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Steps for Sustainable & Profitable Business Growth
GK
Dec 2010
Dec 2010
In my previous articles, I elaborated on what is the business growth and what is the scalable growth. I took examples of Ramesh Patil, a micro level entrepreneur from Belgaum in Karnataka who runs service business of photography and videography and Usha's who runs a product business of selling natural fresh juice in Mysore of Karnataka. We analysed the scalability factors on the both types of businesses i.e. a service business as well as a product business. I gave the assignments with which you may check the scalability of your business as well.
In this article, we will discuss sustainable and profitable business growth and we will examine the factors behind it.
Sustainable Business Growth
If a micro-level entrepreneur is able to maintain the business without affecting the quality of the product/service, with consistency in increasing turnover and profitability, such an attribute is called sustainability.
The business growth has to be sustainable. If there is no sustainability in the business growth, it becomes very difficult for a micro-level entrepreneur to survive. Sustainability is an important parameter for a micro-level entrepreneur. If there is no sustainability, he/she may have to completely close down the business unit. However, large business organizations can still survive with one wrong step forward, but a small/micro-level entrepreneur has to be very careful.
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If you are a micro-level entrepreneur, be very clear before expanding your business whether you will be able to survive even after the business expansion. You must prepare a detailed excel sheet summarizing all the revenues and expenses of the new unit. This would give you a clear idea.
However you should remember that if the expansion of the business doesn't promise to provide Sustainability, please do not expand.
Analysis of Usha's Case Study (Product Business):
We took an example of Usha's business. Usha is a microlevel entrepreneur from Mysore in Karnataka. She is selling natural fresh juice under the name of Sushruta Fresh Juice Centre. Details of turnover details for past 3 years are as under –
Analysis regarding Sustainability factors for Usha's Product Business:
1) Usha's business is sustainable because she is able to deliver the same quality of juice in all the juice centers run by her.
2) She is manufacturing the juice in one centralized location, thereby reducing the cost of production.
3) She is running each of the juice centers as a profitable business centre.
4) She has a common production Machine, Production staff, Marketing staff, Finance staff and HR staff for all the juice centers. This makes her business more Sustainable.
Challenges in Sustainability
- Uniformity in production and packing.
- To create awareness among their customers that natural fresh juice will provide good health.
Profitable Business Growth
A Microlevel organization is said to be Profitable when it makes enough profit to take care of its employees, customers, investors and the micro-level entrepreneur in a satisfied manner.
Profitability plays an important role in motivating the Microlevel Entrepreneur in the right direction. If the profitability is not in there in the business, it becomes extremely difficult for a micro-level entrepreneur to continue in the business.
A micro-level entrepreneur must make sure that his or her business unit makes profit from day one of its operation. He or she must cut down all unnecessary expenses. Also, the entrepreneur must focus on the core business.
However, if the existing unit is not making profit then the entrepreneur first of all must make sure that it becomes profitable. He or she must not think to open up a new business unit if the first unit is not profitable. Also he or she must not spend extra money on additional resources.
Analysis of Usha's Case Study (Product Business):
Lets again we take the example of Usha's business who runs a product business of selling natural fresh juice in Mysore of Karnataka.
Analysis regarding Profitability factors for Usha's business
1) Ms. Usha's business has made 30%, 35% and 40% profit in the past 3 years.
2) She is making good profits.
3) As the turnover is increasing, she is also able to increase the profit margin.
4) This is a good, profitable business.
Challenges in Profitability
- Uniformity in production and packing.
- To create awareness among their customers that natural fresh juice will provide good health.
Analysis of Charan Singh's Case Study (Product Business):
Let's take another example of Charan Singh, who is a micro-level entrepreneur from Jalandhar in Punjab. He is selling fertilizers, seeds and chemicals under the name of Guru Gobind Agro. Details of turnover for the past 3 years:
Analysis regarding Profitability factors for Charan Singh's Product business:
1) Charan Singh's business has made 10% profit in the Past 3 years.
2) He is not making good profits.
3) As the turnover is increasing, he is not able to increase the profit margin.
4) This is not a profitable business.
Challenges in Profitability
1) Charan Singh is making a large turnover but less profit.
2) The challenges for Charan Singh are to increase his profitability along with his turnover.
Key Points to Remember:
Make sure that the existing business unit is profitable. Increasing the profitability doesn't necessarily mean, you have to open up more units. You can increase the profitability either by increasing the price for your products/services or increasing the customer base.
Once the existing unit becomes profitable, a micro-level entrepreneur can think of opening new business units.
Assignment-1
Kiran Reddy's Case Study (Product Business):
Let's take an example of Kiran Reddy who runs a product business of manufacturing of Jasmine Scented Agarbathi under the name of Sai Baba Agarbathi in Anantapur of Andhra Pradesh. Details of turnover for the past 3 years are as under:
Question: Analyse the Profitability factors for Kiran Reddy's business.
Assignment-2
Anisha's Case Study (Service Business):
Take an example of Anisha's Business who runs a service business of beauty salon under the name of New Look Beauty Parlour in Bhubaneshwar of Orissa. Details of turnover for the past 3 years:
Question: Analyse the Profitability factors for Anisha's business.
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