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When we opened our small food cart business, we’re not aware of the challenges that we will encounter when we established it.
Though we have formulated a plan from the beginning, there’s still some missing information that we “forgot” to account.
This is the story of a struggling small sized food cart business against the big restaurants currently situated near our store.
Do you remember the old story about David and Goliath? Well, it sort of like this but a little different. In the old bible story, a young Hebrew is fighting an enormous opponent named Goliath. I can say that in this story, our store is David fighting ten (10) Goliaths surrounding it.
Yes, you heard it right. Ten big restaurants and food cafeterias are surrounding our business. But before I share to you what we did to survive the five years competing with the market, I must this first. We didn’t actually win, we survived.
To be honest, we didn’t consider that we beat up those big businesses around us because if we did, they’ll be closing shops now. But they’re still operational up until now. Same us ours.
So without keeping you wait, here’s our valuable tips on how we managed to survive.
We Set our Goal
You might heard this a million times “Life without a goal is like a race without a finish line, you’re running nowhere“.
To be real, this is true and you should follow this. Right before we signed the check for payment of our franchise, we already have goals in mind. My husband’s goal for the business is to be able to provide us generous passive income monthly which I totally agree. But we thought that having that goal is too vague so we decided to quantify it by assigning a number to which it will define the monthly success of our business.
According to my husband, a Twenty Five Thousand Pesos or 25% return on sales (net income) is a good and decent enough passive income for the month for six consecutive months. Aside from being to conservative, it’s highly achievable and realistic.
We never dreamed of a six digit monthly income, we just want to have a stable, consistent and decent passive income where it will go directly to our bank account for savings for our future house.
You see, having a goal from the start is like having an imaginary finish line. You run towards it. And when you’ve reached that finish line, you set another one and try to finish the race. If once again you reached the second finish line, you set another… and another. There’s no limit to success.
But what if you didn’t make it? Say for example, at the third goal you set for your business, you failed to achieve it. You calibrate! You adjust and analyze if your new goal if its still achievable. Then you modify but don’t give up!
Another goal we set for our business is to be able to pay for its fixed expenses (Rent and Salary) for the first six months and stay in business for one year. For the first three months our business is really hard. We’re getting a daily sales for approximately P800 to 1,500 which is kinda low. Though we have computed our daily break even point and expected that the turn out of our store will be slow for the first three (3) months, we never expected that this will go on for three months.
When the customers and passersby are familiar with our store, then the surge of customers went high which returned a P2,500 sales per day. I forgot to mention that during the first three months, we are already thinking on how we can improve our sales by finding new products to sell.
At its sixth month, our store are already doing great. It’s earning P3,500 to P4,000 on an average. The next thing we did was to adjust our new goal and do the things what we did before. We strive to achieve our new goal.
Measure your success regularly
I don’t want to bore you with the details on how to measure one’s success. But technically, this can be achieve through simple accounting. If you didn’t know how accounting works, I suggest you read few books and learn how to do it.
The good thing about this is both me and my husband are Accounting Graduates. Plus, my husband practice accounting as part of his day job. So we didn’t need to hire an accountant just to manage our books.
Anyway, one tip for new entrepreneurs is to record each sales. In our store, we provide our employee a “Daily Sales Report”. The Daily Sales Report is a printed form where our employee will fill up whenever a sale of a product is incurred.
At the end of the day, our employee will total the entire day’s sales and compare the cash he have in the cash register. The cash from sales will be collected the next day by my husband.
The same cash will be deposited in the bank account specifically for our business. The cash from the bank will be used to purchase inventories, pay the monthly expenses such as salary and rent.
The residual cash will be our savings.
If you’re not knowledgeable in accounting, you can measure your success thru your business’ bank account. First thing to do is assign or open a bank account for business purposes. Then every time you made a sale, make sure to deposit all the cash to your bank account. Just like ours, you may use that bank account to pay all the expenses related to the business.
At the end of the month, compare your beginning balance versus the ending balance of your Cash in Bank. That my friend is your income! Though this may not be sound accounting, you can still get the idea that your cash is increasing.
As you can see, measuring your success is correlated to the first item we have discussed (setting your goal). In layman’s term, if you’re in a race and aiming for the finish line, you need to be aware if you’re still far or near the line.
You need to have a realization if after several months and you’re still too far from your target, you need tweak your strategies a little to make it work.
We Exclude Ourselves in the Competition
This one is my favorite marketing strategy which I’ve learn from Dan Lok. For everyone’s information, Dan Lok is a “celebrity influencer” which teaches people on several topics. I don’t follow him much but watch few of his videos online.
One of the video says you don’t need to compete with the market instead exclude yourself from it. By that way, you earn leverage against your enemies.
Here’s how I managed to apply his teachings in my business:
My food cart business sells sodas. Coca Cola products to be specific. If you’re going to survey the minimum and maximum price of Coca Cola products form each store, restaurants, cafeterias and coffee shops around our business you will get the amount of P15 (minimum) to P30 (maximum).
