Business Concept 6: Target Market

In every business, you have to know who your customers are. If you don't, you have to make a profile of the customers you want, so you can customise your products and services to suit their needs. The clearer you are about your target market, the better you can cater for them. Take for example the tale of 2 coffee shops located side by side at a highway rest stop pictured below:

You can see that the coffee shop on the left has at least 5 tour vans parked outside and the coffee shop on the right is empty. Why is this so? Here's my interpretation of their business plans:

Lee Chong Cafe (left)

Target Customers: high volume, high revenue customers = tourists

Where to find them: Tour agencies, so need to visit their offices in town to make arrangement for them to send their tourists to dine here.

Decision maker's concerns: Quality of food, cleanliness, tour guides taking tourists elsewhere and making money on the sidelines

How to address their concerns: Create a set lunch comprising of local dishes complete with dessert (which equals to more sales revenue), use table cloth so tables can be cleaned quickly, create cashless payment vouchers and signed by coffee shop owner.

Jia Shing Cafe (Right)

Target Customers: nearby residents, anybody who stops by

Where to find them: Don't need to, just wait for them

Decision maker's concerns: cheap food

How to address their concerns: Create a cheap menu using the cheapest ingredients

Lee Chong Cafe is operating at a higher profit margin and higher volume compared to Jia Shing Cafe even though they are in the same type of business located next to each other. Thinking and planning that little bit extra can make such a big difference to your business.

What I Learnt from a Self-Made Multi-Millionaire

I got the honour of spending 4 days with a self-made multi-millionaire from Taiwan. With over 95 countries under his distribution network, it is no surprise that he is one of the smartest businessmen I've ever met. What makes him stand out from the crowd is his knowledge in marketing. He is also a voluntary invited speaker to MBA courses in Taiwan universities. The following are some business concepts that I learnt from him during my brief encounter with him:

1) Find the right customers

There are some hotels that charge $100 a night and others that charge $1,000 a night. There is no point arguing which rate is reasonable because the value is determined by the guest. Guests that stay at the $100 hotel value a no-frills hotel, whereas guests at the $1,000 hotel value comfort, service, security, class, hygiene, etc. Instead of spending time, money and energy into converting one type of guest into another (sales skills involved), it is more efficient to use those resources into finding more guests of that same type (marketing skills involved).

Commentary: I wrote an article earlier explaining sales vs. marketing. As an analogy to the paragraph above, sales is like trying to convert a person from one religion to another, whereas marketing is finding a location where the people are free-thinkers and trying to convert them. Directing your resources into marketing, followed up by sales, will make your business more efficient.

2) Have a strategy - and maintain it

You have to acknowledge that you cannot satisfy everyone. If 80% of your current customers share the same characteristics, you must be aware that your current business strategy is catering to their needs. There will be criticisms coming from the remaining 20% and you will be tempted to change your strategy for them but bear in mind how it will affect the 80% majority. If you will lose customers from your majority to cater for the minority, then it is not worth doing. Keep doing what you are doing right.

3) Capturing the city

When asked why he picked Chile in South America as the first country when expanding overseas, he replied,

"The biggest market is the USA, but as in the art of war, you do not attack a main city head on because it is the most heavily fortified. To capture the main city, you first take on the weaker surrounding villages. After you have captured the surrounding villages, it is easier to take on the main city."

4) Show concern to your customers

Showing that you care for your customers will add value to your product, especially important for a product that is competing in the premium range. This is why his company's motto is "Care about your products, and show concern to your customers". The company encourages their distributors to find a low cost way to show customers you care even though there is no transaction, using the example of an optometrist cleaning your glasses for no charge even though you do not buy from them.

