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Shopping for the best business expansion model?

How does one find the business expansion strategy that\\\'s best for one\\\'s business? Two entrepreneurs give tips
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As each business is unique,  expansion strategies that work for some businesses might not work for others Both MOJO, a manufacturing and distribution business, and Bonnie's BBQ Grill, a hospitality food chain, had to try different growth models before they successfully widened their reach to serve more customers.

Joey Cuerdo, proprietor  of MOJO Slippers and Sandals says he has tried several expansion strategies, among them: (1.) broadening client base through sales agents, and (2.) consigning in different store chains in Metro Manila. Through the company's 18-year-history, Cuerdo has learned that increasing the number of branches "is definitely good, but [this] has to be backed up by a bigger and very efficient supply chain."

Cuerdo admits that "the tendency in expansion is to get sloppy. [This results in] warehouse inventory not matching the needs of the stores, and collections not coming in fast enough to match the financial needs of production. [This is] bad for small or expanding businesses [such as ours was] because we were still working with rolled-over capital."

Through the experience, Cuerdo learned that one should focus on a fool proof supply chain, and study the trend of purchase orders. "All items should be specifically targeted to a store needing that product. Don't guess, because guessing for 100 stores can wreak havoc on a limited financial system, unlike [if you're] guessing for 10 stores."

Myra Salvosa, co-owner of Bonnie's BBQ Grill shares that they expanded by (1.) opening company-owned stores, and (2.) franchising.

"Both experiences afforded us good learning experiences and [allowed us to] touch base with more customers." The company realized that the relationship between franchisee and franchisor may be likened to a marriage. "It's a partnership of equals. You won't know your partner unless you stay in one house together. You have to work at it and keep communication lines open."

What growth model is right for you?
Currently, MOJO sells through more than 50 concessionaire stores in Metro Manila and through an agent in Visayas and Mindanao. As of now, there are no plans to put up stand-alone stores. This is because MOJO carries a limited number of designs. "Other brands have double or triple that of MOJO, justifying the set up of their own stores," says Cuerdo. "Our finances are not yet ready. A mall store renovation will cost P1 to1.5 million. That [amount] is best put into production at the moment."

Salvosa, on the other hand, believes that their business model is very franchisable. "We focus on one particular product line with complementary food offerings so the operation is very simple and streamlined. [Our franchises operate] the same way we did when we were still in Tarlac operating a small store with no unnecessary processes. We have deliberately kept it that way." 

Salvosa thinks that "some food business concepts are not franchisable or do not lend themselves well to franchising. They may be too complicated or too 'chef-centric'. Bonnie's is affordable and mainstream. We keep within the P 55 to P150 per meal cost limit. Our food is easy to prepare. Our service is straightforward, with no frills. We focus on food and service."

Find the appropriate growth model for your business
Business owners itching to expand their firms may get overwhelmed by the sheer number of expansion modes that are possible. The burning question is, how does one find the perfect strategy for expansion that suits one's business? "You should be a risk-taker," Salvosa states. "In Bonnie's case, it was by trial and error. Observe, travel, and smell  the market," she suggests.

Cuerdo opines: "It all boils down to putting on the shelves the items that the market accepts and buys. The low-risk way is by slowly building SKU's that move. This is by trial and error. But when you do have attained this, then standard financial formulas in retail management apply."

Salvosa gives additional advice when it comes to growing your business.

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  • DO...

...begin with the market: Observe, travel, eat out, and ask questions.  
...the Math: Factor in all costs and don't count your eggs before they hatch.  
...market, market, market: You can?t survive on a good product alone. You have to market. You have to sell.

  • DON'T...

...ask your people to do something you haven't done yourself. The proof of concept lies with you.
...get too excited. New things are always exciting, but don't get carried away. First, do the Math.
...expand beyond your time. Only expand in ways that you have time for.


Contact details:

MOJO Slippers & Sandals
3/F Balai Lakbay, 2 Alondras St. cor. Congressional Ave., Mira-Nila Homes, Tandang Sora, QC
Website: www. Mojosandals.com

Bonnie's BBQ Grill
Food Village, Tiendesitas Ortigas Avenue Corner E. Rodriguez Jr. Avenue (C-5), Pasig
E-mail: bonniesbbqgrill@yahoo.com

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