LEAN HIGH GROWTH

HIGH PROFIT BUSINESS

Tesla :India China Cheap labour –low
costs=higher gross margin
• Top line = net revenue

• Selling price of pen Rs 118

• GST Rs 18
• Net revenue = 118-18=100 Rs

• Cost = human capital cost ex. Salary Add this cost to gross margin
• Revenue – COGS(Cost of Good sold) = Gross Revenue

• Gross Revenue gives EBITDA

• EBITA  EBIT

• Finally you get Net Revenue

Hidden TIP
• To improve profit margin substantially,
always Include human capital cost as COGS (for service
business/startups not for manufacturing or product businesses)

Gross margin = total revenues or sales – Human capital cost

If you cant get more customers and still want
to scale up
• Increase AOV(Average order value) per customer –
upsell,crosssell,downsell,decoy pricing

• Increase LTV(Life time value of customer)

D2C brand
• Don’t diversify too much – reduce your SKU’s(Stock keeping units) as
much as possible
• Have a delivery delay time but make it exclusive for customer –playing
with customer mind
• We stitch fresh fabric after you give order – get advance money as if
customer becomes your investor—delay the delivery time—don’t be
amazon—customer can wait for 15-20 days
• Avoid Subscription model for consulting business
Bharat 1
Bharat 2
Bharat 3
• BIG BRANDS DO CONTENT MARKETING
• Lack of consistency systems team processes

• Lack of targeting ,focus

• Time mismanagement
NO BRAINER OFFER
• 1. categorize your Product Based on Quality
• Notably, in every business, entrepreneurs have to deal with many products. Different
products perform differently.
• Different products can be categorized in the following manner, replicating the
popular Indian cricketers such as:
• in other words, you have to decide:
• 🔯 Which product is top-performing?
• 🔯 which product is bottom-performing?
• 🔯 Which product should be kept?
• 🔯 Which product should be fished out?
• To solve this dilemma, you have to know the profitability of every product.
• 2. Pool of Fixed Expenses
• In business, you have to take care of a pool of fixed expenses like:
• 🔯 Salaries
• 🔯 Rent
• 🔯 Electricity bills
• 🔯 Marketing
• 🔯 Sales
• 🔯 Internet cost
• 🔯 Interest cost
• You have to pay these expenses on a monthly basis.
• 3: Expenses are not paid from Revenue
• Where are these expenses paid from? Many entrepreneurs think that all the aforementioned expenses are paid from revenue, but that is not true.
• These are not paid from revenue, because revenue has its own expenses on the product. These expenses are paid from the gross profit.
• For example:
• If 1 litre of Bisleri water bottle is sold for Rs 10, then this Rs 10 revenue will not be used for meeting the expenses like salary, interest and
marketing.
• instead, revenue will be used to meeting actual expense incurred on:
• 🔯 product
• 🔯 water
• 🔯 bottle
• 🔯 bottle cap
• 🔯 bottle wrapper
• 🔯 carton
• 🔯 damage
• 🔯 transportation
• After deducting all these expenses from revenue, you have to take care of the pool of fixed expenses, with the remaining amount, which will be
your gross profit.
• Hence, it is clear that expenses are not paid from revenue, but the gross profit.
• 4. Keep Rotating Your Product
• Suppose on a Rs. 10 water bottle, your cost is Rs 5; in this case, you will be left with only Rs. 5 to take care of all
these above given expenses.
• Now, you will think that your expenses will not be met in just Rs 5. Here another most important thing comes i.e.
Rotation.
• High Margin Vs. High Rotation
• Some products have a thin margin with high rotation, whereas some products have a high margin with very less
rotation.
• For example:
• 🔯 Fastrack is a fast-moving brand as its watches and glasses are sold quickly because their average ticket size is less
than Rs 1000. Its product rotation is very high.
• 🔯 On the other hand, Louis Vuitton is a high gross margin product. Its handbag costs in lakhs. It has very few
showrooms as compare to Fastrack due to low rotation.
• So, below are the two things that manage your expenses and profitability:
• 🔯 Gross Profit
• 🔯 Rotation
• 5. Calculate Your Gross Profit
• Following are the steps to calculate your gross profit:
• i. Identify Your Cost
• You should identify the cost incurred in producing a product. It includes the followings costs:
• a. Fixed cost: It remains the same whether your production is high or low e.g. machinery cost and fixed electricity bill.
• b. Semi-Fixed Cost: It is the cost that increases after each phase of production. It is half fixed and half variable.
• For example, if you need 100 people to produce 1,000 bottles of water, then for producing 3,000 water bottles you may need
around 300 people.
• c. Variable cost: It is incurred as long as you keep selling the product. the variable cost in the production of a water bottle
would be:
• 🔯 Plastic
• 🔯 Water
• 🔯 Bottle
• 🔯 Bottle cap
• 🔯 Wrapper
• These costs are incurred only when you sell a product.
ii. Decide Your Gross Margin
Suppose your cost for producing 1 water bottle is Rs 5, excluding distribution and marketing cost. If you want a
gross margin of 50% to cover your expenses, then you will have to sell it for Rs 10.
When you decide your gross margin, you get to know:
🔯 how much profit you have to earn to cover your expenses?
🔯 What should be the price to cover your expenses and be profitable?
iii. Rotation
It will tell you how many times you need to rotate your product to manage gross profit.
Gross Margin x Rotation = Revenue / money
the more you rotate your product in the market, the higher will be your gross profit.
For example, if you have a product with a margin of 30% along with 10 times rotation and another product
which has a margin of 10% with 100 times rotation, then the second one will be more profitable.
The more the rotation, the more will be your sales.
Focus on multiplication of gross margin and rotation
You have to focus on multiplication of gross margin and rotation to ensure:
🔯 Frequency of cash inflow
🔯 Profitability
🔯 increase in sales
🔯 Expenses are covered
🔯 Availability of products in the market
• 6: Select the Top Performing Product
• Implement this framework in your products, and check which product
has a high gross margin and rotation, and which has low margin and
rotation. You should follow this:
• 🔯 Select which product should be kept and which should be removed.
• 🔯 Keep producing the top-performing products.
• 🔯 Remove the bottom-performing products.
• Key Learnings
• 🔯 Increase rotation of your product to increase gross margin
• 🔯 take care of the pool of fixed expenses
• 🔯 Do not pay expenses from revenue, but gross profit
• 🔯 Identify the cost incurred in making a product- fixed, semi-fixed and
variable
• 🔯 Identify how much gross margin you need to cover your expenses
• 🔯 Keep producing only top-performing products
• 🔯 Remove bottom-performing products that incur high expenses
Decoy Pricing
Customised Solution
• Simple business strategies can revolutionize any business,