5) Have a strong competitive advantage

Being the only brand from Asia of his category in one of America's largest distributor is not an easy feat to achieve. These are his competitive advantages to stay ahead of the game:

• One stop shop - His brand has the biggest range of products so his customers do not need to look for other brands to find what they are looking for (example of doing thing better)
• Ahead of the game and continuous improvement - His products are always the trendsetter and continuously improved in quality because the company invests heavily into research and development (example of doing things faster and better)
• Great quality products at a reasonable price - Because of continuous improvement and strategically located, his products are cheaper (not cheapest) than comparative products in the same quality (example of doing things cheaper)
• Unrivalled marketing knowledge - With 30 years of experience and a wide global distribution channel, the company can provide advice and recommendations to new distributors on how to increase their sales volume (example of doing things better and faster)

6) Get a "lost leader"

This is a marketing concept which supermarkets use a lot. They advertise one product at 30% off to draw you to their shop with the idea that a shopper will end up buying more than just that 1 product on sale. When trying to widen his distribution network, the businessman made it a point to sell at least ONE product when the distributor has no interest in any of his products. Even having only 1 product on his shelf has a chance, however small it may be, for a re-order. If you leave empty handed, you get ZERO chance for future business. That 1 product on his shelf may open doors that might otherwise be impossible.

The 4 Levels of Wealth

Adam Khoo is one of the smartest Singaporean business authors I've ever come across. His book titled, Secrets of Self-Made Millionaires, is a very easy read and summarises many business and money concepts taught by other great authors such as Robert Kiyosaki. In chapter 5 of his book, he writes on the 4 levels of financial wealth (summarised with my own words), in ascending order:

Level 1: Financial Stability
- without having to work, you have enough money that can sustain your most basic lifestyle for at least 6 months

Level 2: Financial Security
- without having to work, you have "money making machines" that can sustain your most basic lifestyle indefinitely

Level 3: Financial Freedom
- without having to work, you have "money making machines" that can sustain your current lifestyle indefinitely

Level 4: Financial Abundance
- without having to work, you have "money making machines" that can sustain your desired lifestyle indefinitely

Business Review 3: Massage Centres

What's the difference between a massage centre and a foodcourt? At first I didn't think there were any similarities until I was enlightened by how massage centres operate from a friend...

My friend told me that massage centre bosses usually get their employees from referrals from their current employees. He would help to arrange the travel documentation and provide them accommodation. I used to think that accommodation and food would be included in their employment agreement, but according to my friend, it isn't. Accommodation rental is charged to the masseurs, together with other services like food catering and transportation. This is where I think is the brilliant aspect of this business.

The massage centre bosses have 2 income streams:

1. paying customers who come for a massage
2. their own staff who pay - royalty for each massage transaction, rental for accommodation, charges for transportation, food, travel documents, etc

So even when a massage centre has zero customers, income derived from his own staff can offset some of the fixed charges he has to pay. The massage centre boss is basically creating an environment for the employees to work and make money, while charging "rental" as an income stream. Once again, the concept of helping others make money applies here.

If you put this in the context of a typical foodcourt, the masseurs are renting the place like renting a stall which requires them to pay a rental to the foodcourt owner. The foodcourt owner sells drinks and the volume of drinks he can sell is dependent on the quantity of customers who patronise the foodcourt. The quantity of customers is dependent on the pulling power of the stalls collectively. This foodcourt drinks business is like the royalty the boss earns from every massage service carried out by the masseurs. The boss has to ensure the quality of massage remains at a high standard to pull in crowds because this will not only increase the amount of money he receives from the royalties ("drinks" business), but also the chargable services ("rental" business) he earns from the masseurs. When masseurs can make money, they will recommend friends or family members to come work for the boss, which increases the income derived from his "rental" business. 1 action can grow 2 streams of income. You can consider it unethical or inhumane the way some of the bosses run their businesses, but as an income-generating business model, it is simply brilliant...

Business Concept 5: Humans Vs. Systems

No, I'm not referring to Terminator here... I'm talking about the relationship between humans and systems in a business. Consider this scenario:

The accounts department gets confused by the many pricing structures of a company. There are:

• limited-time price promotions
• free gift with purchase
• quantity discounts

If you asked the accounts department to bill a customer based on his previous invoice, how can you make sure it is not billed based on a promotional price? When a mistake is made who do you blame - The person or the system? There is a difference and it is important for a business owner to understand the difference. The lazy, easy and common way is to give the accounts clerk a good scolding and hope that the mistake doesn't repeat itself. But what happens if the clerk is on leave and another person has to take over the job and makes that mistake?

The alternative to a good scolding, provide intensive training, multi-level checking, etc is to try to improve the system so that we close the loophole to prevent another repeat incident. How about creating a special code for all non standard items? This can be a form of a promotion invoice tag or promotion product code, so when the account clerk is about to price an item, promotional items are clearly marked. This will lead to less confusion, therefore less mistakes in the future.

