Quick-Launch Business Plan – Part 2

Now that we’ve been through the Discovery
process, let’s look at the planning map that guides the rest of the business
plan development. Again, these are just suggestions as to how we’re
going to collect the data that we need to develop a good business plan. When we’re talking about a good business plan,
what we’re doing is telling a story. We’re giving a rationale
as to how the business is going to operate. We’re projecting into the future
how it is that the person is going to make money. What kind of money are they going
to make? We’re also presenting our argument for why we think the business
will be successful, how much money it’s going to make and why it fits this person
and the market at this particular time. We’re going to break that down into sections.
And, you’re going to go work on those sections. Then, you’ll come
back to another lesson. We’ll move through the lessons. Finally we’re going to work through
some spreadsheet applications. Later on, Dave Hammis is going to talk about
the considerations of PASS and Social Security applications in talking specifically
about self-employment for an individual with a disability. Let’s start with the product and service.
Just to run you through the map, we started identifying what’s the
product or service. We talked about the market environment and the business feasibility.
How are we going to test that we know that there is a market available
to us and that the business is feasible? That is, that it will move forward.
It will succeed. It will make the person money. We’re going to move into the three C’s: customers,
competitors and capabilities. Are we going to serve customers
in Thailand or are we going to stick to our local economy? How much can we
do? Then we move on to the marketing mix. How
are we going to sell this item? How are we going to reach
our customers? How are we going to get the product or the service to the customer?
Again, what are the best techniques of promotion and advertising for
this particular business? We’re going to move on to operations. What
kind of tools are we going to need? Where is our supply chain? Do we
need multiple suppliers of the same product? Do we need to negotiate special prices
with suppliers? What happens if something goes wrong with
one supplier, and they can’t reach us? Have we thought about opportunities and figured
out wholesale pricing? What are our contingencies? And, what’s our production
plan? How many of these things do we have to sell or services do we need to
provide every month to make a living? How are we going to measure that? Finally we move on to the financial plan.
What’s the cash on hand? Has there been a benefits analysis done? Are we using
Social Security work incentives? What kinds of assets or tangible items are
we bringing to the business ourselves? What kind of tools do we already
own that we’re going to use? What’s our cash flow projection? Again, for many folks in the rehabilitation
world, you may not know a lot about cash flow and budgeting. And that’s
okay. Anybody who has ever balanced his or her checkbook has done cash
flow analysis. It’s not as complicated as some people make it out to
be. Are loans going to be necessary? Have we thought
about where we’re going to borrow money, and what are going
to be the interest rates? What is going to be the impact on our business of borrowing
money? Again, what are the work incentives that we can leverage, whether it’s
subsidy or a Plan for Achieving Self-Support? There’s a sample business plan in your materials.
It’s the quick launch One-Day Business Plan. It’s called Anna’s
Natives Arts. I’m going to point out a couple of specifics. Then we’re going to
go back and look again at each section of the business plan that we’ve talked
about. If you look on the second page of the business
plan, you’ll see we have an introduction to Anna. She is right
there in the opening paragraph. As we move down, there’s a mission statement
of sorts. She has four parts to her mission statement. It’s to establish
a self-sustaining business. It’s to hire at least one part-time staff
within 18 months. That’s to relieve the ongoing support from her provider agency
and family. This has obvious financial ramifications.
She has to make X number of sales per month to be able to afford to hire that person.
This becomes a planning issue. Folks who are going to invest in your business
are going to be interested in that, folks like Vocational Rehabilitation or the
workforce investment system, or perhaps somebody who is loaning you money.
Perhaps the family is saying, “We want to see that you’re going to be self sustaining
at some point. Certainly the Social Security Administration is going
to be interested in that if you’re applying for a Plan to Achieve Self
Support to start your business. It’s important to look at your mission statement.
What are some of the financial or self sustaining activities that
you’re going to undertake and achieve through your business? You’re going to develop an international repeat
customer base. That’s an important thing in this particular kind of retail business.
Repeat customers are an important base for most retail businesses.
It’s said that 80% of your profits come from 20% of your customers in this kind
of business. It’s very important to have a strong customer service and a strong
repeat aspect to your business plan. We’re not talking about pages and pages
of strategy here. We’re talking about a simple rule. Treat people right in
your business, and they’ll come back to you. Keep good products at reasonable prices,
and you will get repeat business. And, [in the mission statement] she has to
become known as an e-Bay leader in authentic Native American jewelry sales. Her
core business is that she’s selling over e-Bay. That’s her distribution channel.
