Welcome back. Well what did you write down? What did

you write down? How many of you wrote down, that if Susan grew her business,

she'd be able to help more people that had ciliacs disease to have nice

pastries, cookies for parties, desserts Help children, who had celiac disease.

How many people said, Susan could help more people? Raise your hand! Yeah I said

that when I thought about it, the question she asked me, and that sort of

fit into who Susan was. because Susan was, a helper, she was a

teacher and a guidance counselor. Okay.

Why else would Susan want to grow her business? Well in the case, she talked a

little bit about one of her dreams. Maybe she could build the business big

enough so all, or some, of her sons could come back in the business.

And it could be a family business, and her boys could work together.

That's why the name of the business is Three feller's bakery.

Because of her sons. Well that's another reason to want to

grow, okay. And notice, neither of those two primary

reasons have to do with making money, because Susan's situation, money wasn't

the primary goal. For most entrepreneurs Most entrepreneurs

want to grow their business. Okay? One,

to help more people, two,

make more money. Okay? To make more money, which allows

them then to do more things for their business, for their employees, for

htemselves, for their commuity. Alright? And in many cases, entrepreneurs

are trying to do good. Are trying to do good.

So they try to do more good. But Susan had, in the back of her mind, a

couple of primary reasons. Help people to build something that my

sons could work together and build and make it into the dominant big

gluten-free, all natural, certified bakery, okay? Helping people enjoy foods

when they have celiac disease. An honorable, good goal.

Now. What was her strengths and weaknesses?

She was an artist and a guidance counselor.

What did she say she loved in the case? She loved baking beautiful desserts,

cakes and she loved making them for. Weddings, birthdays.

She said to me, when the joys in her life was one of the first birthday cakes she

baked for a little boy who was celiac. And it was the first cake he'd had in

years and she took it to his birthday. And he was so happy.

And she said, that's why I love making cakes and pastries.

And wedding cakes and birthday cakes. Alright? And if you think about it.

It puts together her love of art and creativity, her love of giving as a

guidance counselor and her love of solving the coeliac problem.

So what was her weaknesses? She didn't know accounting, she didn't know how to

create business processes. Right? She didn't even know what her cost

per unit was. And she really, didn't want to manage a

big business. So she was sort of in a quandry, where

her personal goals, were propelling her to get bigger and grow But, as she grew

the business, she was playing not to her strengths, but to her weaknesses.

And the other thing is, as she grew her business, and she was the lead sales

person, okay. She grew her business, The more the

business grew, the less time she had for making her beautiful cakes for weddings

and birthdays which was her love, her passion.

So Susan really was like this. Her personal love and passion.

What are strength versus what are weaknesses and she is presented with all

these big alternatives. In what way her alternatives?

Well, you should have listed these. She can continually increase and grow

slowly. Now let's ask ourselves questions.

Let's grade Susan's business, okay. Remember in week one we talked about the,

the key things about being a great entrepreneurial business.

Did Susan have strategic focus? What do you think, she has strategic focus?

Well some of you saying yes she's making gluten-free dessert well you're right,

you're right well inside that realm of gluten-free desserts was she

strategically focus on certain types of desserts? Or was she trying to make too

many deserts. Should she have focused on frozen cookie

doughs, because of long shelf life. Should she just focus on certain types of

cakes, certain types of cookies. Or maybe should she just do the big cakes

for the weddings, birthdays, that she likes to do every once in a while.

And should she just make many individual serve deserts? Lots of decisions isn't

there? Yeah, and this is what you'll face as you try to grow a business, lots of

decisions. So I don't think Susan was strategically

focused enough I don't think she. I think her, if you will, her line of

products, the large number for her size, especially since she didn't know which

ones were profitable, was too large. Did she have operational excellence?

Okay? And I put a question mark by this. Did she have operational excellence.

Well, it depends how you define operational excellence, doesn't it? Did

she produce, as far as we know, a great product every time? Yes.

That's why she got, stayed in new crops. That's why she got into whole foods.

She can make a good product, but what we don't know is, was she making those

product's individually profitably. Because she didn't have processes that

measured her per unit cost's. She didn't have real, an accounting

system. Alright? She just had a file folder with

accounts payable, accounts receivable.

Okay. She didn't have sales strategy or sales

process, she didn't have processes that she could basically used to teach other

people. So, she was weak on process.

The end product was really good as we wouldn't be having this conversation Ok,

it's really good. But the processes she was weak on.

So, she was weak on strategic focus, she was weak on operational excellence.

Did she, was she customer centric? You know what that means.

Was she? Yeah, I agree with you. She was very customer centric.

Yes. Did she have high employee engagement?

Why's that important? Because you learned in week 1.

If you're going to grow a business it takes more people.

It takes more people. And did Susan know how to engage her

employees? Were here employees meaningful engaged, and producing excellent products

because they cared about the in product, yes.

