You’re all welcomed to MBA series 9th part Till now we ‘ve talked about the idea Learnt about how that idea can be converted into a business model Learnt about its marketing, how team is hired Learnt about the cost analysis, leverage Almost we have learnt about a business’s all departments Today we will talk about how you can grow your business. Here,I’m considering one thing that your business is running you have run the pilot and have made a sustainable model That means your business would keep on running, it won’t decline, your product is good and the service you are providing is good as well. People have liked it as well If all these factors satisfy, then only we can go on growth expansion. Here the first way is Bootstrapping Now, what does bootstrapping mean? The amount of profit we are earning is being reinvested back into the business its been one year our business is on and we generate 1 lakh rupees a month of profit that 1 lakh of profit we reinvest back into our business Now at what speed our business can grow ? According to per month 1 lakh rupees of growth rate. Right? Not faster than this. Our growth rate is significantly lower when our business is bootstrapped. We aren’t able to grow at a very high speed. Bootstrapping is great when its the start It’s good when you are running the pilot for the business when the the business model isn’t sustained, when you don’t know whether the product is good or not. When you things your product and everything is great, then bootstrapping isn’t that viable and we have to look for expansion plans outside it. 2nd way is Debt Raising. Debt raising means borrowing funds from the market I can take it from a bank, my relatives or any private money lender. Just kidding !!! When you take a loan, you have to give a specific return in the form of interest. Now let’s consider you have to give a 10% interest on whatever amount you have borrowed For example, if you have a crore of loan, you would be required to give a 10% of that as interest in a year that is 10 lakhs in a year if your operating profit that is the profit you get from the business is at least 1.5 times more than the amount taken as loan, then only I should consider this path, otherwise not. This means If I have to a pay 10 lakhs as interest amount and I’m getting 15 lakhs of profit that is sustainable that means it is recurring There is no risk involved if any problem appears then only I will do. If that is less than 10 lakhs then I won’t do it. Normally what happens if I talk about CCD’s failure They worked upon too much debt There are many business ideas that work upon debt They keep on taking the loan If the overall profit margin that comes is , lets suppose, 7% then if you take a loan of 10% interest, then every year you have to bear an additional 3% loss Here, that is why so many businesses flop every year this is not a wrong thing, debt raising is a very good way of growing but if our operating profit is more If I’m operating on 50%/100%, then I can always raise debt and grow my business One thing to always remember the amount of funds I’m bringing I have to always keep them liquid Liquid form means, for example, what CCD people did they took a huge loan from the market with that amount they bought a property and setup everything Now if they require money that is all is spent in buildings, and it’s difficult to sell building overnight If some crisis, I can’t sell that property and return the money quickly. 3rd, one of the very important factor is there should be cash flow in our business Cashflow means there is flow of cash inside and outside There are many businesses in starting they think we are a startup, we will operate in losses, ultimately they all are doomed. CCD is one of the biggest examples of this same thing. Now what CCD could have done is 3rd thing is the Franchise model Franchising and licensing, two things I would explain When would I do a franchise, when suppose I’m in restaurant business, or any service provider business where my business model is ready and all the SOP’s are set everything from how I would give the product to how a certain thing would be prepared is all ready. Now I would go to a person and tell him that “I’m a brand”, and I do all this thing which is all set you give me a certain amount of money and become my partner. Now all the labour would come from my side like if we take an example of Mcdonald’s, firstly you have to give a royalty fees which is different according to regions. Suppose you gave 50 lakhs, then constructed the whole thing, whatever team that would come would be from Mcdonalds The people would be their team that means people who are trained internally by them They have set their operating procedures like how a certain thing would be prepared at what temperature and for how long just like that, we’ll also make operating procedures in our business, I’ve mentioned this in in one of my videos before Now our product is present at a particular place as it is at other places The raw material is also provided by us and we are also taking a certain commission on every sale Here a big example is Youtube, I’m making content advertisers are putting ads on that The revenue that is coming is being distributed between creators and youtubers As a content creator, I’m working for youtube only I’m their employee only and ultimately its the benefit of the consumer, mine and youtube too. If somehow you can make an ecosystem like this, then there is nothing better than that. That would also lie in this category Next, there is licensing as well If there is some product that I have patented or licensed something that no one can copy some medicine or formula now I want to grow that, I would go to a the factory owner who makes that product I would tell him if he wants to increase a certain product to a great height for the example