Selling to Customers

To complete your work on marketing, you need to think about what you want to happen after you get a customer. Your goal is to provide your service, satisfy customers, and put money into the cash register.

One-time customers can't do the job. You need repeat customers to build a profitable annual sales volume. When someone returns for your service, it is probably because he was satisfied by his previous experience. Satisfied customers are the best form of advertising.

If you previously decided to work only for cash, take a hard look at your decision. Americans like to buy on credit. Often a credit card, or other system of credit and collections, is needed to attract and hold customers.

Based on this description and the dollar amount of business you indicated that you intend to do this year, fill in the following workblocks.

Fixtures and Equipment

No matter whether or not customers will come to your place of business, there will be certain equipment and furniture you will need in your place of business which will allow you to perform your service.

Parts and Material

You will probably need some kind of parts or material to provide your service.

I plan to buy parts and material from:

______________________

Before you make any supply arrangements, examine the supplier's obsolescence policy. This can be a vital factor in service parts purchasing. You also look at the supplier's warranty policy.

Now that you have determined the parts and materials you'll need. you should think about the type of stock control system you'll use. A stock control system should enable you to determine what needs to be ordered on the basis of: (1) what is on hand, (2) what is on order, (3) what has been used. (Some trade associations and suppliers provide systems to members and customers.)

When you have decided on a system for stock control, estimate its cost. My system for stock control will cost me __________ for the first year.

Overhead

List the overhead items which will be needed. Examples are: rent, utilities, office help, insurance, interest, telephone, postage, accountant, payroll taxes, and licenses or other local taxes. If you plan to hire others to help you manage, their salaries should be listed as overhead.

____________________

Getting the Work Done

An important step in setting up your business is to find and hire capable employees. Then you must train them to work together to get the job done. Obviously, organization is needed if your business is to produce what you expect it to produce, namely profits.

Organization is essential because you as the owner-manager cannot do all the work. As your organization grows, you have to delegate work, responsibility and authority. A helpful tool in getting this done is the organization chart. It shows at a glance who is responsible for the major activities of a business.

As an additional aid in determining both what needs to be done and who will do it, list each activity that is involved in your business. Next to the activity indicate who will do it. You may do this by name or some other designation such as "worker #1", Remember that a name may appear more than once.

Activity / Name

_____________ _______________

_____________ _______________

_____________ _______________

_____________ _______________

_____________ _______________

How Much Money Will You Need

At this point, take some time to think about what your business plan means in terms of dollars. This section is designed to help you put your plan into dollars.

The first question concerns the source of dollars. After your initial capital investment, the major source of money is the sale of your services. What dollar volume of business do you expect to do in the next 12 months? __________

Expenses

In connection with your annual dollar volume of business, you need to think about expenses. If, for example you plan to do 100,000 in business, what will it cost you to do this amount of servicing? And even more important, what will be left over as profit at the end of the year? Never lose sight of the fact that profit is your pay. Even if you pay yourself a salary for living expenses, your business must make a profit if it is to continue year after year and pay back the money you invested in it.

The following workblock is designed to help you make a quick estimate of your expenses. To use this formula, you need to get only one figure - the cost of sales figure for your line of business. If you don't have this operating ratio, check with your trade association.

Whether you have the funds (savings) or borrow them, your new business will have to pay back these start-up costs. Keep this fact in mind as you work on the "Expenses" section, and on other financial aspects of your plan.

Break Down Your Expenses

Your quick estimate of expenses provides a starting point. The next step is to break down your expenses so they can be handled over the 12 months. Use an "Expenses Worksheet" form to make up an expense budget.

Matching Money and Expenses

A budget helps you to see the dollar amount of your expenses each month. Then from month to month the question is: Will sales bring in enough money to pay the firm's bills on time? The answer is "maybe not" or "I hope so" unless the owner-manager prepares for the "peaks and valleys" that are in many service operations.

A cash forecast is a management tool which can eliminate much of the anxiety that can plague you if your business goes through lean months. Use a worksheet, "Estimated Cash Forecast", or ask your accountant to use it to estimate the amounts of cash you expect to flow through your business during the next 12 months.

Is Additional Money needed?

Suppose at this point you have determined that your business plan needs more money than can be generated by sales. What do you do?

What you do depends on the situation. For example, the need may be for bank credit to tide your business over during the lean months. This loan can be repaid during the fat sales months when expenses are far less than sales. Adequate working capital is necessary for success and survival.

