Hey guys! I hope you are fine, for I am great. Last week we took a look at Plexis Strategy and concluded that while its mission is noble it will not get me where I want in life in its current form, at least in the targeted time frame. I highlighted the fact that I had a start up plan that I am executing that would help me close the strategic gaps that I have identified in Plexis Strategy. In this article I will talk about that start up plan. I have created two startups, one in the fuel industry and the other one in utilities, namely electricity. As you can see these two items are considered necessities as opposed to marketing services that are not considered a necessity by a lot of companies in Zimbabwe. They are also required by the common man as opposed to businesses only and as such it is much easier to get clients as there is no bureaucracy etc. to deal with. These two factors mean that money will start coming in quicker than with Plexis Strategy. These three startups form a business ecosystem which I think will get where I want to go. Let us see how these two startups fit in the start up plan.
The Strategic Planning Gap. The idea is that my other two startups are part of a three pronged ecosystem where the three entities complement each other in my start up plan in a way that I shall explain below.
Integrative growth is a growth strategy in which a company increases its sales and profits through backward, forward or horizontal integration within its industry. A company may acquire one or more of its suppliers to gain more control or generate more profits (backward integration). It might acquire some wholesalers or retailers, especially if they are highly profitable (forward integration). Or finally, it may acquire one or more competitors through acquisition (horizontal integration). (Design and Marketing Dictionary). I looked at using this growth strategy so that my growth curve can jump onto the one that is in the middle in the image above marked ‘Integrative Growth’.
A marketing consultancy cuts across all industries so any type of business that I get into is said to be in my industry. I looked at embarking on forward integration and decided that acquiring a company and making it my client could be a viable option. The idea is that whatever results I achieve with this company that I would have acquired and turned into my client could be used as a case study by a potential client to assess whether or not Plexis Strategy is worth its salt. After all, results are results and the numbers don’t lie right? I wanted to acquire a company with the following characteristics which would ensure that I got the results that I wanted from my start up plan:
Ambition: The leadership team of a great company has a great ambition for the company – usually one that addresses an unmet customer need. The ambition is not one of personal greed; it’s about building a company that delivers on its promise and does it with a unique quality
Customer: Every good company begins by meeting a customer need. That need is deeply understood by the company’s founder because they, themselves, experienced the need – and saw how that need was not being well met.
Focus: Good companies focus on what they know and can do well. When companies search for new ideas, they often drift into unknown territory and get into trouble. Good companies just keep growing and expanding into familiar territory.
Execution: Satisfying a customer requires relentless attention to execution. Building the company’s capability to deliver makes the difference between turning a great idea into a business or failure.
Inspiration: Smart companies engage all of their associates in the building of the business, from idea creation through delivery. Ideas don’t just come tops-down, they also come bottoms-up and from every other direction. Everyone in the company feels like they own a piece of the action and are accountable for how the company performs. (Business Know How)
LivELite International. This company has the attributes that I have mentioned above, and some other advantages, that I will mention below.
LivElite international is a network marketing company that is into the distribution of various products such as Xtreme Fuel Treatment, XGT Green Tea, EcoMist and Freezpoint among others. Let us start by analysing LivElite and seeing how it checks out against the characteristics that I talked about above.
Ambition: Xtreme Fuel Treatment meets an unmet customer need in Zimbabwe, and that is enabling Zimbabweans to reduce their fuel costs by up to 25%; Allow me to quote their Corporate Overview statement, ‘Our company was founded in 2008 as a solution for everyone who wants to break through the barriers that hold them back and have the life that they want.’ There is no personal greed there, check!
Customer: The products perform as expected. Even we the internal customers are very well taken care of. Check!
Focus: They are involved in the distribution of various products as mentioned above. The issue is all of these products are distributed using the same business model which is network marketing. On my own level I can also ensure that focus is maintained in the way I operate as I have 95% control over what happens in the section of the company that I bought into. Check!
Execution: I have 95% control over this aspect as I am an independent distributor of Xtreme Fuel Treatment. As a result of this control I can execute my strategy in any way that I like. Check!
Inspiration: This is an aspect whose occurrence depends on the culture of the organisation. The compensation plan that is used by LivElite International rewards team work (in monetary terms) and has checks and balances that ensure that everyone contributes to the advancement of the company. Engagement of all associates in the building of the business, check!
So, LivElite international checks in well with my requirements for a company which I would like to acquire in order to grow at a rate that is in line with my start up plan. I acquired a stake by buying into the business. Through forward integration with LivElite International I now have a platform on which to show what Plexis Strategy can do, there is no need to beg someone for a chance to showcase my skills now.
