Growth Boosters- Can i find em in Tea?

Ever since we moved office to this part of town – the whole of the team has become almost completely addicted to the corner tea-stall. The shop is your regular road-side tea kiosk managed by this ol man- who is the brewer, accountant, salesman and the delivery boy- all packed in one.

Growth Boosters in teaIt may come as a surprise but our “baba” (as he is fondly called) is an astute business man. His concepts of tracking demand , recovering Variable/Fixed cost are so well engrained, that he doesn’t deliver at our office if there are fewer than “X” people- coz he wont be able to recover the cost of the rickshaw he hires to reach the office. He also calls us on Friday nights to check and confirm if we are open on Saturdays and how many cups are required.

Baba also makes one of the best teas that I have ever had- He knows that this is the trade secret that keeps him in business inspite of his irregularity of delivery.He told us that he once had an assistant who “stole” his recipe and started his own shop- right across the road from Baba’s previous establishment. That explains why Baba is so scared to expand his “team”.

Baba charges Rs 5/- per cup of tea has a regular demand of atleast 200 cups of tea twice a day for atleast 5 days a week- which translates to a weekly sales of Rs 10000/-. Not bad for a road-side vendor you might be thinking ! Baba has been able to achieve this scale coz he selected a neighborhood that had “few” offices in a largely residential locality.

This had the twin advantage of:

a. Ensuring that there were few large customers (like us) with sufficiently high demand

b. There will be little or competition coz its a primarily residential area. Other tea vendors are close to business or corporate hubs.

Assuming his profit margin to be 40% Baba is currently at Rs 16000/- per month take home. Much better than a lot of call center execs huh? But Baba’s business is stuck at this level of scale for quite some time now.

Here are the reason(s):

1. Most corporates want the tea delivery once each in the 1st and 2nd halves of the day. Given that they are wide spread- Baba cannot deliver to too many offices, by staggering the time of delivery. He has already experimented with just sending his kettle with the rickshaw chap- but there were some trust and logistics issue involved.

2. Corporates that grow mostly start investing in a vending machine or eventually move to a more “corporatish” locality.

3. Baba is adamant to not hire a “chottu” to scale up his operations coz of the bitter experience in the past. And am sure there are no IPRs in their business yet.

So what if anything can this brilliant brewer do to grow even further in his quest to get more nicotine down more throats ?

Delhi-Gurgaon Toll Plaza: Is adding more Marshals the solution ?

There has been much hue cry about the mis-management of the newly openend Toll Plaza at the Delhi-Gurgaon Expressway. There have been reports of consistent traffic jams during peak hours where commuters have alleged that they were stranded for almost 2 hrs only at the plaza.

Source: http://adatewithdelhi.wordpress.com
Source: http://adatewithdelhi.wordpress.com

While I symapthise with all those who have to undergo such drastic methods of increasing their patience levels Рthe management of the plaza has some serious genuine problem at their hands. Consider this:

– Most of the “regular” commuters have still not shown any early indication of shifting towards the monthly token, which would ensure a smooth pass from the plaza.

– The other option the plaza mgmt has is to manually charge issue receipt for each vehicle passing the plaza. Assuming it takes 20 seconds per vehicle- the bottleneck is pretty obvious.

– The peak demand for toll-marshals exists for only about 2 hrs each in morning evening and this is where the tricky nature of the problem is

– One can invest in multiple marshals per lane (as has been done currently)- which leads to parallel processing hence increase in the “capacity” of the plaza. But what do these “extra” hands do during the off-peak hours?

– The increased labour could be used to actively promote or even hard-sell the monthly tokens (during the off-peak hours) but I doubt the efficiency of such a step.

So is there an innovative solution to such problems where one needs extra “labour” to service intermittent peaks in demand? How does one ensure a good return on such investments? Should there be some “incentives” to drive more rapid migration to the token process. Plz do keep in mind that most of the tolled projects in India have had a history of not breaking even. Though my guess is that the Delhi-Ggn plaza will be an exception.

Business Case Study # 1: What should the Indian Farmer do?

Indian FarmerWas on a road-trip when I came across a possible biz dilema that is faced by most mid-sized Indian farmers.

– Our man-HariRam has been able to save enough to either buy some more land or a tractor

– Hari like most other farmers is not sure about credit- either the rates are too high or the micro-credit firms have not really reached his village yet- This means that he cannot really buy both the tractor amp; the plot at the same time

– HariRam’s current plot size doesnt really need him to buy a tractor

– If he decides to buy land- he will have to stretch himself really hard for 2-3 years before he can afford a tractor.

– if Hari buys the tractor-he sees a high rate of depreciation on his asset which will not see full scale utilization

What do u think the Indian Farmer should do?

I suggested Hari to find a few other such farmers in his community & then

– Either pool the money amp; buy a common tractor

– Or buy a tractor & start lending/leasing to these other needy guys also. He rejected my 2nd idea rightaway- saying “If i start making money by lending tractors to others- these other guys will also buy it & ¬†I would not see the ROI on my investment”.

So put on your strategic mgmt caps & tell Hari what he should be doing.