Do you improve man to compensate for a weak system, or do you improve the system to compensate for the unpredictable man? I believe that humans are too variable and unpredictable to be depended on. Humans are emotional beings and performance can be affected by many outside influences. I also believe than systems should be set up to be run by people rather than people running the system. In order for a business owner to go on a long holiday and not worry about things going wrong while he is away, he will need to set up a foolproof business system. Remember: a self running business is the difference between a self-employed and a business owner as defined in the earlier article, "How to Make Money". If the business system is not foolproof to be run by employees, the owner can never take himself out of the business and his income will be proportionate to the time he puts in the business.

Business Concept 4: Sales Vs. Marketing

Many people cannot distinguish the difference between sales and marketing. We all know that the economy is about supply and demand. So in a nutshell,

Sales is about creating supply, and
Marketing is about creating demand.

In the context of war, the sales team is like army soldiers. They fight in the battlefield and their success depends on their fighting skills. The more skillful they are at their combat ability, the more opponents they can kill. The marketing team is like the army general. He plans the battles, chooses the battlefield, looks at weather conditions, research new weapons, and finds the most effective way to counter the opponent. His skill sets are different from the army soldiers, but his decisions will affect the soldiers. Even when the soldiers are outnumbered or less skilled than their opponents, strategic decisions made by the army general such as fighting in a downwind or downslope direction can make or break the battle.

A great example to illustrate sales and marketing is the (hypothetical) story of the shoe salesman of Africa: There was this shoe company who sent a salesman to an African village to sell their shoes. After spending one month at the village, he came back to the office and told his boss, " I've tried my best, sir. These tribal people are used to being bare-footed. They don't even need shoes to walk on the hot sun baked ground. There just isn't a market for these shoes". Unable to accept this excuse, the boss fired this salesman and sent another one on the same assignment. The second salesman came back one month later with the same excuse. The boss fired the 2nd salesman and sent a 3rd. Half a month later, the 3rd salesman came back to the office and told the boss, " there are 200 people in this village so I'll need 400 pairs of shoes to sell this month. Oh ya, and also pack me 3 boxes of broken glass"

The difference between the 3rd salesman and the 2 before him is his ability to create demand. Some might not agree that sprinkling broken glass just to make a sale is ethical (and I'm not saying it is), but that is not the point of the story. The story above shows that creating supply by sales skills alone is not enough is some cases. Even if there is no demand for the product initially, demand can be created; and this job of creating demand belongs to the marketing team. Sadly, marketing is not widely practiced for a few reasons:

• lack of knowledge and expertise in the marketing field
• lack of budget for marketing programmes

I do not need to elaborate on sales skills because it's quite self explanatory. Most companies only spend money to hire the best salesman that can push their products but think of the marketing team as an expense with no clear return on investment. Business works well when there are push and pull strategies akin to yin and yang. Sales is a push strategy and Marketing is a pull strategy. Understanding the difference will give you an edge in your business because once you start asking yourself "how do I create demand for my products / services" you will have a different viewpoint on the way business is conducted similar to the shoe salesman in the story above.

Let's make up a scenario for an example: You have a new brand of fishing rod to sell to the market. Most businesses would get a salesman to drive around town for all shops that sell fishing equipment and try to convince the boss of that business to try out your new product. This is a straightforward sales strategy (without marketing), and needless to say, you can imagine the results of this plan - Unpredictable, and basically praying for good results

How about this as a different approach: Before I even approach a fishing equipment retailer, I approach the local fishing association and ask if I can take up an advertisement in their monthly flyer / newsletter. I would prepare an advertisement complete with testimonials from satisfied users from overseas. Before they publish the advertisement, I would send out my salesmen to all fishing equipment retailers (where most would happen to be members of the fishing association) and tell them that I would insert their business in the advertisement as so interested buyers who see the advertisement could contact them to buy my product. Wouldn't you agree that this would make it easier for the salesman to push the product because you have in a way created demand on behalf of the retailer? This is an example of how an army general (marketing team) can create an advantage for the soldiers (salesmen) on the battlefield (market) just by applying marketing intelligence (push and pull strategies working together). This example also illustrates how thinking of helping others make money first, will help you make money down the line as discussed in my earlier article, Helping Others Make Money First.

