Helping small business owners develop extraordinary businesses that really work for their customers, their employees, themselves and their families

Does your business “pencil out”?

When someone starts a business or introduces a new product, they are very excited.

It’s good to be enthusiastic, but you don’t want your emotions to blind you to the reality of whether your business will work or not.

Before charging ahead and investing a lot of money in marketing and infrastructure, put together some estimated numbers about how your business will work.

What will be your business model? How will the business generate ongoing revenue? Most businesses can’t survive as a “one product wonder.”

How many sales can you hope for? What will be the cost of fulfillment? What is the estimated cost to promote the product or service? What infrastructure (rent, employees, independent contractors, equipment) will be required?

An accountant can help you put these figures together into a financial projection or business plan. The projection is only as good as the assumptions and information provided to the accountant. You might need additional information from engineers, marketers and other individuals with experience with a similar business to assure the assumptions are realistic.

Marketing teacher Dan Kennedy shared an experience about a client who had a great skin care product. It was costly to produce because the ingredients were rare, exotic and expensive. The product would have to be sold for $149 per month to be profitable. Dan’s experience was this type of product wouldn’t sell for more than $49.95 per month. (That’s an amount that goes “under the radar” on a monthly credit card statement.) He spent a day explaining to his client that the economics didn’t work for this product, and no marketing strategies could overcome bad economics.

Avoid sending your money down a “rat hole”. Pencil out what the likely outcome will be from offering your products or services. If the business can produce a profit and you’re still excited, then go ahead.

Are your customers or your employees more valuable for your business?

It's great to appreciate and support your employees. It's also important to remember that customers pay the business's bills in exchange making their lives better. I believe the business exists to provide valuable products and/or services to its customers (usually solving a problem), and, in the process, to provide quality of life for its owners/investors and employees.

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Business and Personal Planning: What’s Important v. What’s Urgent

The beginning of the year is when most businesses and individuals focus on planning and setting goals for the year ahead. In order for us to be most productive, it’s helpful to know where we are going. In The 7 Habits of Highly Effective People, Steven Covey called this “Beginning With The End In Mind”, and he covered the subject in more detail as “Habit 3 – First Things First – Principles of Personal Management.”

When we are prioritizing our goals and how we spend our time, we should distinguish what is Important and what is Urgent.

Important goals have a long-term payoff. They represent an investment of your time. Important goals relate to the things you value most, your personal mission. For example, most of us would say we rank our family relationships as one of our highest values. That means investing your time in family events, like celebrating birthdays, anniversaries, and graduations, are classified as important. For a business, building your list of qualified prospects and your customer list represents a “future bank” that is one of the most important things you can do for your business on a regular basis.

Goals that aren’t important represent spending your time without much payoff or that aren’t valuable to you.

Urgent goals are screaming to be done immediately or very soon.

Covey categorized goals or activities into four quadrants:

Quadrant I – Important and Urgent. These are important items that must be done now. The problem with focusing on it is it tends to grow and get out of control.

Quadrant III – Not Important and Urgent. These are items that represent a distraction. They should be delegated or procrastinated, because they aren’t important and don’t represent a good use of your time. Because they are urgent, they are often erroneously categorized in Quadrant I.

Quadrant IV – Not Important and Not Urgent. These items should be ignored. Since they aren’t urgent, it shouldn’t be difficult to ignore them.

Quadrant II – Important and Not Urgent. This is the key area for building “future bank” for yourself and your business. When you work on these goals or activities, you are getting control of key areas of your life and your business that will help shrink the items on your Quadrant I list. They should be high priorities but are often neglected in favor of Quadrant III items.

When working on getting control of your time, you are trying to achieve a balance between (P) Production and (PC) Production Capacity. Production represents current bank and Production Capacity represents future bank. Both of them are required for a sustainable life and business.

As you plan your schedule for the year, quarter, month, week and day, start with a written list of your goals and the activities required to achieve them, categorized by Quadrant. Be sure you are regularly prioritizing working on items in Quadrants II and I and delegate or procrastinate items in Quadrants III and IV. If you neglect those items, they might just fade away. By focusing on the most important items, you will using your time most effectively and accomplishing the most important items in your life and your business.

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Helping small business owners develop extraordinary businesses that really work for their customers, their employees, themselves and their families