Sunday, February 27, 2011

Don't Bring a Knife to a Gunfight

Analogies between business are war run rampant in our culture.  Some of them deserve some merit.  I do believe that Sun Tzu's Art of War is a great bona-fide business book.  Most of those analogies, however, make a terrible distortion on the nature of business.  If you do things right, business is most often NOT a cut-throat dog-eat-dog world.  Kaladi Coffee is all about finding a niche (preferably with fun clients, honest vendors, and a livable profit margin) and then letting the rest of the coffee world go its own way.

But still...if you're serious about your business, if you intend that it should pay you and your people and provide your clients with a great experience, there are certain harsh realities you need to face.  The core people, systems, and equipment for your business are CRITICAL.  If we're discussing coffee joints, we're not talking about plastic water cups and toilet paper dispensers here.  We're talking about your coffee machine, your espresso machine, and your grinders.  The same thing could be said for your brake, shear, punch, etc. in a metal fabrication business or the cleaning and imaging apparatus in a dental practice.  Identify the equipment that is critical to your work and focus your spending ability there.

Don't buy cheap equipment for the core of your business.  That's like bringing a knife to a gunfight.  Or entering your Corolla in an F1 race.  Those comparisons are funny, I guess...until you realize that it costs you a couple of hundred grand to enter the race in the first place. 

Winning is tricky even when you have the right tools.  To run the race of business with anything but the best stuff, though, is truly challenging fate.

Thursday, February 10, 2011

Nature Hates a Vacuum

A green but intrepid client recently asked of her fledgling business: "so when is the right time to hire new employees"?

Drawing upon life at Kaladi Coffee here, the right answer is always "several weeks before you NEED to hire new employees". 

There is a tongue-in-cheek dualism to that answer.  On one level, the most obvious level, businesses need to hire in advance of need because there is a training and inculturation period.  Once you are in the weeds, having a newbie on board doesn't really help...they're dead weight until they're trained and up to speed. 

But there's another reason to hire ahead.  In the coffee business, quality is everything.  And after quality, speed is everything.  (And after that, I guess, hot liquid in a paper cup is everything...and so forth...)  A customer who comes in for the first time and has to wait for six minutes in line is unlikely to return.  So if your business is growing, and two people working in tandem can cover the bar MOST of the time, well...those new potential customers who arrive when you're at your slowest? 

They never come back. 

It is a conundrum: either you hire too soon and you waste labor dollars, or you hire too late and you hose your growth. 

I'm decidedly in favor of hiring ahead of time and just eating poo on labor for a while.  If you've hit a bare-bones level of critical mass, you go back to eating Ramen noodles for another month.  My reasoning, as best expressed in vaguely evolutionary terminology, is that nature hates a vacuum.  Traditional wisdom dictates "when the market demands, business will accommodate".  I believe the contrary: by the time the market demands, it is too late.  Being reactive isn't good enough.  Be proactive and create capacity.

So long as you can do it without building a lever that works against you, I believe that it is almost always best to create excess capacity in your business.  Staff a bar that makes better drinks faster.  Build a roasting facility that can do 150% of your expected terminal volume with grace.  Overtrain your the point that they could conceivably strike out on their own.  Enable your business to do more big, beautiful, fun and fulfilling things than it has to do.

Nature hates a vacuum: if your business creates a great inviting space, the Universe will fill it with customers who love you.