My Money is Rotting in the Bank!

The Government recently announced that the inflation rate for Malaysia in February 2009 was 3.2%. The current interest rate for my current account savings is 1.25%. This means that the money in my account is rotting at a rate of roughly:

1.25 - 3.2% = -1.95% per year

That kinda sucks. Well I have another foreign currency account holding New Zealand dollars that's giving me an interest rate of 4.99%. The inflation rate for New Zealand in January 2009 was 3.4%. Without taking into consideration exchange rate fluctuations / risk, my New Zealand dollars are doing fairly better growing at roughly 

4.99% - 3.4% = 1.59% per year

I chose to hold my savings in New Zealand Dollars for the following reasons:

1. New Zealand has the highest interest rates among all developed countries (I was getting 7.99% p.a. for my savings account before the credit crunch hit)
2. The Governor of the Reserve Bank of New Zealand practically has the target of keeping inflation between 0% to 3% written in his job description - so he will not give-in to pressure from businesses to lower interest rate for the sake of economic activity
3. New Zealand is politically stable and very much less corrupted
4. Bank savings are now guaranteed by the Government

The rule of 72 is used as a quick way to estimate how long it will take your money to double in years. Just divide 72 by the return on investment per year. So in the case of my NZ current account, it's:

72 / 4.99% = 14.4 years.

Damn... if I have $10 in my bank account, it will take me 14.4 years for it to grow to $20. And that's not even taking into account of inflation! If you take inflation into account, the time it takes my purchasing power to double becomes:

72 / 1.59% = 45.3 years. 

That's very sad... That's also the reason why I'm still studying businesses and investments because only these financial vehicles offer a higher annual return on investments, which decreases the time it takes for money to grow.

Business Review 2: Burger Times

There's one thing the local people do well... selling burgers. It's a convenient supper snack because there's one in every corner of town. Someone came up with the idea to modify Burger King's logo and make it their own, renaming it Burger Times. 

They are relatively safe from copyright infringement because Burger King doesn't open a restaurant here. The burger is nothing special and is priced higher than others. I hardly ever buy from them because there are better burgers out there. I am reviewing this business not because I like the product, but I think there is some great thinking behind the idea.

There are roughly 6 of these burger stalls in various foodcourts around town. They have the same standard menu. The beef cheese burger that usually cost me rm 2.20 elsewhere cost rm 3 here. The business ideas I like from this business are:

1. No direct competition - By selling at foodcourts, there are no other burger stalls that operate there for a simple reason; rent. Many are not willing to sacrifice profitability for this expense which makes Burger Times the only operator selling burgers. In business terminology, this is called "competition barriers to entry"
2. Captured audience - Once customers sit down at the foodcourt, they usually do not change venue to dine. If a customer feels like eating a burger, they do not have an alternative. And most people do not dine alone; they have friends or family members with them. This is unlike the customer base from regular burger stalls that can drive on by.
3. Social networking - By employing youths that fall into the target market of this product, the boss is indirectly taking advantage of his employees' social circle and turning them into customers.
4. Economies of scale - By purchasing and preparing ingredients from the main station for the other branch stalls, they are more efficient in terms of man power and cost. 
5. Time leverage - By having standardised menus and ingredients, the boss doesn't need to spend his time cooking for each of his customers. He multiplied his productive time by the amount of stalls he has out there i.e. time is now not a limitation to his income. Where others slave to make say 40 burgers a night, he can make 6 times that amount (taking 6 stalls as an example) and is only limited to how many more stalls he can open.

The Burger Times van being loaded with supplies at the main station for branch stalls at the start of the business day

I do not like the burger, but I admire the business. This is the concept behind how Ray Kroc turned Mc Donalds into the giant franchise it is today, starting by selling burgers... Many can cook a better burger than Mc Donalds, but they are conveniently located everywhere around the world with standardised recipes. If you're able to sell a sub-standard, over-priced product like Burger Times and still make money, you're not a good chef, but a marketing genius. Who cares about your ability to cook a good burger when you have money in the bank?

