Critical Massing the Capital
The capital invested into various forms will generate revenues. The first milestone each entrepreneur must reach before profitability will be the break-even point. This is where the revenue matches the expenses. From here every sale will turn a profit. This may be a simplistic explanation but it’s clarity is cannot be disputed.
A good entrepreneur won’t stop at the break-even point. He needs critical mass where his ratio of profit to revenue is highest. This is the confluence for all his resources, managed skilfully, meet at the point where profit is maximised. In sports, it is called the sweet spot.
There are two important points here i.e. the application of resources and skilful and wise management. What’s next after the first critical mass? A second critical mass can be achieved but it will be at the expense of losing the some profit margins gain in the first critical mass. This is due to new fixed and leveraging costs applied towards new capital expenditure and other resources link to expanding recruiting, training and retaining talent and etc. Further, management wisdom and skill need to go up a few notches to cope with the new business model which may be a entirely different animal altogether.
With this, it will lead to the next point.
Contentment and Critical Mass
At each critical mass the entrepreneur must evaluate whether his contentment is still there or in diminishing returns mode. This scaling up process will definitely exact a toll from the entrepreneur. Mitigating contentment’s diminishing returns will be paying careful attention to synergising the various parts of the business and reaping the benefits of economies of scale.
The ambition to take the business to a higher level is every entrepreneur’s dream. The question is how to make it worthwhile. A few important factors that need particular attention in a business are what I call the four R’s.
1) Human Resource (HR),
2) Public Relations, Marketing Communications (PR and MARCOM),
3) Back-Room Operations (OPR) and
4) Strategic Initiatives (STR)
Careful understanding and balance application of these factors will create a symbiotic effect thus releasing potent synergistic forces that will ensure that the venture will bear fruits and most importantly contentment.
Part 1
Part 2
The capital invested into various forms will generate revenues. The first milestone each entrepreneur must reach before profitability will be the break-even point. This is where the revenue matches the expenses. From here every sale will turn a profit. This may be a simplistic explanation but it’s clarity is cannot be disputed.
A good entrepreneur won’t stop at the break-even point. He needs critical mass where his ratio of profit to revenue is highest. This is the confluence for all his resources, managed skilfully, meet at the point where profit is maximised. In sports, it is called the sweet spot.
There are two important points here i.e. the application of resources and skilful and wise management. What’s next after the first critical mass? A second critical mass can be achieved but it will be at the expense of losing the some profit margins gain in the first critical mass. This is due to new fixed and leveraging costs applied towards new capital expenditure and other resources link to expanding recruiting, training and retaining talent and etc. Further, management wisdom and skill need to go up a few notches to cope with the new business model which may be a entirely different animal altogether.
With this, it will lead to the next point.
Contentment and Critical Mass
At each critical mass the entrepreneur must evaluate whether his contentment is still there or in diminishing returns mode. This scaling up process will definitely exact a toll from the entrepreneur. Mitigating contentment’s diminishing returns will be paying careful attention to synergising the various parts of the business and reaping the benefits of economies of scale.
The ambition to take the business to a higher level is every entrepreneur’s dream. The question is how to make it worthwhile. A few important factors that need particular attention in a business are what I call the four R’s.
1) Human Resource (HR),
2) Public Relations, Marketing Communications (PR and MARCOM),
3) Back-Room Operations (OPR) and
4) Strategic Initiatives (STR)
Careful understanding and balance application of these factors will create a symbiotic effect thus releasing potent synergistic forces that will ensure that the venture will bear fruits and most importantly contentment.
Part 1
Part 2
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