So she had customer centricity and she had high employee engagement.

She had an issue of strategic focus, and she had an issue of operational assets.

So, we, we talked about her strengths and weaknesses.

We just talked about the businesses' strengths and weaknesses.

And think how we're analyzing this because this is a template for you to

analyze your business. This is a template for you to analyze

your business. So what were her alternatives? Keep doing

what she's doing. Improve and grow slowly.

Number 2, expand into more Whole Foods stores.

And expand the product lines in Whole Foods.

3, remember in the case, you had the idea.

Why doesn't she make gluten-free products and sell them to other bakeries in

Richmond, in Charlottesville, in Danville, around the Richmond area? Not a

bad idea. What's the difference between selling

wholesale and retail? Well, she's selling wholesale already to Ucrops and, and to

whole foods, right. When she sells whole sale, to someone

who's going to resale it, she has to sell it at a price that the resaler can make a

profit. If she was opening up more retail bakery

stores, She would get both profits. Okay? And let me go back here.

Let's find something. All right, if you sell, hold on there, a

little technology here. Okay, bear with me.

Brain's working faster than the arm. Again.

If you sell wholesale, let's say it costs $10 to make a product, okay, and it's

going to sell basically for $20 to the buyer.

If I sell in retail, I got $10 profit. If I sell it wholesale, cost me 10, I

sell it someone for 15. They sell it for 20.

I make 5, they make 5. I make more money by selling retail than

selling wholesale. But it's easier to sell wholesale.

And grow a business, because that person can sell lots of pot.

You're leveraging yourself. So she could have a wholesale distributor

sell and deliver her products. And in the case we had the issue about

entering into the big bakery venture in New Jersey.

This was interesting. Two people, that she really didn't know,

came to her, had heard about her product and said, "let's form a joint venture!

Let's build a bakery that makes gluten-free products, and we'll use your

recipes, and we'll sell them." Okay. And then the other alternative is to

combine some of the above. Now, I asked you to then look at pros and

cons of each 1. Well let's go through this, okay.

In here in order to learn you're sort of checking yourself, what did I think

about? And probably some of you thought of some things which I don't have here on

the charts we're going to go through. Post them on the class forum.

Okay, post them on the class forum where we all can learn.

Improving on the status quo. Moving slowly.

What does that allow her to do? It limits her risk.

What kind of risk? Money risk? People risk.

It allows her time for her custom baking. You remember? She said, she loves baking

those cakes, for weddings and birthdays. because if she grows, she's not going to

have time to do that. It paces her outlays, for increased

production, additional equipment and upgrades.

It paces her cost. It lets her grow incrementally.

It allows her to operate within her financial confines.

Okay. All right.

Steady, slow, incremental, iterative. What's the cons? What's the negatives

about that approach? Well, the obvious one, it does not address her goal to help

a lot of people. With her concentration of customers with

new crops and new foods, she has a customer concentration.

The more business she does with one customer and gets a big customer, if that

customer changes its mind or something happens, she loses lots of business.

Has to let people go. It creates a loss of opportunity to

dominate a market. This goes to the issue of frozen cookie

dough. If she could get her frozen cookie dough

into big national distributors. It could go national.

Just like that, national. If the business doesn't get big enough,

it won't attract her sons into the business, and there won't be enough

money. Okay, money to support her sons and their

families as they grow. So that's alternative one.

Lots of unknowns, pretty safe. Alternative two.

Expand into More Whole Foods stores. The pros.

I got a track record. Susan's got a track record what Whole

Foods means. She's already approved for all the stores

in the Mid-Atlantic region. So all she's got to do is go visit more

stores. And once she's in the Mid-Atlantic.

And she does, and she doing well, maybe she goes to the southeast, maybe she

starts expanding, nationally with whole foods.

Because she's approved in the mid-atlantic, the sales time, in the

acquisit, customer acquisition costs are lower.

What are the cons? Well as she grows, with whole foods, They want more product.

So think about it, I got to produce more so I need more people, equipment, raw

materials, all right. I then probably need a full time person

running my retail store, if I decide to keep that, okay.

More chefs, expand the kitchen, cash flow challenges, all those that's going to

cause money. I got to put all that money to make all

that new product and I don't get paid for 45 days, my customer concentration risks

go up and in I need delivery people, delivery trucks.

Oh, okay, this sounds pretty good and easy.

This sounds like it's going to cost me money.

Wholesale to Virginia Bakeries. Okay, what's the, what's the thing here?

Well, I got more control, and the main thing, it diversifies my customer base.

I gotta lots of customers. Like Julie, lots of customers.