The thing is, the cost of a bottle of Coca Cola alone is just P10.50. So if you’re going to sell this at P15 or P30, you’ll get a profit margin of P4.50 and P19.50 respectively.
The cost of the soda that I’ve mentioned excludes the overhead costs for the electricity which we can assume that costs P1 per bottle. This makes the cost a little bit higher, which is now P11.50.
If I’m going to price my Coca Cola at P15, I’ll be joining the entire herd of sellers in the community. But if I sell this at P14, I will be the minimum price and “might” loose a peso each time I made a sale.
But I realized that I am not looking a peso. Instead, I’m earning P2.50 as my profit margin. Aside from that, I will be attracting potential customers because of my cheap sodas.
Word of mouth will take place and the customers will go directly to me and buy sodas from our store. You see, I’m not joining the existing market. I’m creating a new one. If I’m going to join the existing market, our store will be eaten alive!
By now I hope you get the idea what I’m trying to say, right?
We didn’t want to win the race, we want to win the marathon.
You might be wondering why I’m mentioning “race” all the time. Just because its the best metaphor to use 🙂 and also running a business is like a race. Or should I say a marathon if you’re competing against the giant business like what we’re experiencing.
I’m sure you know the difference of a race and a marathon.
According to Google, a marathon is a long-distance running race, strictly one of 26 miles 385 yards.
While a race is a competition between runners, horses, vehicles, boats, etc., to see which is the fastest in covering a set course.
The difference is that marathon is a defined by a certain length of the road race while a race is a just contest between people, animals, vehicles, etc where the goal is to be the first to reach some objective several horses run in a horse race , and the first one to reach the finishing post wins.
We build customer loyalty
Customers are important in business, there’s no question with that. Without them, you’ll be packing your bags and going home early.
We already know that your sales are directly related to your customers right? Before I get to my point, may I ask you (if you may). When you did your “feasibility study” or “market study” or “business plan” or whatever you call it of your business, did you ever think of the customers? Did you ever think where will be your customers will be coming? Have you tried studying the demographics?
If not, then what are you waiting for. Do it!
Here’s what we did, there are three types of potential customers for our business. These are:
- The neighborhood community – these are the people living within the area or the vicinity of our business.
- The passers by – these people are the working class walking towards EDSA and BGC. These people are coming to work or going home.
- The BGC Workers on a break – obviously, these are the people working in BGC currently on a lunch, merienda or dinner break.
Now, these customers are regularly visitors of our community. These people see our stores daily. They are potential customers who may convert to actual customers. So what we did, we try to hook them to buy something from our store. Maybe a soda? A mineral water or any cheap item from our menu. This is the only chance we have to impress them by giving them quality product.
Say for example, a certain customer will buy from us a soda. We don’t want to serve him or her a non cold (room temperature) soda. We want to serve the best cola he or she will ever have. We will give the ice cold drink he or she deserve. If they want, we can give him a freezing cold soda.
Through that simple gesture, we build something inside the customer’s head. We implant an idea that every time he or she will buy a soda from us, an ice cold soda will be served.
That way, we build customer loyalty. We built an illusion which doesn’t hurts us both.
We make sure to offer what others don’t have
When planning for our business, we are well aware of the current market situation in our location. The community where our small food cart business is currently situated have several restaurants and cafeterias established. So putting up another food business will instantly fail.
Not unless if we put up another food business which other restaurants and cafeterias don’t offer. Introducing our small food cart business, where we can serve home cooked quick (all day) breakfast meals at very affordable price.
Most of the restaurants or carinderias currently operating in our location serve home cooked meals but they don’t serve it hot. They cooked the foods early in the morning then display and try to entice the customers. There’s no harm with that but the quality of the food is compromised due to the time it was cooked against the time it was actually served.
In our store, food are only cooked when a customer ordered it. We don’t cook the food in advance because that will violate our mission.
See what we did there? Most of the restaurants in the area can offer the customer food but not that fresh and hot. Thats where we come in!
We offer a solution that others can’t!
We don’t fight all battles
There will come a time where you need to compete with the other businesses around you. And as what a competition is defined, there will be a winner and a loser at the end of the day.
But what if every month, you will be challenge by your competitor? Will you accept the challenge? Of course not!
We don’t fight all battles!
Say for example, in my previously discussed “Coca Cola” pricing. One of my competitor decided to lower down their price of soda same just like ours. Do we need to compete? The aggressive move will be lowering down our prices by another peso. If I will decide, I will not lower down my price. Because If I lower down my price, my profit margin will be much lower. I let them copy my pricing and live with it. There’s no harm with that.
And besides, if one store will copy my pricing there will be two of us sharing the market at P14 per soda. But my edge is the loyalty from my customers that I already built.
Though I can still lower my price but it will be much harder for me to achieve my overall goal.
Another strategy is we can also try to have a “promo” where we offer the soda at P13 per bottle for the thirty (30) to (60) days just to build another illusion in the minds of the customer and reverting it back to its original price of P14.
This is just my personal opinion, you may choose whatever strategy you want. 🙂