Three years ago a young entrepreneur started a biltong shop. The shop cannot yet sustain her, so she maintains her full-time job and employs people to run the shop for her. Unfortunately, because she is not in-store herself, her staff steal from her and do not run the store efficiently.
The entrepreneur started this venture with the most noble of ideals; to provide employment to someone with a disability. She did her homework, taking time to consider opportunities before selecting a biltong franchise, and set up shop in a mall.
Unexpected issues arose. The shop could not be manned by one person – the hours required in the mall were too long. A succession of staff drawn from people desperately needing jobs saw the business continuing to make losses or stay at breakeven. The stock count never seemed to reconcile, banking was erratic and the point of sale system was not used. Finally the real situation became clear – stock and money were disappearing at an alarming rate. When the entrepreneur fired the people concerned they sought and got compensation for illegal dismissal. For all the careful investigation this entrepreneur had done she had failed to realise that biltong is a very portable commodity, sold mainly for cash, and an absent owner and weak systems add to the temptation.
Let’s go back to the beginning and examine what could have been done then – and must be done now to avoid further expensive lessons: A key decision is the business model. A franchise is desirable if the entrepreneur wants to reduce risk, have national marketing, product quality and consistency and get established systems and support. In this case control systems and support for labour procedures were either not available or not used, and despite the expected low risk the company made large losses. A franchise may be the right choice but it is not the only choice, and if it is selected then back-up must exist and be used.
The right premises are important. Franchisors will mainly be interested in high traffic counts to boost volumes of products supplied. This means large malls with compulsory extended opening hours and two employee shifts. But smaller volumes and reduced staff costs in lower traffic premises may make a more profitable and less risky business. I salute this entrepreneur for helping a person to regain the dignity of employment, but to extend this charity to several unknown people is too risky. The company needs the right staff and every staff member must have clear and agreed instructions of what is expected of them and the rules of conduct. This is particularly relevant in a retail environment where appearance and manner will affect the image of the business.
Staff terms of reference should cover cash and stock reconciliation and the recognition that these returns will be checked and discrepancies investigated. Staff must be held accountable and be aware of this requirement. An old proverb says that a padlock is there to keep out the ‘honest’ people and not having the equivalent of padlocks on the cash and stock management is dangerous.
Processes must be enforced and checked routinely and cash banked daily.
Spot checks are desirable and shopkeeper neighbours can provide useful feedback – as in this case where the entrepreneur later discovered that student friends of a staff member routinely took large packets of biltong away. CCTV cameras may provide answers if theft is suspected. Owners of even very small businesses need to be familiar with labour law especially as it applies to disciplinary matters and dismissal. There are too many horror stories of entrepreneurs being obliged to pay compensation to employees dismissed unprocedurally. If they are reasonably suspected of theft or fraud this hurts badly.
Focus on marketing
And finally the entrepreneur should again focus on marketing. This is difficult when the enterprise struggles for survival and incurs massive losses, but marketing should never be ignored. An increase in sales will provide more profit to invest in systems, staff development, supervision and marketing promotions. The entrepreneur should think back to the start-up time, when flyers handed out by enthusiastic students and samples of the products attracted customers to visit the mall for their biltong. Retailers in shopping malls can become over reliant on passing traffic, but customer loyalty is far more desirable. Work with the franchisor to increase demand for the products, and over time the very expensive ‘school fees’ could well be recovered. And that would be wonderful for this caring entrepreneur.