In this lesson we are going to start looking at how your business is going to develop into a long term enterprise which you can, if you decide to, turn into a full-time profitable career.
First, make a list
It is more than possible, over the last couple of months, that you have tried a variety of ideas some of which will have worked better than others.
I'd like you to write down each of things you have tried and give each of them a mark out of three on various scores.
- Profitability - 0, total loss; 1, lost money or made no sales; 2, broke even; 3, made money
- Effort - 0, could not complete tasks involved; 1, too much effort for the reward; 2, enjoyed working on this; 3, no effort at all
- Viability - 0, would not mention on CV; 1, risky but possible; 2, steady long-term possibilities; 3, a gold-mine
Hopefully you'll have a grid something like the (purely imaginary) one below:
|AdSense adverts on blog||1||3||1||4|
|Paid for downloads||3||3||0||6|
|Selling on auction sites||3||1||2||6|
You'll note from the above that it looks like we have two winners tied but, any task that scored a zero should be disqualified from further effort because it cannot work as a long term business under present circumstances.
Of course rules are here to be broken, that is the STB way as you know by now, so you may want to ignore your list but it should give you a hint as to where you want your business to go next and what, if anything you want to concentrate on.
Following through on the example above, let's now look at our runners up. There are two of them. In this example the two dovetail quite well and our business can carry on with the two activities together. If they had not and you need to choose your backup activity, use your bonus tenth point as a tie-breaker. Which task fits better with your primary winner and which do you enjoy more?
So now you should have no more then three activities upon which to build your business. We are going to continue following our example business through this lesson, so let's learn a little about what they have been doing first.
Why You Are Doing What You Do
Our imaginary entrepreneur is a keen amateur bryologist - yes, I wanted to choose a niche market that you are unlikely to have chosen and one that you won't just go copy! How he got into the hobby of studying mosses is not really important at this stage but it is important to note that he has no scientific background or qualifications and is now in his fifties, so unlikely to get a formal education in his area of enthusiasm.
As for his work circumstances, things are not looking great. Like many, he suffered redundancy from his public sector career and his prospects for a new job are bleak in the current economic climate.
So our example is a fifty six year old with little in the way of formal qualifications and no experience of self employment. His wife is still working but part-time in the care industry looking after patients released from hospital and earning a little over minimum wage.
He and his wife could, probably get by but holidays and luxuries are now off the agenda.
Ken Cooper, for that is what I have decided to call him, wants more for his family.
His next task is to write his story in such a way that it looks as though his business was always part of his life plan and not a series of circumstances.
Here is what he came up with:
"Ken Cooper launched http://www.CooperMoss.co.uk in May 2010 to share his knowledge about mosses and liverworts and their interesting features and forms with other amateur enthusiasts. With his infectious enthusiasm and energy he soon found his site becoming a valuable resource for many curious readers to learn the basics and enjoy greater interest in their own forays around town and country.
He started selling his own written guide to the study of mosses and score sheets with identification hints for those keen to explore the regions where they live or visit. Now he has decided to take advantage of the opportunity of early redundancy to develop his hobby into a formal business to supplement his families income into the future"
This is not actually required for this lesson, it will be needed when you put a full plan together in lesson twelve, but it's something you need to be thinking about for yourself as you look at your future activities from the narrowing down list.
Realistically Looking at Turnover
How much do you really want to make next year? As you can see, our Ken is pretty modest in his aspirations - a holiday and some little luxuries. How much could that be, realistically? For planning purposes Ken is going to aim for an annual net profit of £3,000.
Your aspirations may be much more ambitious, particularly if your business is going to be your sole income. If that is the case you need to sit down and write out exactly how much you and your family need each and every month to get by. The Joseph Rowntree Foundation produce annual updates on this figure and it is likely to be around £15,000 for a single person and £30,000 for a family. Your circumstances may be different but that's not a bad figure to use as a base guide to check your calculations.
So, if Ken is selling his moss field guides for £6.50 (comparable to similar products) and it costs £4.00 for each sale, he'll be aiming to sell 1,200 per year or 100 in a month or 23 per week or at least 3 each and every day of the year. Suddenly his target does not look so modest after all, does it?
Translate that to your own aspirations - can you, realistically sell 30 of your products each and every day of the year?
Before you start writing a full business plan, you really need to get this little issue thrashed out in your mind and on paper. You see, the enthusiasm with which you launched yourself into business just ten weeks or so ago won't actually bring bread to your table let alone riches, wealth, fame and whatever it was you were hoping for.
Cash Flow Forecast
A Cash Flow Forecast is something you really do need to monitor on an ongoing basis how well your business is doing against your targets. There are many, probably thousands, of free templates out there that you can download for free from the internet. One of the most thorough is to be found on the UK Business Link website here:
It's certainly thorough but you may find it a little over complex for your needs. Just make sure that all your expenses and costs are listed and you can find alternatives on the Microsoft download website. Whatever you choose, make sure it's a British one as those from overseas jurisdictions may need too much work to adapt to UK circumstances.
As you tackle your chosen template, you'll need to address the following questions:
- What are the direct costs of the product or services per unit?
- What are the monthly and yearly costs of the business?
- What are your family monthly and yearly costs?
- What is the sales price per unit of the product or service?
- What are the available sources of cash, other than income from sales; for example, loans, lodger rent, or other jobs?
Whichever template you use, you will need to adjust the rows to suit your specific circumstances. So what might Ken's look like?
|Cash on hand||500.00||735.94||604.94|
|Total Personal Expenses||501.06||868.00||953.00|
|Field Guide Sales||650.00||650.00||650.00|
|Total Business Sales||697.00||697.00||697.00|
|Accounting and legal||-||-||-|
|ISP & internet||24.00||24.00||24.00|
|Salaries & wages||-||-||-|
|Taxes (real estate, etc.)||-||-||-|
You might want to copy and paste that into a blank spreadsheet to start with but it won't have all the sums and carry forward calculations you need from a template. So work with a combination till you get your perfect solution.
Ken is going to have to look at his expenses as they need to be pared down!