She’ll be selling over e-Bay unique pieces of Native American art, manufactured
locally one piece at a time in New Mexico. As we move down you can see the products and
services section. Just reference this. You can print it out or look
at it on your screen. You can read it for yourself. I’m not going to go through
it word for word. But her primary sales outlet here is going to be e-Bay. E-bay allows her to reach all kinds of people
everywhere in the world. Over time she will have created a strong
customer base through her feedback on e-Bay. Really it’s a virtual network
business model. We’ve put in an extra little bit of data to
make her case about why e-Bay is important. This is going
to be important when you write whatever business plan you’re writing. For
one thing, selling on E-bay is an accommodation for her. She likes the computer
work, and she already has that kind of technology. She obviously knows her
market. Selling in Old Town in New Mexico is not as accessible for her as her
computer is. She’s been selling at flea markets locally.
She’s not necessarily going to stop that. But e-Bay allows her to
hit customers all over the world and not have to compete with her suppliers
every weekend at the Indian market. We’ve
gone on to do a little more research about
e-Bay businesses. CBS News estimates that over 250,000 Americans
have quit their day jobs to open full-time businesses on e-Bay. That’s important
information that establishes e- Bay as an obvious outlet for this kind of
artwork. Plus, she’s already been selling on e-Bay.
It’s part of our feasibility testing. Not only were we selling
at the flea market locally, not only had we established ourselves with
local native artists who would provide the jewelry at wholesale prices to
Anna, but also that we’ve been putting pieces on e-Bay to slowly start to
build momentum. She needs enough inventory to get low enough
prices to make a profit and build her reputation
on e-Bay. We’ve also done some costing here as you can see. We’ve done some
estimates about sales based on sales at the flea markets and her trial E-bay
sales. A very simple statement that we think she can sell, Just to start
out, 30 items at $15 per month (mostly the silver earrings), 10 items at
$50 per month, and 2 items at $100, the more costly things. We discovered in researching the business
that, until you have a reputation that your feedback on e-Bay is
strong, people are not going to drop $100 on your product that they can’t
see very well. Even though there are pictures of items, customers can’t
tell the kind of quality of the items. Building up the feedback,
having other purchasers say, “Wow. This is some of the best authentic certified
jewelry that you can buy at reasonable prices,” is really important to
building up her business. We’re starting small with smaller ticket items.
We’re going to building up over time to more expensive items.
We’re really starting to understand the market here and the fact that
we’ve got to build this loyalty first. We’ve also made sure that we’ve identified
the pricing structure. Right? And what are the costs of selling?
What are our wholesale costs? What are our sales costs? We know that e-Bay charges a fee. We know
that we’re buying the jewelry in bulk at e-Bay or at wholesale prices.
We are turning around and trying to get double our money, a reasonable
markup on e-Bay. We are also paying the fees to e-Bay and the fees to Pay
Pal. Pay Pal is an on-line bank that allows people that is owned by e-Bay
that is very convenient for the purchaser. They don’t have to mess with money
orders. Pay Pal is safe and credit card protected. It does cost
Anna a little bit. But in the long run, we decided that Pay Pal makes
it so convenient for people to buy, that we should go ahead and absorb that cost. You have some business decisions to make whenever
you’re working on a business plan. You have to think about what
are the costs and are the costs worth it. In this case, it made sense. If we move down, you’ll see we have our customers,
our competitors, our marketing and our sales. If you reference
back to the planning map, you see that we’ve talked about those issues. We’re
just simply outlining what are Anna’s products and services to make it short,
simple and as painless as possible for the customer and for the person
who is going to help fund this business. Boom, boom, boom. She’s selling authenticated
handmade silver jewelry from the heart of Indian country. That’s whom
she is going to be known as. It’s moderately priced, not the highest priced
stuff. But it’s good stuff. She has a wide range of designs. She’s also
getting unique items from her producers. She’s got a money back guarantee
on quality and the description. So again, very simple, very straightforward,
very to the point. It shows people that you’ll be sending this
business plan for review that you’ve thought through the process. Almost anybody, almost any kind of business,
can talk about their primary model and their customer service.