In Part A of this article I highlighted the fact that Plexis Strategy needed a lot of clout in order for me to achieve my financial objectives in my start up plan. People will have to see some good results in order for them to do business with me on the financial level that I want and my partnership with LivElite can produce the results that will give me that clout. I think that this partnership will help me achieve my objectives because:
- We sell Xtreme Fuel Treatment, a fuel additive. Fuel is used everywhere with Zimbabwe using 1.4 billion litres of fuel a year and South Africa using 23 billion litres of fuel per year. Oh, and I forgot to mention the 75 other markets that we participate in. A big opportunity is it not? A business with such potential is what I need to be in so that I can meet my objectives
- I can run the business in any way that I like. This lack of interference will mean that there shall be a full and unadulterated application of Plexis Strategy’s approach to business which is one of the main goals of my start up plan. This counters the problem of not being given full control of a company in order to produce the required results. I talked about this problem in the first part of the article.
- I have what it takes to make this venture a success and in this case I do not need to ask anyone for a chance, I have created that opportunity for myself, so time and energy saved.
- The results that shall emanate from this venture will go onto Plexis Strategy’s company profile with Plexis Strategy receiving all the credit for consulting on the project.
So, how is this project looking so far as an income generator and profile enhancer for Plexis Strategy? It’s looking great. My section of the organisation has grown to 6 distributors whose efforts I benefit from although I am only responsible for bringing two of those individuals into my organisation. The sales are going well and with a profit margin that ranges between 25% and 60% I am not complaining. The return on investment is great (though to be honest I have not yet calculated it to the dot) and it more than justifies my involvement in the business. I mentioned that most of the growth is not my doing because for the last few months I have not been working on growing the business but on making it recession proof, which is a major goal of my start up plan. I am almost done with dealing with a threat that I identified when I conducted my PEST analysis. The numbers will be presented as a case study to potential customers for Plexis Strategy when they become, well, overwhelming. I also mentioned that Plexis Strategy needs money to grow, well, say hello to one of its cash cows. Some of the profits from this business will be used in Plexis Strategy to grow it in accordance with my start up plan.
The Ansoff Matrix. The last time out I talked about 3 of the growth strategies that are in this matrix. Let’s finish off what we started, shall we?
Diversification growth is a corporate strategy to enter into a new market or industry which the business is not currently in, whilst also creating a new product for that market. This is the most risky section of the Ansoff Matrix, as the business has no experience in the new market and does not know if the product is going to be successful. (Wikipedia)
Now, why would I want to do that? Simple, who is going to fund my venture with LivElite International? Definitely not me! Here’s the thing. Plexis Strategy has huge potential but it will take time for me to realise the benefits of this project. My venture with LivElite International is based on Xtreme Fuel Treatment. The product works but it is still new in Zimbabwe so the stage that it is at in terms of its product life cycle still means that I might miss my targets. It also needs funding for the marketing activities etc. It is bringing in revenue faster than Plexis Strategy so its place in the ecosystem is justified. I decided that I needed a project that would fund my venture with LivElite international and Plexis Strategy as well, a super cash cow. I needed a venture that needed virtually no capital injection at all, aside from working capital that I could extract at any point. This money would just circulate, but not be spent such that you could not even list it as an expense. Enter Tengai Magetsi!
Tengai Magetsi. Does anyone want to buy a ZESA token?
Tengai Magetsi is a startup project that acts as an agent for the ZETDC selling electricity vouchers for a commission. So, why do I call this type of growth diversification growth? It’s simply because of the way that I will operate this business. I am in the industry for marketing consultancy where marketing is practiced in its purest form adhering to marketing fundamentals etc. Tengai Magetsi is going to be run like a normal African business, no science, nothing. This is me being a vendor.
Why did I change my approach and dump the science on this one?
- Time. Marketing principles need time so that their effects can kick in. I needed something that was going to start making money immediately
- The other two projects are based on complex products and services that need time and energy to sell and to support them (after sales). Tengai Magetsi has the effect of an over the counter product or service that works immediately with minimal effort, and little to no after sales support required, so it’s easy to sell with minimal resources required to make the business work
- The other two projects are based on new products that people do not understand yet and are sceptical about. Tengai Magetsi is based on a product that people already know about so it is easy to push sales
The reasons above resulted in me making money from this venture almost immediately. How is Tengai Magetsi doing as a vehicle for making fast money that will feed into the venture without it taking up resources itself? It’s doing better than expected. The venture is in its 6th month now and in terms of revenue when I compare the receipts for the first month with those of the 5th month there has been a growth in revenue of exactly 1533.98%. The ‘normal’ project is growing much faster than Plexis Strategy itself, how about that?
That’s my business ecosystem. A self sustaining operation with a venture capitalist providing the cash in the form of Tengai Magetsi, a client in the form of LivElite International who will provide a track record and the consultant, Plexis Strategy providing the tactical nous to ensure that all the objectives are met in line with the start up plan. It’s a closed circuit with no room for investors to come in and spoil everything by having a voice in the entity. This enterprise has to remain pure, free of numerous opinions and interruptions, if Plexis Strategy is to grow in a way that will make it great. The nice thing is, any of these projects can blow up and become really big.
So, this is how I manage the growth of my startups, by using the start up plan to analyse the various options and choosing the ones that will work best at that time. At the moment I have chosen to use the integrative and diversification growth strategies as opposed to using the market development growth strategy among others. As they say two minds are greater than one so tell me, what do you think of my little start up plan?