Build Smarter: Why Efficiency Outperforms Effort Every Time

We all want less work for more money right?

Less risk for more money?

I would say it’s a fair assumption.

Question?! do you ever walk into a restaurant and see a menu with 150 items and think wow, this all looks super fresh?

In reality, the kitchen will be full of so many ingredients (some old) with a low inventory turnover, I mean, how else could they provide such a large menu? Even if they fully booked all night, every person would need to order a perfect combination of dishes to keep the food churning.

On the other hand, what about when you see some street food with 4 things on the menu and think YES, not only more delicious and fresher, but a far more efficient business model that provides more stability yet flexibility.

Here is an example of a business I looked into a few months ago….

I will revert back to the coffee cart stand I wrote about HERE and compare it to a physical coffee shop, same ideas, same concept, but one operating far more efficiently.

Lets compare the two in terms in financial performance: (note, the coffee stand article was based in Edinburgh, UK, therefore I will use this as a benchmark for pricing in the city)

🔑 Key Takeaways

(no pun intended)

As we can see from a quick glance, how much more streamlined a coffee truck is in terms of cost.

What about revenue?…… well the truck wins again.

I had a good search through biz buying sites in Edinburgh, and struggled to find any cafeterias turning over as much as the truck, and of course with margins much tighter.

For example, a good turnover was in the 6 figures, but one of the most profitable I could find for sale had a net profit of around £50k per year. (that was the best I could find)

The coffee truck on the other hand, netted as estimated £130k running at around 60% margins. (both had the owner working)

This is before we consider how good the product is from specialisation, and the convenience of being able to move pitches relatively easy is a huge win if foot fall is poor.

It is hard to imagine the corporate ladder in Edinburgh will pay grads £25k climbing to maybe £60k in 5-10years, when the guy on the coffee truck downstairs is making £130k+ from each site.

🥇 Why efficiency wins

The point is this, when you focus on efficiency, it frees up time and money to expand.

Because it goes back to the same old point, if you dont have the time you need the money, it’s one or the other.

If you run your first coffee stand, you have capital to open another. However, if you run a physical cafe, you will be constrained by time therefore need capital to expand, but potentially working on much lower margins.

Fast forward 5 years and the cafe will quite likely be in the same place, facing fierce competition from global competitors, whilst a truck or portable unit which typically pitches in a zone further away from the likes of Starbucks or Costa, can easily be moved if the pitch is wrong.

Every time I look at businesses to buy, to start, to write about, efficiency for me is the top of my list. Because without it, I would constrained to one idea, one business, and would be required to raise substantial capital for expansion investing in a team to scale.

I am not saying this is bad, just not my preference. For those who are tighter on resources, you are likely searching for ways to grow and build by bootstrapping and staying scrappy.

Don’t get me wrong…

Not everything has to be streamlined, there are plenty of great businesses that have a lot of moving parts, however, these are the type of businesses more susceptible to economic downturns, with heavy operating costs, it doesn’t take much to watch the margins diminish.

Personally, I look for efficiency over anything, allowing me to dip my finger into many pies at the same time. The type of business that typically has low start up costs of methods for creative financing.

NOT the type of business where I need to hire 5 people and invest £200k before I sell a thing. This is what I consider front end risk, and lot of it.

Focus on efficiency and keep your businesses lean. This will allow to grow and explore other ideas without being too heavy invested in time or money in one idea.

That’s a wrap!

Let me know what you think about this weeks copy ⬇️ 

See you next week

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