THE START-UP TRIANGLE

THE START-UP TRIANGLE

As a small start-up you’re always trying to prioritise and juggle things around.  I’ve recently become aware of three opposing forces that I imagine at each point in a triangle, and if one gets more dominant than the other things dramatically happen to the business.  There’s probably some theoretical MBA explanation for this, but I haven’t the time to find it.  The forces are cash flow, stock, and profit.

Start-Up Triangle
Start-Up Triangle

CASH FLOW

First and foremost is cash flow.  Money coming into and money going out of the business.  I’m ALWAYS focusing on this and weirdly feel naked if I’m not making sales calls.  Calls take a while to convert to money in, so I have to be continually calling.

Likewise managing costs are CRITICAL at this point.  Trying to keep the operating costs as low as absolutely possible, and focus on the biggest expenses first.  I’ve done lots of weird things to make this happen like drilling print cartridges to refill them with ink (the price of cartridges are a rip off).  I’ve looked at my highest costs, electricity being one, and worked at ways to keep things to a minimum (minimum fills on kettles for coffee and turning off the fridge as two examples). 

Even how I purchase things has changed.  Previously as I got towards the end of something, like a pile of plain paper, I would order the next batch.  Now I will till it runs out before buying. I continually ask do I really need to buy it, and if I can keep saying “no” then I don’t buy.

Another good example is I currently need a small consumable item.  I get a quote for 1000 costing £60, or 250 costing £20.  Which one would you order?  The £60 one right?

 I look at how quickly I will “consume” the item and work out that for cash flow the extra £40 is better in the bank account rather than tied in consumables sat on the shelf for months (despite the saving).

STOCK

The second force is stock.  Balancing stock levels I’ve found challenging (and fun).  Like the consumable you don’t want too much sat on the shelf, but you don’t also want to sell out (particularly when beer takes one month to “condition” before I sell it).

In the last couple of weeks I saw a run on bottle sales orders which drank me dry on some product lines (yep a microbrewery without beer!!).  Now I was fortunate to have some beer in casks so immediately switched my sales calls to focus on those (no point stimulating demand for something I couldn’t fulfil).  I also desperately cobbled together what remaining stock I did have, and carefully ensured that I didn’t let any customer down (switching product lines where appropriate). 

Finally I brought “online” two new lines that have been “conditioning” in the background and launched them.  I also planned the next brews!

PROFIT

The final point of the triangle is profit (no surprise there).  Having too much allows investment in the business and growth….eventually leading to the dreaded “Corporation Tax” (a tax on pure profit).  Having too little and it makes the efforts on cash flow less fruitful, stock management harder, and basically slows down the business.

Profit is always in the back of my mind and I’m reminded of a friend who has sadly passed away.  He lived in Romania, was a fabulous visionary, and ran a charity to provide a summer retreat for people in need.  He regularly bought cheese from the local market for the camp, and visited every local producer sampling their cheese on the day.  Upon choosing the cheese to buy would negotiate fairly on price, not paying too much or too little.  Everyone needs to earn a living.

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