Whether an owner-manager seeks to borrow money for only a month or so or on a long-term basis, the lender needs to know whether the store's financial position is strong or weak. Your lender will ask to see a current balance sheet.

Even if you don't need to borrow, use it, to draw the "picture" of your firm's financial condition. Moreover, if you don't need to borrow money, you may want to show your plan to the bank that handles your store's checking account. It is never too early to build good relations with your banker, to show that you are a manager who knows where you want to go rather than a store owner who hopes to make a success.

Say that you are the sort who's starting new small business. You Have given attention to the general opportunities for success,
and have chosen the new business you wish to establish.

What practical issues will you face in starting the organization? How Much money will you need for beginning new small business?
Where can you get it? What kind of business organization will you own? Where should you find the company? (start company tips to
follow)

The first question you want to answer is: How much cash will I need? But this question can not be answered until several other
questions are answered and many decisions are made.

To Determine how much cash is needed to start a business, enter all Of your prospective income and all your planned expenses on a
job sheet or kind.

Even though you might feel that This Type of planning is more than You need to initiate a simple small business it is beneficial
to get started with this approach to direction which puts figures down in black and white. You'll find exactly the same approach
valuable in an established business.

First, estimate your sales volume. This will depend on the total Quantity of business in the area, the number and ability of
opponents now sharing that business, and your own capability to compete for the customer's dollar. Obtain assistance in producing
your sales quote from wholesalers, trade associations, your banker, along with other business-people. Several business and
statistical books could be useful in making sales volume quotes.

In reaching your final quote of sales do not be over-enthusiastic. A brand new company generally develops slowly at the start. If
you overestimate sales you're likely to spend too much in gear and initial inventory, and commit to thicker operating expenses
compared to your actual sales volume will justify. Since you are just starting up you might have no sales for the first few
months. At any rate you can expect your first few months to be very low.

You must also decide what percentage of your earnings will be money And what percentage will be sold on credit. If you estimate
that a particular part of the earnings are going to be on credit then you have to figure whenever you're going to get the money
for these earnings. 1 month? Two months? More? Never?

Next, in our guide to starting new small business, estimate how Much money will be paid out. Bear in mind in starting a business
you may be purchasing gear, paying licenses and fees, which makes deposits on rent, utilities and so forth, several months until
you open the door. A few of those expenses are easy to estimate. If you've decided to rent a building (more about this later) then
you know what your deposits will be and how much you will have to pay out each month. You are probably able to get the expense of
fees, licenses and utility deposits with a couple of telephone calls.

Other cost figures might take a bit more work for you. One way Is to obtain typical operating ratios for the kind of company in
which you're interested. Among the sources for such ratios are Dun & Bradstreet, Inc., trade associations, publishers of trade
magazines, technical accounting companies, industrial companies, and schools and universities. The typical ratios for your type of
company multiplied by your projected sales volume will serve as bench marks for estimating the several items of expenditure. But
do not rely exclusively on this way of estimating each expense item. Verify and modify these quotes through investigation and
quotations in the specific market area in which you plan to operate.

Do not forget to pay yourself also. You Might Need money to live on if You need to quit your job. If your spouse is working and
can encourage the family for a while you may not have to withdraw cash from the company. The longer you can go without taking cash
out, the quicker you will develop a strong cash position. Now you've estimated your money receipts and expenses, write down the
amount of money you will put into the business to begin. This goes online 1 in the case below. Then add lines 2 and 1 for your
first month to get line 3. Then add up all the expenses to get line 5. Subtract line 5 from line 3 to find line 6. This money at
the end of month then goes to line 1 for the start of the following month, and so on.

If you continue this for the Whole year, very shortly you'll find You have negative numbers or even a negative cash flow. About
this time you'll also realize that you ought to be working on this kind with a pencil which has a fantastic eraser.

In this overly-simplified illustration, you see that by the end of June you're minus $200 in money. Two solutions can be attempted
- reduce your purchases at June by $200 or start with $200 more. You may be unable to reduce costs (they will probably go up as
your company starts). So you will have to put in $200 more to start with. If all you've got is 4000 then the additional $200 you
need is funding you must get from somewhere else.

Don't be fooled by this simple illustration. Many small businesses Begin with the $200, and attempt to acquire the $4000 from
someplace else. Since a Major cause of failure in the early stages of a business is Under-capitalization, be very careful in your
planning at this stage. You can Almost always aim on several unexpected expenses and a few flaws in anticipated income.

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