I launched my start up, Anita’s Garden, about six months ago. It’s a good time to look back and reflect on how my business has evolved in that time and discuss my vision for its future. In this series of articles, I will draw on real-life experiences and examples and share a bit more about my journey as a business owner. I’m a very transparent person. In my business dealings, I like everything to be put on the table. I’m also very open to sharing my ideas on how I am running my business, as well as how I think a business ought to be run. As always, there’s a lot of ground I’d like to cover. This is the third post in on this subject. In Part I of this series, the issues that I touched upon were thematic in nature. In Part II of this series, I focussed on some practical matters that pertain to the day-to-day running of the business. In Part III on this subject, I would like to share some thoughts about some broad issues related to running a business.
1. Your most valuable asset as a business owner is goodwill
A business accumulates assets over time. What is an asset? Put simply, an asset is something of value that is used in the course of running the business. I firmly believe that a business’s most valuable asset is its goodwill. In accounting terms, goodwill is an intangible asset, making it difficult to quantify. It sits on the balance sheet of the business and is often overshadowed by tangible assets, which can be converted into cash more easily. The value of goodwill is only realised when it comes to selling a business. What is goodwill? A business doesn’t simply trade on its name. Over time, it develops a reputation. As discussed in a previous post, reputation refers to what a person or business is in fact. Image is what a person or business appears to be. If you are interested, you can read more about my thoughts on the issue of reputation in my Honours seminar paper and dissertation which I wrote as part of my law degree.
I have already become aware of the importance of my reputation as a gardener when I approached some leading businesses in the industry to enquire whether they would be interested in me becoming a brand ambassador and retailer for their products. Many already knew of me and had been following the development of my garden after it was featured in the New Zealand Gardener magazine. This helped me to break into the field (no gardening pun intended) and establish my business.
2. Running a business requires you to draw on many different skills
As discussed in a previous post, in order to run a business successfully, you need to be able to draw on a broad knowledge base and skill set. Having a commerce degree or an MBA may be helpful in understanding how a business operates and how to manage one, but this is only the starting point. As I mentioned in a previous post, I have neither a commerce degree nor an MBA, yet this hasn’t stopped me from creating and running my own start up.
As I was telling one of the partners from my team at Bell Gully, my previous employer, becoming a business owner has brought together so many different threads from my life. The hard work that I have put into different jobs and activities along the way has really paid off. My Bachelor of Arts helped me develop strong writing skills, which are useful for writing my blog and weekly gardening newsletter. My previous experience in retail while I was a university student has helped me run my plant nursery. It also gave me a very good understanding of how a business functions from the bottom up. I sometimes use French when communicating with the wwoofers who stay with us and help around our garden if they come from France. Learning accounting while at secondary school helps with record keeping and the overall management of my business. My knowledge of maths is also quite helpful when making calculations in order to price stock appropriately. Law is central to my business as everything is regulated. I’ve found my legal skills useful in reading terms and conditions attached to trade by suppliers and also in negotiations in the course of my business. To read more about my thoughts on the subject of negotiation, please click here.
3. Be prepared to get your hands dirty as a business owner
A lot of people have asked me why I would leave a good job in a nice office with a panoramic view of Auckland Harbour for one where I have to work hard physically outdoors and get my hands dirty. I have also been told that I should be paying someone to do gardening work rather than being a gardener myself. There are a few things I would like to say in response. When I worked as a lawyer at Freshfields, the firm’s clients were some of the largest companies in Europe. Their core business wasn’t exactly the stuff of glamour and was rooted mainly in secondary industries such as manufacturing. One of the large cases I worked on while I was an associate in the International Arbitration group of Freshfields Bruckhaus Deringer in Paris involved a dispute arising from the construction of a nuclear power plant. Even as a lawyer, I spent a lot of time on the actual construction site which isn’t exactly glamorous. Business owners often end up spending a lot of time on the factory floor. It’s good to be on the ground of your own business, even if you can afford to hire staff to help you with day-to-day activities. It helps you to engage with your business more closely as well as identify ways that it can be improved and developed. Don’t forget that some of the world’s most successful empires (and indeed many of New Zealand’s largest companies in the primary sector) were founded upon sheer determination, sweat and labour. The partner I did all of my work for while I was a lawyer at Bell Gully had a client who is one of New Zealand’s largest companies and manufactures whitewear. You can’t own a business like this if you don’t know how a washing machine is designed, manufactured and assembled. You need to spend time on the production line in order to understand your business well, even if you enter a business at a high level as an investor later on.
4. Distinguish yourself from your competitors
In order to succeed in business, you need to distinguish yourself from your competitors. Try to stand out. Be innovative. Find your niche and create a market for your products and services. For me, one of my selling points is my worksite. Most garden centres are located in a physical premise that is specifically fitted out for this purpose. I run my boutique plant nursery from home against the backdrop of our garden. My customers all love wandering around the garden for ideas and inspiration. It’s also really handy as I can refer to our own garden and show customers how to plant what they have purchased into their garden. As a boutique business, I offer a more personal service. Coming around to purchase plants from my nursery is akin to a personal shopping experience, which you wouldn’t find if you went to a large chain or even an independent garden centre. I also take orders on request, so I’m able to supply exotic herbs and veggie seedlings to my customers, many of whom come from countries in Asia such as Thailand, the Philippines, Malaysia, Singapore, Fiji, India and South Africa. These customers have a hard time sourcing these items for their cuisine from local garden centres who mainly sell run-of-the-mill varieties. It’s gratifying to be able to link people with their culture through the garden and help them re-connect with their roots.
5. Be very clear about the terms of payment
In business, you need to establish an hourly charge out rate for professional services, much like lawyers and other trades. Obviously, retail sales are different because you are selling a product, not a service, but the price of course reflects overheads, including staff salaries. As I mentioned in a previous post, I have experienced some difficulty in developing a fee structure for my business because I didn’t know what I should charge for my services. My business is quite unique and it’s hard to find a comparator to create rates. I also feel really awkward about asking for and accepting money from other people, which is why I’m not really cut out for being in business. Unfortunately, I have learnt the hard way after having a bad experience. I was left with an unpaid account which I have written off as a bad debt. This is partly my fault, but I look at it as a learning curve, much like life itself. It’s not nice to be left feeling that someone has taken advantage of you so I had to pinpoint where I went wrong so I didn’t make the same mistake next time.
So what happened? In a nutshell, some work was done for a friend on a by donation basis. Due to the circumstances surrounding my services and products, as well as the fact that we were friends, I told her that the payment could be made later. It has been more than a month and the payment (whatever it would have been) is still outstanding. As she was a friend, it is awkward asking her for the payment. I had a chat to my cousin, who is a successful engineer with extensive experience working in the telecommunications sector in New Zealand, Italy, Brazil and the USA. He now runs his own business. Nick advised me to put everything in writing beforehand and berated me for not knowing better as I am after all a lawyer! Nick told me to create a pro forma invoice specifying my hourly charge out rate, any overheads, costs of materials and so on and agree the amount with the client beforehand. In cases where work is done on account, for example, landscaping, he recommended that I make a time estimate and ask for an upfront payment prior to commencing work, with the balance to be settled upon completion. This makes perfect sense and I should have done this from the start, but you learn from your mistakes.