How much is my enterprise going to cost? One important reason to be painstakingly thorough when writing a business is that it really helps you see the costs involved. Remember, there are always “hidden” or “unanticipated” costs involved in starting a business.
If your business is a product business; what are the costs of designing, developing and installing the product?
Are there middlemen, agents, distributors involved?
What are the shipping costs and insurance?
Is your business built around a service?
Do you have all the training necessary?
How much will it cost you to train others?
Are there costs related to the territory, marketing costs and travel?
How long will it take you to get to the first full day of sales?
In other words; from the day I decide to start my company, how long will it take me to make money?
Accurately counting the cost can be the determining factor in making your business a success. Arguably, inaccurately counting the cost will always lead to business failure. This booklet contains worksheets and budget sheets. These are the basic tools of working out the cost of your business. But those tools are less effective if you haven’t spent considerable time “thinking through” your business from every angle.
“Measure twice. Cut once.”
We all want to go into business to make a profit. Some things require a serious amount of effort and planning to generate bottom-line profit. Other enterprises may take very few resources and just a lot of good planning and execution.
The execution of your business plan must generate a reasonable amount of revenue over and above your cost of doing business plus taxes.
How do you find that out? First of all, you need to ask many questions. You need to ask AND ANSWER the same questions over and over. Many many questions need to be asked and answered to discover the full “cost” of doing business. Then and only then can you discover the potential profitability of your business.
Use a Cost-Benefit Analysis worksheet to determine which of your ideas or products can yield the most revenue. Look at the time spent on each product, as well as the cost of manufacturing and operations. The same can be done with a service or an idea. Which yields the most revenue for the least cost? Do quality issues outweigh quantity issues? Sure, product “B” will generate a lot of short-term revenue, but product “A” will keep our customers happier and coming back again and again.
You might look at personnel the same way. Salesman “A” is smart, experienced and EXPENSIVE. Salesman “B” is smart, willing and cheap. You need to ask yourself: “which kind of manager am I?” What is my philosophy regarding quality vs. quantity? An example: I was living in Washington, D.C. and I visited a particular office several times. I was very impressed with the secretary who worked there. She was not the office manager, but seemed to know more about what was going on than anyone else. Short story: I hired her. I could see that she was more valuable than two or three other people. I offered her a significant increase in salary, benefits and title, to do for me what she was already doing for someone else. I made her feel valuable and significant. She was a splendid addition to my staff and contributed much more to our company than we asked. Why, because we made her feel important and we rewarded her for her efforts. Staff is a very important part of your business planning. Don’t just hire “anybodies.” Hire “somebodies.”
Which direction you go is entirely up to you. The important point is that you need to ask and answer ALL questions for yourself. Product, warehouse, quality, sales and staff, just to name a few.
Go out and create your dream.