Hello there, I am Hari, a business student in Grade 11. If you have read my previous posts, this one will take you shopping for the necessary equipment and supplies for your first business. If you're new here and know nothing about how to start your first business, I would highly recommend you start at this post.
I will assume that you (like me) are on a tight budget, and can't afford expensive equipment and supplies. I will show you how you can make an ideal purchase that doesn't dig deep into your pockets. The tips I am going to share with you can be used whenever you want to make a smart purchase.
Introduction
Like I mentioned in my previous post, a business exists to satisfy the needs and wants of people. They combine resources known as the Factors of Production to come up with either a physical product (also called goods) or an intangible service.
To convert raw material into finished goods, a product undergoes what is called production. To ensure a constant supply of raw material, you need a reliable supplier. In this post, I will give you some tips for looking for a supplier.
To assist production, businesses purchase machinery and equipment. In this post, I will also tell you how to buy equipment for your business based on your budget the business scope.
How to Identify what Equipment and Supplies I Need?
To answer the first part of this question, you first need to decide whether you want to manufacture and sell a physical product or offer a service. (This post will help you figure out how you can find the tastes and preferences of your customers using market research.)
I plan to manufacture a physical product
If so, you must now identify the raw materials (materials required to make the product) needed. After making a list of this, you must start identifying suitable suppliers who can provide the necessary supplies. For my business, I selected Ice Cream Sundae as my primary product. I was able to secure a supplier for my ice creams, and another for the toppings and syrups. I identified many suppliers for packaging, but since the scope of my business was small, I wasn't able to meet their conditions.
Once you have secured suppliers for your business, you must determine the production method you plan to use. You could either fully automate your production, or employ workers. If you choose to do the latter, you may skip this section, since it is not mandatory to purchase production equipment. However, you could consider what I am about to say about machine-assisted production.
Machines are more efficient than humans. A machine is capable of producing way more than even the most skilled labour with minimal wastage and quality imperfections. Machines are more productive, as they don't have as many physical limitations as humans. However, they are way more expensive to purchase and maintain. For a start-up company with low funds, it would not be practical to blow all that capital on equipment. So, you could consider replacing your workforce with machinery at a future stage.
I want to offer a service
If that's the case, what sort of service do you plan to provide? Some sort of delivery service, or taxi service, or mobile application that tracks the number of calories you eat?
Once you have answered that question, you must start listing out the equipment that is necessary to help provide that service. For taxi service, you must arrange for vehicles, and for a mobile application you must have a computer, and so on. Identify every relevant piece of equipment for the business and create a spreadsheet (preferably).
Example: A food delivery service (mobile app-based)
Say you want to offer food delivery service for people in your neighbourhood. You build a partner app for restaurants and ask all local food establishments to participate. You then build an application for customers, where they can place orders from the local restaurants. It is a win-win for both the customer and the restaurant.
Financial feature: Through the partner app, you will analyse the price each establishment charges for its products. You will increase their prices on your application by 5% per item and charge the customers with this price. The 5% cut per item is the revenue the business will generate. Additionally, when demand is high, you could use surge pricing to increase revenue.
Your list of necessary equipment could include the following:
- A bicycle for quick delivery
- An insulated bag to keep the contents warm
- A computer to act as a server for your application
Relevant supplies could include:
- Disposable food-grade packaging containers, utensils and paper napkins
- Bags to deliver the order in a presentable manner
- Labels/packing tape to promote the service
You must develop a connection with all the local restaurants and establishments that serve food. Ask them to participate in the partner program, and give them branded packaging tapes, bags and disposable containers to package the food featuring your brand.
Situation: Customer X in your neighbourhood wants to make an order for lunch. They noticed one of the flyers you stuck around the area saying you offer a food delivery service. They download the app and select Restaurant Y to place an order. They select the items they want and proceed to checkout. Restaurant Y receives the order via the partner app and begins cooking. You go to Restaurant Y on your bicycle and place the order in your insulated bag. You then bike all the way to Customer X's house and deliver the food.
Here's what I did for my business, The iKeme Store
I planned to offer a product (ice cream sundae) to the people in my local community. I sourced my ice cream from a nearby Baskin Robbins outlet and other raw material and packaging material from supermarkets around the area. Labels were purchased from Printo, a printing company.
Financial Features: I planned to sell my ice cream sundaes at ₹170 to ₹190. I was able to create value by fashionably presenting the product. Added value per unit was ₹20.
How to Make the Best Purchase?
If you have reached this point, I believe that you know what you want to buy. In this section of the post, I will give you some tips to consider while finalising the equipment/supply you have identified.
1. Search and Catalogue at least 3 Alternatives
If you have identified a specific piece of equipment, search and catalogue for at least 3-4 similar ones which cost lesser or are of better quality. For example, if you have identified a Dell Optiplex 7010 Desktop Computer worth $324.99 on Amazon, look for other PCs by Dell, or other brands.
2. Compare Prices on Other Major Listing Sites
For sake of simplicity, let's search for a commonly available product, say Apple Airpods. Compare the price on other listing sites, such as Target or Walmart. You may see that:
- The price is highest on Apple
- The price is lowest on Amazon and Walmart
Based on your research, you can come to a conclusion of where to buy from. Like I mentioned earlier, these tips are relevant to any purchase you would like to make, be it for your business or for your personal use.
3. Keep on the Lookout for Discounts or Offers
4. Try to strike a Bargain
This is a concept I have used dozens of times in various situations. You need to know where to bargain and where not to. Bargaining works in local shops, where unbranded products are sold. Never try to bargain for a pair of Nikes!
State your requirement and ask them how much they charge, for example, $23.99. Try by offering to buy at $18, and be sure to tell them why you can spend only so much. You must be able to understand how readily the seller wishes to close the deal. Using this information, begin insisting on low prices, and cut-off at $20 or call quits. The seller may agree on $20 or may cancel the deal. You must be ready to forego the product, as you will be to make a similar bargain with another seller and succeed.
Now what?
Now, you know how to identify and purchase equipment and supplies for your business. In the next post, I will take you through the process of setting up your purchased equipment and enlighten you on the importance of a good production method. Talk to you soon!
Next post: https://thebusinessbot.blogspot.com/2021/07/marketing-and-promotional-decisions.html
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