Whether it’s a money back guarantee or some sort of satisfaction. Some idea that
the customer is important. When I’m reviewing and writing a business
plan, I want to make sure that you’ve thought deeply enough about this
business that you can identify not only your obvious customer but also a secondary
customer. Somebody who is going to use the business, the product or the service
a little bit differently than the primary user who is going to use it all
the time. All we have to do is show that we understand
the customer base. The primary customers are American women seeking
tasteful and unique moderately priced jewelry for school and office. We’re
looking at all age ranges here. We are looking for people who are fashion conscious
and have some disposable income. The secondary customer is the international
trade. People from Europe, Australia and Japan primarily, from
our research selling 100 items on e- Bay prior to writing the business plan. These
folks are looking for professional or recreational jewelry that says, “Wow. This
is Native American. This is something special that you don’t see every
day in Europe, Australia or Japan.” A very simple process that came out of feasibility
testing on e-Bay. Very simple front-loading of a few hundred
dollars worth of items. Take the profits from selling them; buying some more
and putting them back on e-Bay. Taking a few months to really test out this
business idea. Obviously some businesses you can test out about a lot faster
than that. We’ve also talked about differentiation here
or “the niche”. Anna’s Native Arts stands out. One of the
sales points here is that it really is going to have a sole location on e-Bay.
We’re going to fade out the other places, the flea market, for instance. Even
though one of her long-term goals is to own a regular storefront and be known
as a jewelry retailer, for right now the place that you get Anna’s Native
Arts is on e-Bay. It’s quality at a good price. It’s super fast
shipping. She regularly heads to the post office. That gets
her out of the house. That gets her known in her supply chain. We’re going
to make it easy to purchase. She’s really going to sell her jewelry with the
idea that she’s right there. She’s right there in New Mexico where all of this
stuff happens. The other point to re-enforce is she’s going
to have another web site, not primarily for sales. It is a place
where people are going to find her on e-Bay and see that she carries more items
and special interest items on her web site. They’ll go to her other Web site
to look for different items. It’s called an add-on in some of the language.
It’s a place where, while you have people buying and in the mood
to buy, let’s capture them and have them look a little bit deeper into our business.
We’ll be growing that inventory over time as well. We’re trying, when we send this to Social
Security or Vocational Rehabilitation or the One-Stop or CRP or whoever
is funding this (even the family) to show that we’ve looked deeper and
to the future a little bit. That this is a plan and looking down the road to
how are we going to grow this. Now, the feasibility is a fairly simple idea.
We’ve been going to the flea markets to see how things sold. Flea
markets may or may not be a good place to sell retail. It depends on the environment
and on the community. On e-Bay, part of her learning curve was to understand
e-Bay. She had to her counselor and her family helping her with
that. Part of the learning curve was to see if there really is a market for good
Native American jewelry on e-Bay. And there certainly is. She had sold over 100 items and earned a net
profit of over $500. That said, “Well, boy, she knows how to do
this and this looks like a great place to go.” Promotion and distribution. Primarily we’re
looking at e-Bay. E-Bay is very unique in the world. Certainly
it’s not for everybody. We actually have started very few e-Bay businesses.
It’s not something that a lot of people want to do. It really does present
a very interesting business model of an opportunity to put a customer and a salesperson
together over the Internet. Nothing like that existed before e-Bay. We’ve moved down and done a sales forecast.
Based on our information about what we’ve had available
on e-Bay, we think we can move 30 pairs of $15 earrings, 10 bracelets and 2
precious stone necklaces per month. We can start out there and run those numbers.
We can gradually increase that. As we start to do the business, we’ll figure
out what sells and what doesn’t and we’ll adjust that as we go. But
based on our previous sales, we think that we can push this much merchandise. We’ve done a very simple startup budget. We
have to think who can fund the business. She will need a new desktop
computer and a printer. We may go to the community rehab programs that support
her, which in this case are the Cerebral Palsy Center or Voc Rehab for $2500.
She needs a computer consultant to set up the adaptations so she will be able
to sell on e-Bay. That’s another $1500. A high quality digital camera is about $300.
High speed Internet connection is $400. Transportation to and
from the post office and to her jewelers. She needs some bookkeeping and tax
service that’s $600. She’s going to need startup inventory that’s about
$1,000. She needs shipping supplies that’s another
$100 to get going. Those are variable costs. As soon as she sells, she’ll
have that built into the price of the item to take care of that. She needs a
decent web site to get started. We estimated that at about $500. She has a total startup cost estimated at
$8900. All of our predictions and rollout of her business shows
that it’s not an incredibly terrible amount to start with. It’s certainly
do-able. Her sales in the first year will be $10,930. We’ll
show you that on the spreadsheets later in the program. That’s the basic business plan we’re making
an argument for funding. We hope that there are a variety of resources
we can draw from for a Plan for Achieving Self-Support. The Cerebral Palsy
Center in this case receives funding to serve Anna to buy inventory, equipment
or provide support. It will depend on the funding streams that they are using;
obviously Medicaid causes some hiccups in that area. So, you may not be able
to buy equipment with that. But you can certainly buy a lot of support with
waiver money. Vocational Rehabilitation can provide equipment
under the tools and equipment line in the Rehab Act. They can
also do it under support of employment funding or under general case funding.
