Checklist for Starting a Dog Grooming Business: Essential Ingredients for Success
If you are thinking about going into business, it is imperative that you watch this video first! it will take you by the hand and walk you through each and every phase of starting a business. It features all the essential aspects you must consider BEFORE you start a Dog Grooming business. This will allow you to predict problems before they happen and keep you from losing your shirt on dog business ideas. Ignore it at your own peril!
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A Step by Step
Guide to Starting a Small Business
This is a
practical manual in a PDF format, that will walk you step by step through all the
essential phases of starting your Dog Grooming business. The book is packed with
guides, worksheets and checklists. These strategies are
absolutely crucial to your business' success yet are simple and
easy to apply.
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Calculating the Overhead Cost
In determining the total overhead cost, a business
should not depend solely on last year's income statement. Due to
inflation and business growth, last year's overhead costs do not
accurately reflect today's overhead cost. The best approach is
to project the overhead costs for the near future, that is, the
anticipated overhead expenses for the next six months to one
year. The projected overhead cost will reflect additional
administrative salaries, the depreciation of new equipment that
the business plans to purchase, rent increases, energy cost
increases, etc. Table 2 shows projected overhead expenses for a
business, ABC Repair Company.
The payroll taxes included in the
projected overhead expenses for the service
business are only those paid on executive and office salaries.
The direct labor payroll, taxes, holiday pay, vacation pay etc.,
are included in the direct labor cost
shown in Table 1.
ABC Repair Company
To ensure that all overhead costs are included, it
is best to project the overhead costs for a full fiscal year.
This aids in the treatment of expenses that occur only once each
year, such as business licenses.
Cost Calculation Example
Perhaps the most common type of service business is the
repair business. The cost calculation procedure illustrated here
for the repair business can be used for other types of service
businesses. The only precaution that needs to be taken is that
the appropriate overhead rate formula which reflects the
business's operation, as discussed above, be used in the
calculation.
It has been estimated, based upon previous experience,
that a specific repair job will require $20 of parts and 2 hours
of labor by an employee whose labor cost is $5.00 per hour.
(These estimates will be used throughout this Guide.) As
discussed earlier, the total cost of producing any service is
composed of: 1) the material cost, 2) the labor cost, and 3) the
overhead cost.
To determine the material cost (the cost of the parts),
check the cost of the part in your inventory or get a price
quote from your parts suppliers. A parts wholesaler is the
source of the $20 material cost in this example.
To determine the total direct labor cost, the number of
hours of direct labor used is multiplied by the actual direct
labor cost per hour. An employee whose actual direct labor
cost is $5.00 per hour, including payroll taxes and
fringe benefits (see Table 1), requires two hours to complete
the repair job.
Labor Cost = Direct Labor Cost per Hour x Hours
Required
Labor Cost = $5.00 per Hour x 2 Hours
Labor Cost = $10.00
The projected overhead expenses were projected to be
$100,000 per year, as shown in Table 2. The nature of the repair
business is that overhead costs are most directly related to
direct labor costs than to direct material costs. The total
projected direct labor cost including payroll taxes and fringe
benefits was determined to be $50,003.20 (see Table 1). The
formula selected to determine the overhead rate bases upon the
direct labor cost is:
(1) Overhead Rate =
Total Overhead Cost
_______________________
Total
Direct Labor Cost:
$100,000 : $50,003.20 = 2.00
In most small to medium businesses, the overhead rate
is between one and two (i.e., between 100% and 200% of the
direct labor cost). Businesses that are very labor intensive,
such as a janitorial service, will have an overhead rate much
less that 100%
To determine the overhead cost allocated to a specific
job, the labor cost is multiplied by the overhead rate as shown
below.
(1) Overhead Cost = Direct Labor Cost x Overhead Rate
$10.00 x 2.00 = $20.00
To determine the total cost of the repair job, the
material cost, the direct labor cost, and the overhead cost are
added together:
Material Cost....... 20.00
Direct Labor Cost...10.00
Overhead Cost.......20.00
..........................______
.................. Total
50.00
Calculate the profit and add it to the total cost to
get the price to charge for the service, in this case a repair
job. Prices charged by competitors (similar service businesses),
economic conditions of supply and demand, and legal, political,
and consumer pressures all influence the profit you can expect
for your service and hence the price you can charge for your
jobs. Inflation, the amount of business you have (i.e., number
of jobs), and your productivity (the efficiency and quality of
your business and service) also all effect your profit and the
way you figure your prices. You can choose from several pricing
methods. Common business practice is to express profit as a
percentage of the base used for pricing calculations no matter
which pricing method you use.
Set Prices Alternatives
In considering the total cost of the repair job
discussed above, the material cost can normally be predicted
with a high degree of accuracy. Labor and overhead costs cannot
be predicted with such a high degree of accuracy. An employee
may not feel well on a given day. Or there may be an equipment
breakdown. Either will result in higher than expected labor
costs. A provision to adjust for fluctuating labor and overhead
costs can be established through your approach to profit. The
profit can be applied to the three costs independently, allowing
for variations in labor and overhead costs among jobs. For
example, a 10% profit on material, a 30% profit on direct labor,
and a 30% profit on overhead can be used to determine the price
of the service.
The concept of applying a different rate of profit on
the three underlying costs ( material, labor, and overhead) is
one method of dealing with the large difference in
predictability of costs that exists between labor and materials
in most service businesses. To reflect the fluctuations in
utilization and cost of labor and overhead from job to job, your
profit on labor and overhead should normally be higher than
profits on materials.
Direct Cost Pricing
With this method you set your selling price based on
direct cost, that is, on direct materials (DM) and direct labor
(DL). DM of $20 plus DL of $10 equals Direct Costs of $30.