Cons: higher cost of acquiring them. I got to have somebody go call on the

bakers, the bakeries. Do I need a sales person? How do I pay

that person? More sales, service, delivery and production capacity, I need

everything. How do I protect my brand? Am I going to

basically private brand and let, Smith Bakery in XYZ city, smell Sell Smith

Bakery gluten-free? Or are they going to be selling Freefeller's Bakery

gluten-free? I got no direct contact with the end-user; they don't even know me.

The same cash flow challenges. So as you see, as you evaluate each of

these things, you sit back and you're getting, remember the scales we had?

Okay? The scales we had the pros and cons.

You're balancing, you're weighing. And you should be struggling right now.

You should be struggling. You should be saying, wow this is hard.

How does she make this decision? because everything has pros and cons and

she has different conflicting means, need to make more beautiful cakes and pies and

be the artist she is, the need to help more celiacs and the

need to build a business for her children.

Wow. How does she make the decision? Couple

more alternatives. Sell cookie dough nationally.

Well, it's got some advantages. It can be mass produced.

I make a big batch by big machines. Alright, now.

Make it, cut it Seal it in the freezer,lasts a long time, easy to ship.

There's a small number of big grocery chains, grocey, grocery store chains

across the United States. That means, I only got to sell 2 or 3 of

them and I'm everywhere, okay. Big sales.

Large volume, ca ching, ca ching. What's the cons? Does she know how to

mass produce cookie dough? Does she have the right people, processes, controls?

Processes and controls are very important when you're in the food business.

'Cuz what puts you out of business is a bad batch.

Signifigant investment in machinery, employees.

Big customer concentration. Profit pressure.

Those big customers will squeeze her profits.

Let's role-play for a moment. You're Susan Feller.

I am the chief buyer at a major national retail grocery store.

I have thousands of stores. You come to see me.

You say, "Mr. Hess, I would like to sell you the best

cookie dough celiacs made in the United States." Well, thank you for coming to

see me. Who are you? Oh, Susan Feller.

What business school did you go to? Oh, you didn't go to a business school? How

long you been in business? Oh, 3 years. Mm-hmm.

Yeah. Well you know, I've got a thousand

stores, so if I'm going to put your cookie dough in my stores, I need

probably 2-3 cases per store, so I need about 3 thousand cases.

How big is your production facility? Oh It's like a kitchen.

Well how big is your kitchen? Oh it's a kitchen in a small house.

Hmm. Have you ever produced in volume? No,

this will be my first time. Uh-huh.

Do you have a bank line of credit? No, I self finance.

Whao, how are you going to afford to make all the product, ship it to me, and I'm

going to pay you 45 days later? Oh, you haven't figured that one out.

Okay, well you know you're a very nice person, you're trying to do good, I like

that. When you figure all this out, come back

and see me. Now that's probably how that conversation

would go. Okay? because that person was saying, I'm

not going to take a risk unless I'm sure you can perform and you have the finacial

where with all to perform. Wholesale distributor.

She becomes a wholesale distributor. She doesn't worry about retail.

Well, she's almost there now. She just has to focus on manufacturing

and quality. She could add distributing to

restaurants. Retails bakeries, diversifies her

customers, decreases customer concentration.

Good pros. It's a delivery solution.

It doesn't talk about whether she can make it in volume.

And then, she would need technology, sales people, customer relationship

people. She's gotta build.

The New Jersey bakery joint venture. Well, what does it solve? It just solves

the issue of manufacturing, maybe. The cons.

Forming a partnership with people that you don't really know, very risky no

matter how nice they are. You lose total control.

You're now in a partnership and you don't control your production and remember

what's the most important thing that she has? The only thing which basically gives

her a differentiating customer value proposition, her flour mix.

So how does she keep control of her flour mix if she does the joint venture? Costs

a lot of money to negotiate a partnership.

It doesn't address how she gets national customers.

Is she going to move to New Jersey? And, if she has this partnership, what does

that mean for her sons if she wants to build a family business? So, she's facing

these big decisions. How does she scale production sales and

distribution? Scaling is getting bigger. [SOUND].

And it depends on the product. The cookie dough is different than fresh

baked cookies. What products and types of customers

should she focus on? What can she afford? All of this is interrelated.

And what we know is, successful entrepreneurs take small steps, not big

risk. They do this, they don't do that, why?

Because, when you face the unknown and you face uncertainty.

You take small steps, and you learn as you go.

Now, what should she do? What should she do? That's the question.

I want to stop here for 3, 4 minutes, for you.

We've been through it, it's been complex. We've talked about Susan's currently

reality personally. Her businesses current reality, we talked

about the pros and cons of the various alternatives.

Susan is looking you in the eye ladies and gentlemen and saying, help me, what

is the best advice, you can give me now? I will be here awaiting your answer.

I'll be back to you in 5 minutes, your time.

Workshop: Part 2 Feller's Gourmet - Growth Analysis

走向伟大：私人企业的理性成长，第一部分

与讲师见面