So there are a variety of options for funding. Also the One-Stop could
provide ongoing support and job coaching, there are a variety of sources there. Let’s go back now. We looked at the sample
business plan. I would like for you to go and read it thoroughly
and see how we put it together. See how it tells a story in a very noncomplex,
logical way. We use the planning map to guide our conversation
so that we don’t get off track and stay to the point. So we’re
as succinct and precise as we can be. We’re talking about something that hasn’t
happened yet. We’re talking about the future. It’s always hard
for many of us that we’re asking for something that we’re not sure of. But
that, in essence, is business planning. That’s why we go back and do our
research this way. As we get into this business mission, what
we’re looking at as you write this is that we want to describe the
business in one or two sentences. It’s also for you to get clarity about the
person that you’re helping. Obviously if the person can write their own business
plan, that’s great. But most of us need somebody to bounce those ideas off. If you’re working with somebody who doesn’t
read or write very well, then you use your counseling techniques to
make sure you understand what it is that they want to do with their business. If they want to mow lawns, then that’s a pretty
simple kind of business. We can clarify where it is that you want to
mow lawns. Does this person drive? Can they get across town or does he need to
mow lawns in his neighborhood? Do we need to go into a development that has
2,000 houses and try to figure out “Well, you know, I really need to mow 20 lawns
a week to make a living.”? We can run that number. If that meets that person’s work abilities,
that they can mow 20 lawns a week, then we must see if there’s
a market for that. We know that we need to canvas neighborhoods that are nearby
so he doesn’t require a car that he can take and haul equipment down by hand
and get that job done. So he can get four lawns a day for five days a week. That
would work fine. Maybe you don’t need all of that detail
to start out. But let’s say that it’s a lawn mowing business in the
Quail Grove Estates Development two blocks from where I live. That’s a very simple
statement to start with. Think as you develop this business what problems
does this product or this service solve for the customer. Why
do they need this? Most of the stuff that we buy during the day we don’t
need. I could have a Coke or a Pepsi. Why did I choose Pepsi? Why did I buy a bottle of water instead of
going to a faucet? Was there something convenient about having it
in a bottle? We make buying decisions all the time based on convenience,
price, status or the need that it satisfies. So think that through. Why would somebody
buy Anna’s art or her jewelry? Why would they buy the jewelry that
she’s selling? And why would they buy it on e-Bay? Maybe because they are busy
students or professionals. They don’t have time to go shopping. Maybe it’s a man. There might be a tertiary
customer. Maybe it’s a man who needs to buy a birthday present for
his spouse. And he doesn’t know anything about jewelry. So he goes on e-Bay
and looks. Anna at this point has maybe 1,000 sales.
And 100% rating. And 1,000 customers who have said, “Man, this
was a great value. It’s really great stuff to wear. I get so many compliments on
this jewelry.” Then I know I’ve got a pretty safe bet and I should buy from
Anna. These are the kinds of things that we’re looking
for. You don’t have to write all that down. You can capture
that in a sentence or two. But you must have that in the back of your
mind that there is some strategy to this business. Write two or three goals for the business.
Part of what people who might fund the business want to see is that
you’re going to be self sustaining or that you’re going to work towards being
self sustaining. We all hope to be independent. We want to be financially capable
of moving forward. We want to have enough money to retire on. Why shouldn’t that be the goal? Right? Also
sales goals and customer service goals are perfectly reasonable
here. How many sales do you want to make? How much
money do you want to make? All of those are reasonable goals. Those
can be monetary data goals or they can be qualitative goals. So let’s go work on that. Let’s get that
written down primarily by telling a story with complete sentences and
complete thoughts. It doesn’t mean that we can’t do bullet items. That’s fine
but introduce it. Talk about it a little bit. Look at the sample business plan provided
or other business plans. If you go to our web site, griffinhammis.com,
you can find other sample business plans. You can do a web search. I
wouldn’t want you to copy somebody else’s business plan, because they
are not unique to your business. But you will get some ideas about language and
formatting techniques. So go do that. Then we’ll come back and start
the next section on products and services.

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