Understanding her business model, I recommended that she follows a ‘razor blade’ approach, i.e., using the low margin less expensive products to pull customers and then upselling the high margin products. She didn’t think much of the idea as her strategy is to eventually move only into design and position herself as an ‘exclusive’ brand.
She highlighted that she is part of a government program that supports small and micro business enterprises to move from the informal sector to the formal sector. Although the program has benefitted her and people like her, she is not very complementary of the program. She feels that the program unintentionally keeps the businesses ‘small’ as entrepreneurs lose the benefit of government support (tax incentives, etc.) if they attain a certain revenue threshold. That is why she has to be very cautious when evaluating growth opportunities.
I recommended that she creates separate entities for women, men, and kids wear. So rather than having one company, she can have 3, with all companies eligible for the government program, helping her grow the business easily. She loved the idea and says she looks forward to implementing it. I was very impressed by her. She seemed to be the most advanced entrepreneur I met. As we ended our conversation, she showed off her amazing collection of artwork and wine!