I was consulting this gym (which is a subscription business)

and it has very high customer lifetime,

BUT

This gym faced:

Low conversion ratio

High Customer churn rate

I just suggested a simple way out, and it worked.

• Refund say 25% if customer
• Achieves challenge
downselling

• CROSS SELLING
Mood of boss
Your approach to boss
• WILLPOWER

• DISCIPILINE

• FOCUS

• PATIENCE
BIGGEST LIVING
• DON’T COMMIT TO ANYTHING TO ANYONE IN

LIFE(PERSONAL/PROFESSIONAL) UNTIL YOU COMPLETELY

UNDERSTAND THE EXPECTATIONS OF THE PERSON IN FRONT OF US

Entreprenuer
• Pay vendors

• Then pay employees

• Then pay government (tax)

• Then pay yourself

• Excitement,passion and energy of business owner stagnates with time and
his business suffers. So upgrade yourself on daily basis with new
skills/knowledge

• Think Big Scale

• Don’t look for shortcuts

• Don’t loose focus- say No to distractions/multiple alternative opportunities..

• Deploy Systems first,People second. Systems work,People fail.
• >90% of businesses are run by MSME

• 3-4% only by Govt

• 5-6% by private MNCs

Time and Financial Freedom
• Run Business like Remote Control(auto Pilot). Your contribution or
involvement should be minimum..Dont try to be all rounder..Then
only you can scale and enjoy family life.

• Marketing,Finance,Delivery,HR,Operations,Customer Delivery,Follow-
up/Support,Legal
• Quality issue,raw material issue,labour management issue,people
issue – DELEGATE TO RIGHT PERSON
• Enjoy your business,Business should not be burden
Stage 1 : Lala Type :BO spends all time on
firefightinh
ReAL ENTREPRENUER
• Vision
• Be practical but don’t limit your dreams
• Plan and be organized but be creative/flexible too
• Don’t get to attached to doing hands-on everything
• Systems and Processes-follow and but don’t make it a bottleneck to
reduce your speed
• Big Future Goals and hypergrowth mindset
• Scaling- New Products,New Geographies
• Next Strategic partnership-Partnership,JV,Mergers
CHALLENGES/ISSUES IN MSME
BUSINESS
• INCONSISTENT SALES
• FUNDING ISSUES
• CASHFLOW CYCLE ISSUES
• MANPOWER MANAGEMENT ISSUES
• QUALITY ISSUES
• LACK OF LEADS
• HIRING/TEAM BUILDING ISSUES
• PROCASTINATION
• SALES ISSUES
• LACK OF SKILLED PEOPLE
• MARKETING ISSUES
• BURNOUT ISSUES
• FEAR OF FAILURE
• LACK OF ENERGY
• DEBT TRAP
• LACK OF TIME FOR STRATEGIC GROWTH
• TOO MUCH FOCUS ON PRESENT –NO TIME FOR FUTURE
• Innovate not only for your products/services quality but in every area

• Target your niche where you can become leader

• No Brand: Sell more :Less Profit