Creating a Fund raising proposal to support expansion (For funding from venture capitalists)

Assignment Taken

To identify the cost incurred and revenue generated by the company, To suggest ways of decreasing cost and increasing benefits (long term horizon), To analyze the firms performance

Case Understanding

Facts of the case •Fresh Growers is a Pune based company that procure and deliver fresh farm produces •Chitranjan Desai, the owner of the business has setup the business in hometown •The startup was established in 2019 •Concept of the business is Farm to dining •The produces will be delivered within 3 hours of harvesting from the farm ideally •Mr. Desai wants to expand his company to 3 metro cities within 2 years •He wants to do so reach breakeven Issues arising •In the implementation stage, it takes 6 hours to reach the dining •Farmers wanting to harvest whole farmland at one go to save cost and effort •Difficulty to the convince farmers to use organic practices over pesticides •Customers easily switching to competitors due to convince •Self-funded firm but funds will be required to expand to 3 more metro cities within 2 years •Mr. Desai is planning to reach the breakeven by expanding to other cities (incorrect approach) Since Fresh growers is a self-funded company, the company is hugely relying on its equity. The finances within the company is mismanaged. There have been losses incurred in the first 4 quarters. Even though the company was able to generate profit in the 5th quarter but the losses in the past were huge therefore there was no retained earnings for the company as well. The company has received no funding. Besides the company is focusing more on the marketing than its supply chain. Only 2 vehicles is catering to the whole cities need. The company unable to generate its current asset. The company's management system is inefficient and the business model and strategy is not completely in alignment with the goals of the company. Expanding the company further in current scenario will create huge losses for the company. There is also a possibility that these issues will arise once again in the other cities as well.

BCS Solution Summary

The concept of Fresh Growers is to provide fresh, seasonal, organic farm to dining produces to its customers. The key to a successful business is to be customer centric and not product centric. Initially the startup should focus on reducing the marketing service and redirect those expenses to carry out a survey to study the market and the customers well. The company must first conduct a survey first for its subscribers then expanding to other parts of Pune. The questions for the survey will be as follows: From a scale of 1 to 5 with 1 being the least and 5 being the most, rate your responses 1. How often do you buy from us? 2. Do the products available in the app match with what you are looking for? 3. Should we include more farm items? 4. Are you satisfied with the quality of the product? Open-ended questions 5. Name 2 more items you think should be included. 6. Who else do you buy from? 7. How many days in a week due you buy from? 8. Do you prefer buying on weekdays or weekends? This survey would give the company a rough idea about the list of produces that the startup should consider to keep in their warehouses. Fresh Growers is a company focusing on produces reaching to their customers as early as possible. Therefore, it should have an efficient delivery system as well. Currently there are only 2 vehicles to cater delivery services which is not sufficient for delivery services. Therefore, the company should incur cost to buy more vehicles (can be vans or bikes). To reduce the petrol and diesel cost, it would be better if the company would buy e-vehicles and also collaborate with some agencies to provide better and fast delivery services. This fast delivery system will generate more assets in the form of cash. The major reason for lesser sales of organic produces are high cost, low availability and habit. To increase the revenue, Fresh Growers must keep their customers updated and notified about the availability of produces every day. This will cultivate a habit for the customers to buy produces that are fresh and readily available. Another major area for high expense is regarding the farmers. Average farm Produce purchase Cost To company per household (Paid to farmer) is rupees 170 which is relatively high. Since around 2 hours is spent in harvesting the crop, the harvesting of crops can be divided in 2 or 3 slots respectively. According to these slots, the crops will be harvested. This will decrease the cost and effort for both the farmer and the startup as well. These slots will be predetermined according to or before the peak time of buying of produces in the local market. Farm Growers should not limit the selling of crops to just household. It should instead expand its customers to retail stores and super markets as well. Fresh Grocers can also collaborate with Private Labels are well. This will generate trust among the customers for the company (intangible asset).

Solution

Management Principles used to derive the solution are:

1. Unity of Direction - The goal of the firm and the employees should be in alignment. This is also the case in this situation. Goals help to achieve maximum efficiency in minimun time. Therefore while preparing the solution, it was made sure that the solution is in alignment with the main goal of the company so that it provides right solutions for the company to grow in the right direction and achieve it's goal.

2. Order - The strategy provided by the firm was unable to cope up with the goal of the company efficitively leading to lack of proper order while running the company. Problems are inevitable. If a company is functioning, it will come across with various problems. It is important to to tackle these problems rationally to come up with effective solutions. The company was struggling to reach its breakeven point. This was mainly due to lack of proper order within the company. Since the company could not identify it's actual reason for the proble, they assumed that expansion of the company was the only solution to the problem. There while providing the solution it is kept in mind that there is proper order within the firm for proper growth.

3. Division of Labour - While providing the solution, it is made sure that there is proper division of labour within different departments in the company so as to maintain law and order within the company. This will speed up the growth of the firm to overcome it's problem. 

4. Authority and Responsibility - The order within the company will be mainteined due to authority. The responsibility will be taken by respective departments to maintain law and order within the company.

5. Discipline - The solution provided makes sure that there is discipline maintained within the company. It also makes sure that the problems arising previously would not arise again. Disciple would maintain work harmony within the company and among the employees and with the customers.

Conclusion

This case study provided a valuable insight about the problems that are faced by growing startups. There might be more problems stemming in a startup but those problems can be solved by observing the situation closely and then providing a new angle and perspective to the situation. The purpose of this case study was to identify what was going wrong within the startup. These problems might be faced by almost every other startup in it's initial stage. It is quite normal for the company to incur losses in its initial stage but the startup needs to make sure that they are not generating revenue via the assets that have been obtained by only debts. There should an optimum mix of capital structure so as to generate assets followed by revenues in the long run. The most common problem that startup face is that they are not completely aligned with the goal that they want to reach or with the vision that they aim to achieve. Therefore it is essential to focus on alignment rather than expansion. The focus should also be customer centric and not product centric to prevent the firm from becoming myopic about it's future. Competitors are also a crucial part of the market henceforth they should studied well. It is not important to provide the first in the market rather what is important is to provide the best of the ability of the firm. Budgeting is also a crucial part and so are surveys. They provide a backbone or path to the firm as well. The resources are limited and the market is huge and some part of it is unknown therefore it would be wise to study and get an idea to know what to offer and how much to offer. Therefore I conclude by saying that startups can safely choose customers over product and always stay in alignment with their vision for a long term success.

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