5 Hacks for Setting up a robust SME Business

After observing so many businesses over the last 4 years, I realized the kind of business buyers and investors want to buy or invest in. So, if you are an aspiring entrepreneur or simply curious about understanding how profitable small-business models work, you've come to the right place! Once you know the basic principles that make small businesses more profitable, you will see your stairway to business heaven right there. sell business

1.    High margin businesses buy business

Here, margins mean the difference between the amount that you buy the product/ service for, (or the manufacturing cost) and the selling price of the product/ service.  buy business

 On the one hand, there are huge factories that handle over 800 staff members, selling an array of products and making 35-40 crores in sales, but, take home almost nothing. On the other hand, some other businesses take home 30% of their sales even without the involvement of a factory-like expense/ product structure. buy business in india 

Let’s take the example of business selling, say product x. It costs about Rs.10/- to prepare the product(including the cost of the materials) and you can sell it for Rs.800/- buy a company

In this scenario, we are not including the overheads and fixed costs, but purely talking about gross margins. I don’t deny the fact that some low margin but very high-volume businesses that can do very well. However, if you are just starting out, it would be wiser for you to look at a business model that has high margins. sell my company 

2.    Negative/ low working capital cycle buy business india

First, let’s understand the meaning of a negative working capital cycle. Imagine the types of businesses where customers make advance payments and the payments to suppliers need to be made 30 to 60 days later. That is called a negative working capital cycle. businesses to buy in india 

Your business is funding itself! businesses for sale in india

Most businesses that I have seen are making a profit in the ‘books’ but cannot remove that profit or withdraw the funds because they are stuck in working capital. If you do not get money from your customers for months or your money is stuck in the form of unsold stock, these are high working capital businesses. It is always better to develop a business model that does not need large amounts of active working capital so that you can mobilize your funds for more growth-oriented purposes. buy a business in mumbai

eg – Amul Milk, distributors pay upfront to Amul or maybe at a lag of 1-2 days, Amul pays after 15-30 days to the milk suppliers, hardly any inventory – Negative Working Capital business 

3.    Businesses that are not too owner dependent  business brokers​​​​​​​

Ever wondered how some businessmen and women always look like they are ‘free’? The truth here is that these people have businesses that run themselves! Over the years, I have seen that some of the best businesses are the ones that can run even without the owner being present at all time.  businesses to buy in delhi

Of course this does not meet that you leave your business totally. It simply means, a day without you being physically present won’t create chaos. sell business​​​​​​​

The secret to running such a business is to make your business an ‘automated’ one. Meaning to say, make your business more process-driven, one that depends more on pre-decided processes and not the conventional people-driven processes.  sell business india

Unfortunately, most Indian businesses cannot survive without the owners, if something happens to the owner, the business starts declining. In other words, the health of the business depends on the availability of the owner. Avoid building a business that is overly dependent on your presence so you can concentrate on the bigger picture that matters more in the long run than getting stuck in the nitty-gritty of matters.

4.    Less concentration of business on few customers/ markets buy business india​​​​​​​

Depending on a single customer to buy your product/ service can become problematic. If that ‘key customer’ fails in their business dealings, your business is bound to fail. Businesses that don't necessarily rely on a single customer, geography or market are the best kind of businesses. When you design your business model, make sure that it caters to the needs of more than one market and meets the needs of larger customer segments. buy business

In case your business is very niche-specific, it would make sense for you to predetermine your customers' and establish contracts with them. If contracts are long enough, margins are good and the client is stable, there is a higher chance of the business running more successfully than a scenario where nothing is pre-determined, but there is high-dependence on one customer or market. buy business in india 

5. Build scalable businesses sell business in india ​​​​​​​

Building a scalable business is about establishing a model that has the potential to multiply your revenues with minimal incremental costs. The central idea is that you should be able to grow your business as much as you want to, without hitting a growth ceiling. Companies for sale

This means there is no limit to how much the business can grow. Businesses that require less upfront capital tend to be more scalable. sell business in india 

Most businessmen think of scalability of their business in terms of a literal weighing scale (imagine a taraju), where one side of the scale measures the profits and the other, losses. However, a better way to look at this would be to imagine your costs on one side and your revenues on the other business opportunities in india

For any business-related queries, reach out to sonakshi@kapso.in

About the author: 

Sonakshi Pratap is the Founding Director at Kapso Business Services