PGentile - Writer and Attorney

Business Writing and Advice

Month: April 2015

Business Plans – By the Numbers

Well, here we are. We have finally arrived at that point in the business plan where we get the opportunity to do some math! Wooo Hooo! What? Crunching a few numbers doesn’t float your boat?  That rapid heartbeat isn’t from excitement? That lightheaded feeling isn’t based on that adrenalin rush? You’d rather have root canal? Come on … it won’t be that bad. Trust me.6355220839_982b1263d5_m

Let’s start with your anticipated monthly expenses. Begin with those expenses that are common for all types of businesses and then add in those special items that are particular to your business model. Your business needs a place to conduct business so what is the going rent in your area for the size space you need? Check online or in the local paper for commercial space and use that as a guide. Now move on to your utilities – electric, heat, water, phone, internet, etc. If you’re not sure, you can use your household expenditures on these items as a baseline and adjust accordingly. Will your business be needing any special equipment – ovens, mixers, computers? If so, add in the monthly payment for these. How about general office expenses such as pens, paper, marketing, insurance, salaries, etc.? Once you’re finished with this you’ll have a good idea of how much money you’ll need to generate on a monthly basis to keep your business humming. Please note that this does NOT include one-time, up front expenditures that you’ll need just to open the doors (e.g. equipment purchases, security deposits, etc.) Bottom line here: keep it lean and mean! Don’t bloat your overhead and your stress level will be low!

Here’s a sample:

Budget

Now we take a look at the revenue side! Take a good long look at your product or service. What will you be selling to your customers? If there are similar products or services in your area, how much do their services or products cost? This is not meant as a limitation on your products or services but merely as a guide for what your competition is charging. Using the homebaker model we’ve used before, you may want to charge your customers $8 per loaf of fresh bread. You can anticipate that some customers will ask themselves “Do I really want to spend that much on bread when I can go to the local market and pay $4?” That’s ok because your product is different and unique and some people (not all people) will be willing to pay more for that uniqueness. (We’ll get into the “selling” of your uniqueness in the next installment.) The only advice in pricing your product or service is this: don’t base your price just on the costs to produce your goods; rather, try to price your goods on what they are worth to others. In other words, what is the value your product’s or service’s bring to others.6355818699_a9bed226f8_m

Once you’ve settled on a price per unit you can now determine how many loaves of bread you need to sell on a monthly basis. If your monthly overhead is $5,000, simply divide that number by the price per unit to determine that you’ll need to sell 625 loaves of bread per month. Now you can go back and make some adjustments to your monthly costs or product pricing as you see fit. You can trim some costs and boost your pricing to make yourself more comfortable with the numbers.

Keep your numbers as realistic as possible and as lean as practical. Your stress level will be lower and your excitement level will be at it’s highest. You’ll be able to focus on doing what you love to do rather than worrying about keeping the lights on!

Business Plans – Customers

This is the third installment in the series on business plans and the information that goes into them.

So far, we’ve identified the need/problem and your timely solution to that problem.  Now let’s turn our attention to your customers – who are they, how do you reach them and how do they find you?

Who Are Your Customers

Pinpointing your audience is essential to marketing your business which in turn is key to increasing sales.  This part of the process calls on you as the business owner to focus on the type of persons who are likely to use your services or purchase your products.  It is tempting, no doubt, to say to yourself that everyone is your customer.  It is not enough to generalize your answer.  Why? Because it is not true – everyone is NOT your potential customer.

While some people may be keenly interested in knitting supplies and in your knitting instruction class, I, for one, have no interest in knitting.  Therefore, I will never respond to any advertising, emails, direct mail or any other solicitation that involves knitting.  So, for you to spend money and time (both very valuable resources in scarce supply) in trying to solicit my business would be highly inefficient and wasteful.3313998177_d38c471257_m

So, determine the type of person who would be interested or see value in your products and services.  If you bake artisan breads and cakes, your customers might be people who appreciate wholesome, home-baked goods but don’t have the time or skill to do it themselves.  If you sell fresh roasted coffee, for example. your target audience  might be coffee lovers who value a great cup of coffee and are willing to spend a little more to enjoy that.  If your business provides free food for the needy, your consumers are those families struggling to make ends meet.

How to Connect

If you’ve been able to describe your target customer the you should have a little insight into what makes them tick and a few ideas on how to communicate with them.  For example, you’ve identified your audience as artistic and craft-oriented for your knitting business.  A good place to connect with like minded people might be to teach a class at the community college or establish a strategic alliance at the local craft supply store and offer a class at their facility.  You shouldn’t set up a booth for your knitting class at a sports memorabilia expo.  Wrong audience, wrong location.

megaphoneThe artisan baker and the coffee roaster might set up a stall at local farmers’ markets, street fairs and festivals.  From there, they could further develop those customer connections by creating a direct sales program via home delivery or by mail.

The company that offers consulting services to small business might see some advantage to writing business advice articles for the local newspaper or business magazine.  Perhaps they would enhance their market share by networking with other professionals at local civic organizations or trades. Maybe even offer a free seminar or discussion on current business topics at a local restaurant.

Keep in mind that sometimes the best way to find out what your potential customers are like is to look at yourself.  After all, you are passionate about the problem and your solution. So what is it that drives you and excites you?  What methods of communication and advertising are most effective with you?  Chances are, you customers will feel the same way.

If you know yourself, you’ll know your audience and you’ll have a pretty good ides on how to connect with them.