Business Concept 3: Helping Others Make Money First

Robert Kiyosaki mentions in one of his books: to learn how to make money from business, first learn how to make money for others. Quite a confusing concept for me until I thought about it more. 

A self -running business requires an operational framework or system that enables employees to run and operate without the business owned being directly involved. He would have to think about the operations, how to control standards, monitor performance, etc., just to name a few things. If you read my previous post on "How to Make Money", the 2 examples of self-running businesses were a franchise  and multi level marketing (MLM). Both of these require you to teach others how to make money first before they make money for you.

It is for this very concept that has made my dad into the successful businessman he is today. In a time where quality products were hard to find locally, he pushed a quality branded product into the market as a distributor by selling them off to retailers. Of course, when customers could buy a quality product that they want, they were happy and the retailers made money. They more money the retailers made, the more they ordered from the distributor. Selling a branded product also elevated their status from just "Trader XYZ" to "Trader XYZ, authorised agent of ABC Branded products". The better their image was, the better it was for their business. 

The whole advertising industry is also based on this simple concept. Help the client promote their products, they pay you for your service. So in short, this concept is about "if you give people a rice bowl, they will share their harvest with you" - a philosophical saying I just thought up...

How to Live Happily Part 2

"Having Lots of Money" was not mentioned in the earlier post on how to live happily. So here's financial advice brilliantly written from the greatest wealth creator of our time, Warren Buffet. (Copied off a forwarded email too - thanks to Mike Ho):

We begin this New Year with dampened enthusiasm and dented optimism. Our happiness is diluted and our peace is threatened by the financial illness that has infected our families, organizations and nations. Everyone is desperate to find a remedy that will cure their financial illness and help them recover their financial health. They expect the financial experts to provide them with remedies, forgetting the fact that it is these experts who created this financial mess.

Every new year, I adopt a couple of old maxims as my beacons to guide my future. This self-prescribed therapy has ensured that with each passing year, I grow wiser and not older. This year, I invite you to tap into the financial wisdom of our elders along with me, and become financially wiser.

Hard work: 

All hard work bring a profit, but mere talk leads only to poverty.

Laziness: 

A sleeping lobster is carried away by the water current.

Earnings: 

Never depend on a single source of income. (At least make your Investments get you second earning)

Spending: 

If you buy things you don't need, you'll soon sell things you need.

Savings: 

Don't save what is left after spending; Spend what is left after

saving.

Borrowings: 

The borrower becomes the lender's slave.

Accounting: 

It's no use carrying an umbrella, if your shoes are leaking.

Auditing: 

Beware of little expenses; A small leak can sink a large ship.

Risk-taking: 

Never test the depth of the river with both feet. (Have an alternate plan ready)

Investment: 

Don't put all your eggs in one basket.

I'm certain that those who have already been practicing these principles remain financially healthy. I'm equally confident that those who resolve to start practicing these principles will quickly regain their financial health. Let us become wiser and lead a happy, healthy, prosperous and peaceful life.

Business Concept 2: The Mindset

One of the most interesting concepts I've read from Anthony Robin's book is this little idea:

Beliefs > Decisions > Actions > Results

Your beliefs influence the decisions you make, which in turn, influences the actions you take, producing the results of your actions.

Simple idea, almost common sense, but what implications does it have? Before dissing this concept as useless, ask yourself, are you satisfied in a situation where you are NOW?

Most people in this world are not. They complain that life isn't as good as it should be and do nothing about it. Rather than complaining about the government, your family background, economy, etc, have a moment and reflect on yourself...

Where you are today is the result of your actions, decisions and beliefs made in the past. For example, if you're not happy with your job at the moment, it's because you acted and applied for it in the first place. What made you make that decision to commit to that job is influenced by your own beliefs. Maybe at that point in time, you thought you were not good enough to apply for that dream job of yours or there are no jobs that suit you?

It all starts from your beliefs. If you're not where you want to be now, maybe it's time to change your beliefs because doing the same thing and expecting a different result is called insanity. The reason I can still remember this concept by heart from Robin's book is because I think it is such a simple, yet powerful tool to better your own life. If doesn't cover just your financial goals, but your health, social and general aspects of your life.