the chemicals industry there are many products that are patented from before it is said in a way that if the other person uses the product, it would increase the efficiency of the business. We can also say, if you use our process your efficiency would increase, or the cost would decrease. That person would connect with you and you can yearly charge a fee from him. I’m not concerned about how much quantity you make, I just need a specific amount yearly or on sale, according to the agreement. Another option is Equity raising The thing that is going on these days, startup funding I have made a full series on this yesterday, I put a community post about a blog that we wrote. people were commenting there should be a series on this, it is already there. Startup funding full link in the i button. You can watch it. Now raising funds isn’t that easy it used to be because 70-80% of people who are raising funds have some other idea in their minds I made a video Startup ka Ghotala Watch that you would understand it better This is the reason the funds aren’t released that much and also global recession is coming, the investors feel it is not the right time to invest right now. How would funding help? let’s understand this It’s not like that you won’t get funding at this time If your business idea is great For example, if I talk about Lapaas For Lapaas if I want to open 100 branches and I need this much amount The business is profitable, marketing is going on, management is good Now if I go to ask for funding, I would get it. If I want to, but personally I have told you earlier also I don’t wanna go on the funding path. The reason behind this is my equity would go. Equity means like right now I’m 100% owner of my company I can do whatever at my own will whether it is teaching for free or putting out videos on youtube. But if I bring a partner, I would have to listen to him because he has given a lot of money Suppose here only, if I have to open 100 branches For that, I tell an equity partner to give me 50 crores That person takes 20% in return of 50 crores As I have taken his money, I’ll have to listen to him If he says the interior should be like this or the fees of the students should be increased or so many tools shouldn’t be given. He’ll say anything and I won’t have any option but to listen to him Otherwise he would ask his 50 crores back This is the reason I personally don’t like funding that much Here, I’m gonna take a very big example of franchising Recently I went to an event and on the plane, I met a person He told me an idea plus I also added on that, and prepared a franchise model Normally, what happens we become a brand and after that distribute its franchise we’ll reverse this we open an outlet, run it for a month or so do the marketing, standardize the taste, ready the SOP’s ready it and give its franchise to someone else Now what happens suppose there is my store, and I sell Chole Bhature I market it and people know about me, because of features and there is recognition because of taste Now my sale is ready and it took me around 8 lakhs to set up everything with 2 months of running cost Now, I”ll ask someone to become a partner of a running store in 10 lakhs You take the shop and I would charge a 20% on each sale as profit. The number of employees would be provided by me Everything, employees, SOP’s would be mine 80% profit would be his, he would be happy. I would be happy as I too would be getting 20% recurring profit. I got 10 lakhs, out of that I’ll take 8 and set up another. 2 lakhs I got in two months and 20% recurring. Then again sold and took 8 lakhs out of it to set up another. Again, gave the franchise. Just like that, I would build my franchises. In the first one, there would be some problem while selling later it would be fine. The more the number we would have, the easier it would be to sell. Now just like that, I would have 500 branches and it would be Like we have 20 or 1000 branches for example and none of them we own and take 20% royalty from everyone. After making 5, the cost of one would start coming back. One case study I was thinking about, AskMe group, you tell me in the comments you want or not. AskMe group’s failure reason was they took the funding, their gross profit was very less They weren’t profitable and were operating in losses after that investor said no to give further money there was no money to run the operations and they had to shut the business. If you want, tell me in the comments below. Now let’s come to the assignment, very small assignment this time I gave many assignments earlier also, if you would have done those it would be very easy for you to do this one as well. First of all, you have to take out what is your gross margin At what margin you operate? 2nd in the leverage video that I gave the assignments you have to solve that and open up your mind on the topics of leverage. 3rd you have to see for expansion how much funds are required? Suppose if you have one store, and you wanna open second, how much would money would it require for that? 4th, you have to decide the mode of raising the funds. Debt, equity whatever you feel like, I told about the pros and cons of them all. You can decide whatever would be suitable for you. Lastly, you have to decide what would be your timelines and deadlines that means if I have to open two stores till January comes, then how much money would be required for that and where would it come from? Now sit and carefully solve this. After a long time, a video is coming because I was busy in my marriage’s preparation This is the 9th part, after this a 10th part will come and this series would come to an end. I hope you like this video, Do LIKE and SHARE and tell me in the comments how did you find this video? Bye Goodnight, good morning, good afternoon whatever time you are watching this.