also believe the power of outsourcing and how it could really cut the expenses. I truly believe in those two systems since I’ve already done it myself before but I also failed in it a lot of times as well; not because of the system but because of myself.

    I’m a very good researcher & planner. I almost started few businesses before but ended up just printing my plans on a piece of paper. The closest thing I ever did was having a partners meeting at Bo’s Coffee Shop in Ayala but I backed out after that.

    My problem is that in the middle of “doing” my plans, since there are just too many concerns to resolve in the process, I start to “freak out” & think that I cannot handle it or I have no enough funds or my experiences are not yet enough or I just have no time; especially that I’m married & has 2 kids to feed. Therefore I conclude that, “I can never start a business until I can find a mentor (sad to say it can never be my wife)” – I’m I right? or I’m just lazy & selfish? or I’m just trying to complicate things?

    Nevertheless, I still love my wife though for who she is. I just really need your wisdom Mark. Thanks & More Power!

    Paul

    • markso

      Hey Paul, thanks for writing in. I’m glad that my blog has helped you. but now it’s time to help yourself and your wife who I would think loves and adores you. Take small steps and go for it. If it is outsourcing you are into then learn from me how to do it with Zero Capital. Email me at markso@zerocapitalclub.com so we can talk some more about it.

  5. Ed de la Cruz

    Dear Mark,

    I really appreciate all your eye opening advise,
    can you share some ideas regarding Doing Business from Zero Capital. Am really interested. Please help.

    Ed

    • markso

      Ed, sorry for the long delayed reply, just keep coming back and keep reading, the information you are looking for is there, you just have to find it.

  6. ace

    hi mark,
    this specific article helped me a lot, i mean it really gave a total illumination to me. i am a graduate of batch 2009, currently i am unemployed but i am a part time academic tutor. me and a friend of mine from college entered also tshirt printing business during college, but it was a total flop! but we are planning to re-start again with the help of the lessons gained from past mistakes and from your blog. i pray that this time it will work out!:)

    • markso

      Hi Ace, glad to hear from you and glad to know that you are re-starting. Remember you can never fail if you never quit. All the best to you in your next run and the many more to follow.

  7. Sammie Kover

    Hi, i think that i noticed you visited my blog so i got here to “go back the favor”.I am attempting to find issues to improve my web site!I guess its adequate to make use of some of your ideas!!

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