Being Business Minded: So who is making the money? (Part 6).
A friend of mine, in South Africa, wanted me to join him, in acquiring a business called a “Feeding Lot”. Something he said, intrigued me:
“They have 50,000 cattle on one farm…”
“Did you say, 50,000 cattle?! Wow! I have never seen that many cattle in one place. I have to see this!” I exclaimed with excitement.
Having walked around the farm, and seeing all these cattle feeding in one place, was pretty cool, for a city slicker like me:
“It would be great to have the bragging rights of saying, “I have 50,000 cattle!” I could just see how they would react back in my village, in Zimbabwe!”
But before, I got carried away, I had to look at the numbers. And when I look at numbers, I look at numbers.
How do they make money, and how much!
“Let me get this?” I asked the Managing Director, of the operation:
“You buy the cattle, from other farmers, and then you feed them. Then you sell them to the guy who slaughters them; and he sells them to the supermarkets?”
“So who makes the money?”
“Its an industry”.
“Tell me about this industry, I want to know everything about it.”
The management were professional and passionate about their business. It was clear they had been in it, all their lives. Most of them had specialist agricultural degrees and MBAs. The more they spoke, the more I realized how sophisticated it all was:
There is a science, to everything:
Now the guy was talking about the type of cattle they use; how they get the cattle to put on weight quickly…disease control…competitors from Brazil…. “Wow, they do that?!”
“Yes, yes, yes.”
I wondered what the conversation with the professional farmer, would have sounded like. Or for that matter the abattoir operator, or the buyer at the supermarket chain.
Being business minded, requires you to always approach things with humility and respect. There is nothing out there that is “simple”. Only fools look at what someone else is doing, and say to themselves, “that is simple”.
The process of reviewing their Financial Statements, and Business operations took me several months, working with industry consultants. It was harder than a telecommunications business.
I decided not to buy the business, although I would have gladly invested, for a minority stake, on condition that they stayed to run it. Understanding this distinction will prepare you for the “senior class”, of business minded people.
To be continued…
Source: Strive Masiyiwa