Overhead (OH) costs are $20; so to earn the $11 profit you need,
your selling price must be at least $31 above your direct cost
to charge; divide direct costs into overhead plus needed profit:
$31 ($11 + $20) : $30 = 103 1/3%
(proof $30 x 103 1/3% = $30 x 1.033 = $11)
In most small businesses, there is not a large amount
of overhead cost associated with obtaining parts besides a
telephone call to order them. Charging a large amount of
overhead to parts may result in pricing yourself out of the
market.
By all these methods you are deriving a selling price
for your service. Sometimes however you start with the selling
price already established - by competition or economic
conditions. Then you must figure out the most cost you can incur
and still earn your needed profit.
Setting Prices - Summary
The total cost of producing a service is composed of
direct material, direct labor, and overhead costs. This cost
information is used as a basis for setting prices and profit.
From alternative pricing methods you select one that earns a
satisfactory profit and is easy for you to use. Given
regulations, competition, and the economy, you must have a
pricing strategy that keeps your service competitive and
profitable. The more exactly you figure your costs and set
prices, the greater your chances for continued and profitable
business.
If you manage a factory, wholesale outlet,
retail store, Service store, or are a builder, you will need to
sell. However good your
product is, regardless of what
customers think of it, you must sell to endure.
Direct
selling approaches are through personal sales efforts,
Advertising and, for many companies, exhibit - including the
styling
and packaging of this item - in windows, at the
institution, or even both. Establishing a fantastic reputation
with the general
public through courtesy and special services
is a direct process of selling. While the latter should never be
neglected, this
short discussion will be restricted to direct
marketing methods.
To establish your business on a
business footing requires a Whole Lot Of aggressive personal
selling. You may have established
competition to overcome.
Or, if your thought is new with little or no competition, you've
got the additional difficulty of
convincing people of the
value of the new idea. Private selling work is nearly always
necessary to accomplish this. If you aren't
a fantastic
salesperson, seek a worker or asociate who is.
Another
way to create sales is by marketing. This may be done Through
papers, shopping papers, the yellow pages section of the
phone directory, along with other printed periodicals; radio and
television; handbills, and direct email. The media you choose,
in
addition to the message and kind of presentation, will
depend upon the specific customers you wish to reach. Plan and
prepare
advertisements carefully, or it'll be ineffective.
Most media are going to be able to describe the features of
their viewers
(readers, listeners, etc.). Since your initial
planning described the characteristics of your potential
clients, you want to match
these features with the media
audience. If you are selling expensive jewelry, don't market in
high school newspapers. If you fix
bicycles, you probably
should.
Advertising can be quite costly. It is wise to
place a limit upon An amount to invest, then remain within that
limitation. To help
you in determining how much to spend,
study the operating ratios of similar companies. Media
advertising salespeople will help you
plan and even prepare
advertisements for you. Be sure to tell them your budget
limitations.
A third Way of stimulating sales is
successful displays both in Your place of business and outside
it. If you have had no prior
expertise in display work, you
are going to want to examine the topic or turn the job over to
somebody else. Watch displays of
other companies and read
novels, trade magazines, as well as the literature provided by
equipment manufacturers. It could be smart
to hire a screen
expert for your opening screen and unique events, or you may
obtain the help of one on a part time basis. Much
depends
upon your kind of business and what it takes.
The proper
number and types of marketing campaign to utilize vary from
business to business and from owner to owner. Some
businesses
prosper with low-key revenue efforts. Others, like the used-car
lots, flourish on aggressive, hoop-la promotions. In
any
case, the importance of successful selling can't be
over-emphasized.
On the other hand, don't Eliminate
sight of your major goal - to Earn a profit. Everyone can
produce a large sales volume selling
dollar bills for ninety
bucks. But that won't last long. Keep control of your costs, and
price your product carefully.
Record Keeping. One
essential element of business management is the keeping of
adequate records. Study after study indicates that
many
manager failures could result from insufficient records or the
owner's failure to use what information was available to him.
Without documents, the businessperson can't see in advance which
way the business is going. Up-to-date records may forecast
impending disaster, forewarning you to take action to prevent
it. While additional work is required to keep an adequate set of
records, you'll be more than paid for the effort and expense.
If you are not prepared to keep adequate records - or
have somebody Keep them - you shouldn't attempt to operate a
small business.
At a minimum, records are Required to
substantiate:
1. Your returns under tax legislation, such
as income tax and social Safety legislation;
2. Your
request for credit from equipment makers or even a loan From a
bank;
3. Your claims about the company, should you wish
to sell it.
But most important, you need them to run your
business successfully And to raise your profits. Having a
decent. Yet easy,
accounting system you may answer these
queries as:
How much business am I doing? What are my
costs? Which appear to be too large? What is my gross Profit
margin? My net profit? How
much am I piling on my charge
business? What is the condition of my working capital? How much
money do I have available? Just how
much in the bank? How
much do I owe my Providers? What is my net worth? That is,
What's the worth of my possession of The
business? What are
the tendencies in my Receipts, expenses, gains, and net value?
Is my financial position improving Or growing
worse? How do
my resources compare with what I owe? What's the Percent of
return on my investment? How many cents from every
dollar of
Sales are net profit? Answer these and other questions by
preparing and studying balance sheets and profit-and-loss
statements. To do this, it's Important that you record
information about transactions as they happen. Keep This
information in a
comprehensive and orderly manner and you
will have the ability to answer the above questions. You'll Also
possess the answers to
these other vital questions About your
company as: What products or services do my clients enjoy best?
Next best? Not at all? Can
I carry the merchandise most
frequently requested? Am I Qualified to render the services that
they need most? Just how a Lot of my
charge Clients are slow
payers? Shall I switch to cash only, or use a charge card Charge
plan?
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