How my auntie expanded her business and lost everything

I have two aunties who, being Kelantanese, sell jewelries, real jewelries gold and diamonds.  They had this business since I was very young. They were not in this business together; each was on her own. And they were doing this since I was very small, like at least 25 years ago. Let’s call them Mak Ae and Mak Bee (Codenames – have to because they are still my auntie, nanti nak jumpa masa raya…)

Mak Ae, started much earlier than Mak Bee, and her business were much bigger. However, they both have the same modus operandi, same business model. They purchase the jewelries and sell them to buyers on installments, with reasonable profit margin. Their target consumers are also the same, mostly teachers, government servants and entreprewives (a term I coined to refer to housewives who are entrepreneurs). They would have small gatherings at their homes or at the client’s house. It is exactly like selling Tupperware, but instead of containers, it was gold jewelries, bracelet, necklace and the works.

Their business progressed well over the years, growing steadily as demand continued to increase. Their business model provided the ideal solution to the customers who want to have the jewelries as both investment and adornment. The installment method allows the customers to secure the investment and enjoy the benefits that they otherwise couldn’t with their limited income.

Business went so well and both of them made a lot of money. They made so much that Mak Ae decided to be another Habib and opened up a jewelry shop. Mak Bee decided that she would stick to her ways. Mak Ae obviously thought that by opening up a jewelry shop, she would make more money. The shop was opened and Mak Ae hired her son to manage the business. Everyone had a grand day at the opening and hopes were running high! This is going to be the money making machine.

Mak Ae’s business swiftly dived! It was a disaster and she had to close the shop after only 5 months opening the shop (true story!). They were at a good location in the city and they were selling jewelries just like any other jewelers in town. And these jewels are excellent products; they were GOLD and sold with installments too. And Mak Ae had so many years of experience (at least 20 year if I remember correctly).

I was so young at that time I could not understand it completely but it was a big issue then. Everybody was dumbstruck and could not figure out why.  But now I know why.

Mak Ae was focused on the quality of her product and service. She did not know that she was moving to a new business model. She did not know that it is not her products that brought her money; it was her business model. Her original direct selling model had all the elements for her customers, the needs of the customers were met, the delivery channel was perfect and all the other seven business model elements were working fine.

When she opened up her shop, it was a new business model and the elements of the new business model are not the same as the previous one. By not understanding her new model, she spend too much too early and ran out of cash. Her old customers’ needs were no longer being satisfied so they did not buy from her shop.

She could have saved her millions opening up her jewelry shop, even more likely to be very successful with her shop, if only she knew that profit comes from business model- not product alone. A business model is a complete system of getting the product to the consumers and getting PAID. If she had learned about her new business model, she could plan her actions accordingly and employ the correct methods to satisfy each element of the business model. She would know how to target the new customers and what do they need. She would also know how to plan her resources accordingly. By learning about business model, she would have made millions.

My Auntie Bee? She still giving out the BEST duit raya until today!

NOTE: Elements of Business Model

1.    Customer

2.    Value Proposition (Product and Service)

3.    Delivery Channel

4.    Relationship with Customer

5.    Revenue Stream

6.    Key Resources

7.    Key Activities

8.    Key Partners

9.    Cost Structure

The Author is the principal of ElixirEducate- a Smart Entrepreneur training house. He was an international investment banker, corporate financier and was involved in raising a total of over RM1 billion during his tenure. You can find more information on ElixirEducate at their facebook page, here.  And be a facebook friend