For example, if you're not at the health level you want to be at, reflect on yourself why is that so? Maybe you're not healthy because you have not exercised (action), because you have a nap as soon as you go home (decision), and there is no time to exercise (belief). To change the situation you are now, you have to start by changing you belief that "there is no time to exercise".

Same goes if you're not happy in life, or if business is not doing well...

Business Concept 1: Competitive Advantage

For any business to survive in the long term, it must have a competitive advantage, or edge. To keep customers coming back to that business, it must have an edge over its competitors. Put simply, a competitive advantage is where you are able to provide goods or services which are:

• better
• faster
• cheaper

than your competitors'. 

You don't have to have all 3 of the above to have an edge over the competition. Just 1 or 2. If you can have all 3, that business will be a monopoly player in the industry. 

If you're in business or starting out a business, as youself, what is it about my product or service that is better, faster or cheaper than my competitors? If you can't answer this question, you might have huge challenges facing current and upcoming compeitors.

Who is a good competitor to go up against? Government Linked Companies (GLCs)! Why? Because government agencies are mostly inefficient in terms of operations and cost. Nobody looks after quality, they are slow, and nobody cares about the bottom line. Just look at the opportunities they create:

Astro Satellite TV: We have such bad quality programmes shown on national TV, the public is "forced" to subscribe to satellite tv to get better content for their entertainment. National TV is free to air, but people are willing to pay for a better service.

(Example of doing things better)

Toll Infrastructure Projects: Rather than waiting for government approval of funds, getting the work organised, etc, private companies can get the whole process carried out faster. They fund and build the highway themselves, stick a toll booth there, and the public pays for a service that would require the government another lifetime to have completed because of lack of funds, beauracracy, etc...

(Example of doing things faster)

Air Asia Airline: The national carrier, being the monopoly player in the field, never put operational and cost efficiency as priorities. Now this budget airlines are taching them a lesson or two in operational and cost efficiencies. For customers who percieve air travel as only getting from point A to point B, the full service carriers lose the edge of having a better service to the budget airline's edge of being cheaper.

(Example of doing things cheaper)

The above are some examples of how inefficiencies create business opportunities. When you get an edge over the competition, don't forget to keep looking back as competitors do not just sit on their hands doing nothing. Keep sharpening your edge and don't lose it.

"If you want to be successful, be a professional (referring to a specialist in a field), because amateurs get killed" 

- Quote from a self-made managing director whose company has a turnover of Sg$ 15 Million a year. Also echoed by a businessman who became one of the first few to own the latest Mercedes S-Class when it was available in my hometown.

Things That Make Me Go Mmm...

I'm a simple guy and one sure-fire way to cheer me up anytime is this combo set from KFC. 2 pieces of original recipe chicken, with cheezy wedges as a side order. I had this combo on Happy Tuesday, where they had 25% off for the chicken order (RM 5.62), and special savings for the cheezy wedges and drinks set. (RM 3.80). Total came to RM 9.90 after tax. Damn good value and a very satisfying dinner...

The story of Colonel Sanders is often used to illustrate persistence, the ability to overcome rejections, and the fact that age is no barrier to success. Colonel Sanders started off in a kitchen selling fried chicken, but was forced out of business when the government built a highway to bypass his restaurant and was broke by the age of 65. He understood the difference between being self-employed and a business owner, which is why rather than opening up and running another restaurant, he decided to drive throughout the country, persuading restaurant owners to use his secret recipe, and paying him a royalty in return. 

It took over 2 years and 1,008 rejections before he got his first "yes" 

(I wonder who actually counted the number of rejections he had...)

Imagine your own grandfather who is past retirement age, driving around the country for 2 years and getting nowhere with his "fantastic business idea". How many people would have stopped this grandpa? How many people would have said this old man is crazy and insane? How many people would have told this old man to face the facts and that there is no way his business idea is going to be accepted?

Colonel Sanders managed to become a millionaire in 8 years, starting off at the age of 65. He wouldn't have been able to achieve this as a self-employed restaurant chef because time would be a limitation to his cashflow. This is an extraordinary success story because extraordinary results come from extraordinary men. I am sincerely grateful to this once "insane, thick-faced, desperate and broke" old man for allowing me the dining bliss I am able to experience now.

