I went on a first appointment with a prospective customer a few years ago and started talking about some ideas about getting this particular business off the ground. During the “needs analysis” portion of the conversation I started asking questions about profit margin, expenses, goals and quickly realized that they didn’t have specific answers for any of these questions. How was I supposed to put together an advertising budget when ultimately this particular customer didn’t even know what they needed to bring in to break even?
It is all too common that a lot of businesses aren’t even working with a basic business plan. This plan needs to first address all of the projected expenses. You need to know exactly what it’s going to cost to operate. Many businesses aren’t even expected to make a profit their first two years of business. How many actually plan for that? Next is determining what you are going to sell and for what price. Sounds pretty easy huh?
I think the hard part is actually getting this information into a spreadsheet and working the numbers so that you have a goal to hit. Setting goals and being organized are weaknesses many business owners struggle with. So before you go too far…get someone in your organization that is strong with these aspects. Somebody has to be doing this. Without fail! OR you will fail. STOP WINGING IT TODAY! RIGHT THIS SECOND!
If you have never done this simple drill…please do it within the next 24 hours. You can’t afford to wait. It could be eye opening. You might actually determine why you’re not making the kind of money you expected to make when you first started. With this information you can start applying better practices that will help the areas that need improvement. I regularly post these practices so stay tuned to future blogs.
Getting back to the appointment I first spoke about, we established a business plan BUT sadly realized that with mortgage, utility and all of the other expenses that this particular establishment needed to do numbers that were just not feasible in the category they were embarking on. Based on that information we decided to not to take on the client and recommended against the business going forward. Of course this was information that they didn’t want to hear. It was a hard pill for them to swallow but was accurate. The numbers don’t lie. After 13 difficult months the business went under. By the time we met with them…it was already too late. They were already pot committed. I know this is how it goes down often…too often.
So get your measuring stick out and don’t go all in with a seven and a deuce. Get it?