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Wednesday, May 2, 2012

The best business in the world

How to start a Micro Business: I had a client that owned a hugely successful bagel shop. I visited his store; it was just a hole in the wall place. It was located in a dilapidated shopping center with a grocery store as the anchor tenant. His Bagel place was barely 500 square feet. Most of it was the kitchen. He told me he only worked there for two hours a day. Every morning, he would show up at 4:00am to make the dough. He had a secret recipe and he would not let anyone on his staff know how he made the bagels. Then, at 5:00 his two bakers would show up. They took his dough, formed the bagels, added toppings, and boiled and baked them into delicious hot bread.

Each morning at 6:00am, his store had a line out the door. Secretaries, bosses, contractors, and sales people would line up for a dozen assorted bagels and a container of whipped cream cheese. My client had invested very little in this business. He bought a second hand pizza oven and a commercial stove. His entire investment was under 25 thousand. He told me the most expensive part was that the county required a sprinkler system. He had 4 employees, 2 bakers, and 2 girls to man the register. Each morning the girls arrived at 5:30 to whip the cream cheese and put it in plastic containers. Then they opened the doors and sold bagels until 11:00am. That’s when the store closed, 5 hours later. 

It was open 7 days a week. His employees were paid very well for the short hours. He revealed to me that his store took in just over a million in revenue a year. His profit was astronomical for a restaurant. He had so little overhead. His employee costs were low. Zero advertising!  Flour, water, yeast, and small amounts of toppings were all that were needed to make the bagels. Cream cheese was purchased in large tubs from a vendor. He told me how much he earned for 2 hours of work a day. It was more than most heart surgeons make.

I want to tell you there is an amazing lesson in this. But I can’t. Do you know what made him successful? That recipe. I went and tried his bagels. They were mouth watering. So amazingly good.  He had something you could not buy anywhere else in the city. You would have had to travel to New York to find a better bagel. And he was consistent. Since he mixed them himself, he always had that same taste in every bagel. He did not need to be the one who formed them or topped them. He didn’t even need to sell them. He just had to make the perfect dough.

Plus, it was so inexpensive! You could buy a dozen with cream cheese for $10. That meant you could bring breakfast for a small office for almost nothing. If you made sales calls, you could bring a couple dozen bagels to your first client’s business and they would love you for it. I do a lot of marketing. It's nothing for me to spend $75 feeding a doctor’s office. I wish this bagel shop was where I live now. I would make just as many friends with a $10 dozen of bagels, I am sure.

I learned that he never shared his dough recipe with anyone. How could he? The only thing that made him successful was the secret to how he mixed the ingredients. With that knowledge, you could have stolen his business. Just like Coke and Pepsi, the bagel man had trade secrets.

Would I want to be the bagel man? I think so! Imagine the freedom he enjoyed every day. Only two hours of work and the rest of the day to do anything you want. Occasionally, he closed the restaurant for a week or two. The minute he was back the line would be longer than ever. It really was the perfect business.

So what can we learn form this?

First of all, have a truly spectacular product that you can’t get from anyone else. There were lots and lots of bagel places competing with him. But none of them had his delicious bagels.

Second, keep your overhead, start up, and employee costs as low as possible. His initial investment was a tenth of what most restaurants pay to open the doors. His payroll was under 75K per year. Supplies including all that flour cost less than the employees. The rest was in his bank account.

Third, reduce your role to only the things you do the best. He was really good at making the dough. So that’s all he did. The other jobs were done by competent people who felt they were well paid for their time. Anyone can make the dough into bagels and add the topping. Selling them and mixing the cream cheese was also a fairly easy job. It all came down to the recipe for the bagels. Do the thing you do the best and then hire people to do the rest. That’s the prime directive for all successful small businesses.

Fourth, the best adverting is word of mouth. He never had sales. Not once did he have a newspaper or radio ad. It was all based on people talking and trying his bagels. I learned about him first when a fellow therapist brought a dozen to work for breakfast. I was hooked!

I think there are applications of what he accomplished in lots of businesses. The key thing is creating something your customers can’t get from anyone else. That is the path to success.


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