Business Review 1: Chicken Buffet Restaurant

I just came back from stuffing myself at a chicken buffet. Noticed some interesting business aspects of the restaurant, so feel compelled to jot them down. By the way, this post is dedicated to my first encouraging comment left on my blog by P J Stuart, Thanks :)

As I sat there and observed the business operations, I thought that it's quite a good concept. But before we go through the strengths of that particular business, let's discuss what makes a BAD restaurant:

1. Bad food or inconsistent quality
2. Bad service from that bitchy waitress
3. Food takes too long to be served
4. Unhygienic place
5. Overpriced

Let's run the above through with the buffet restaurant I just went to:

1. When the main course is fried chicken, it is usually hard to go wrong because to me, the hardest thing to cook wrong in this world is fried chicken. Even if the other dishes have been cooked bad, you don't usually complain because there's others to choose from.
2. The only interaction I had with the service staff is at the entrance where I paid my dining fee, then accompanied to my table. The rest was self service at the buffet bar, so very little interaction with the service staff, less chance of being poorly served
3. The buffet bar is ready when you are so no waiting time, unless there's a queue...
4. It was neat and tidy. The staff attentive because their only job was to clear the tables. They were focused on the job because they do not need to carry out the typical restaurant tasks like taking orders, sending out food to the right table, making recommendations, distributing and retrieving menus, etc... 
5. All customers are aware of the price before dining, so there can't be surprise because you pay first.

Other than point number 4, which is unavoidable in any premise, the buffet restaurant doesn't seem to be susceptible to the usual restaurant complaints... Now lets talk about the strengths, or advantages:

1. Ease of operations - the cashier can easily be the person who shows you to your table, and also help bring out the food from the kitchen to the buffet bar. Low skill sets and able to carry out different tasks. Even the complexity of calculating the bill is almost non-existent because everyone pays the same amount.
2. Easy to track profit and loss - as the boss, you should have a rough estimate how many people need to walk into your restaurant for you to break-even. Imagine if you're overseas on holiday, all you need to do is to have your manager send you an SMS on how many people visited your restaurant that day and you'll know you've made money or not.
3. High revenue per table- buffets are usually social events so there's usually more than 2 people dining per table.

Seems like a good business to own... easy to operate, duplicate and monitor. But what do I know? I've never run a restaurant in my life. Just sharing my thoughts. And even if this is not a good business idea, the morale of the story is, whenever you are at a business establishment, ask yourself questions like:

• is this a good business model?
  
• how do they make money?
• what are the potential weaknesses and threats?
• what else can they do to make more money?
• how do they keep the business running smoothly?
• what can i do better if i were the boss?

Ask more, learn more, grow more...

How to Make Money

The following is my interpretation from the works of Robert Kiyosaki from the book Cashflow Quadrant

Kiyosaki sums up the 4 ways of earning money is by being a/an

1. Employee
2. Self employed
3. Business owner
4. Investor

Hence, the E-S-B-I Quadrant. I'm planing to go into detail of each quadrant in my future posts. Here's just the run through...

Being an Employee

Everyone knows this as this is the formula for steady income. We study hard to get our degrees, so we can work in a big and well known company with a respectable salary. You basically sign a contract (employment letter) to determine what you are worth on an hourly rate for your services to your employer.

The maximum income potential is: (your hourly rate) x (hours company is willing to pay you)

Your hourly rate is a fixed and the only way to increase the amount of income you have is to work more hours, but of course, there is a limit to how much you can work or how much extra time your company is willing to recognise

Being Self Employed

Being self employed is being personally involved in selling a product or a service, or simply put, being your own boss. Might sound like the best way to go, but unlike being the employee, there usually is no fixed working hours or holidays for the self employed because each blood, sweat and tear directly affect his income. the self employed person is central to the operations meaning that if he is not at work, the business would not run.

The maximum income potential is (profit margin per hour) x (hours worked)

Here, like the employee, your hours worked is limited by your own input, but of course, the limit to any human being is 24 hours a day. The only variable you can change is the profit margin per hour, so your focus is to increase it to the highest you can. Below are some examples of different self employed careers:

Doctors - High profit margin per hour compared to most service based industries. On top of that, the doctors in Malaysia sell medicine too. (In western countries, the doctors can only charge a consultant fee and the patient has to buy the medicine at a pharmacy). So selling medicine is a method that doctors use to increase the profit margin per hour.

Shop Keeper - Medium profit margin per hour. To increase the amount of sales per hour, they can source for higher margin products or find more customers

Small-time Food Seller - Low profit margin per hour. Like the above, they can increase the amount of sales per hour by improving their product mix or increasing their customer base.

Being a Business Owner

This is where things get interesting... The difference between a self employed and a business owner is that the business owner is not directly involved in the day to day operations of the business. The business owner has a self running business run by employees. His objective is to set up a business and getting the right people to run it, so his focus is to set up an effective system, or easier still, employ someone to set it up. The best way to determine if someone is a business owner or not is to ask him if he were to go on a 6 month holiday, would his business still be running by the time he gets back? If the answer is yes, then he is a business owner. If not, he is self employed. This question also shows that a business owner is not limited by time as his income is not directly affected by the amount of time worked. This is the biggest difference, and advantage, the business owner has above the self employed and employee.

His maximum income potential is: (profit margin per hour) x (business hours)

Because his income is not limited by time, he can use his time to set up more self running businesses, which in turn increases the amount of income earned per hour and number of business hours. For example:

Franchise / store branch owners - If the business has a fixed recipe or operation manual, etc, the franchise / branch can be duplicated. A 2nd store opening will double BOTH the profit margin per hour AND Business hours. Both variables in the equation above can be increased - unlike the employee or self employed where time is a limitation

Multi Level Marketing (MLM) - MLMs can actually make you into a business owner. After setting up an effective sales downline, you will notice that for every successful downline, you've just increased your profit margin per hour and business hours because your downline is using their time and effort to make you more money. Once again, no limit to profit margin per hour and hours worked.

The most important concept in this type of segment is that time is no longer a limitation of your income. The business owners build up cash cranking machines, which are the self running businesses, then continue to build more. This is where the good life is.

Being an Investor

An investor is a person who buys an entity and rents it out, and over time, the entity should increase in value from the time it was first bought to make it a positive investment. A person who buys shares from the stock market and sells it for a profit is NOT an investor. This is a common misconception that any person who makes money buying and selling shares to make a living is a "good investor". He is merely a trader making a profitable transaction. I'm planning to write an article on the difference between a trader and an investor. So from the definition above, here are some examples of investors:

Property Rental - The owner buys the property for an amount of money. Usually rents it out at the amount slightly higher than the monthly installment, and over time, the property increases in value. Because the rent covers the monthly installment, this means that the renters are actually helping the property owner pay off the mortgage. And when the mortgage is fully paid, the investor has just acquired a property of full value by paying just the down payment. If he put down $20k for a $100k property,

his return on investment is (100k - 20k) / 20k * 100% = 400% at the end of the loan period

but if over the time the rent is paid, the property value increases to say, 120k,

his return on investment is (120k - 20k) / 20k * 100% = 500% 

Running a Foodcourt - Similar to property purchase, you only need a downpayment, not the full amount if you can plan that the rent you are charging and monthly sales profit covers the bank loan. Over time, you are using just your downpayment amount to aquire a property in full value.

The concept of investing is not about creating massive amounts of cashflow, rather, using the smallest amount of money to acquire an asset at full value. Many people do not think of it this way. This concept of leveraging money is covered in more detail in Kiyosaki's book, OPM.

Dividends on Stock - The investor buys shares in a company that he believes will continue making money in the future, therefore profitable and pays out a dividend annually. He reinvests the dividends into buying more shares of the same or another company, and year after year, accumulates more dividend-paying shares. These dividends should give a better rate than the fixed deposit (FD) rates from the bank and on top of that (as a bonus), increase the value of the underlying share. Because selling the share for a profit is not the focus of the investor, the daily fluctuations of market price do not make him nervous. His focus is to acquire more profitable company shares that pay a dividend to increase the number of income producing assets. So another way to look at this is that an investor buys the company shares, rents it out to the company, receives rent in the form of dividends, and if he has done his homework right, bought the shares at below its market value, and the share price increases over time. When's a good time to buy shares at below its market value? During a stock market dip / crash / correction, when everyone's selling shares...