Working on a Business Plan

by Diane M. Hoffmann

When you start working on a business plan, you need to think of all the expenses that may be expected. Even if you will start in your home to operate the business, add the expense of renting as well.

Because this will get you to begin to generate the sales you will need to cover all of those expenses.

A lot of people also do not see and understand how even their own salary must be provided for in the vision of a business plan. They just think of the "self-employment" and the "sales" they'll be "automatically" getting, and assume they'll be able to live on what's left in the bottom line.

The most important aspect of any business is "sales". If you are not prepared to sell, you shouldn't get into business. Sales is everything. Without sales there is no business. So you should start immediately making your sales activity a priority.

And it doesn't matter what kind of business it is -- whether it is ONline or OFFline -- this works for any type of small business start-up. It works on basic figures that you can expect a business to make no matter what product or service it provides.

How much money do you need to live? You need to pay for your shelter, food and necessary expenses. If you're single, you may get by with $25-30,000 to start. If you're supporting a family you'll need more!

Whatever it is that you need, include it in your operating expenses. Include everything that will cost to operate your business. Then work it backwards to the first line of your operating budget -- sales.

In other words, if you calculate that your operating expenses will total $200,000 including everything, then you will need at least that in your revenue (sales) figure. This means you will have to sell for that much to make your business work.

Of course there is also the direct cost of sales that you have to figure out and allowance for your tax and other financial obligations before the final net profit line. We'll talk about that in a future post.



Starting and running a business begins with a Business Plan. Whether you are starting a new business or running an existing one, you need a business plan, if you don't have one.

Especially with the economy as it is today, we need to be close to our figures, and monitoring regularly is not an option it is a necessity.

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Working Out A Business Plan

 Working Out A Business Plan

As I have mentioned in earlier posts, there are a lot of people who dream of starting a business but don't think about doing a business plan first -- especially when it comes to getting into an Internet business.

Somehow, they think that just by following what the hundreds of Internet marketing "experts" say, they can start today and make money tomorrow.

Well, the first thing I say to these people is "Don't quit your day job yet".

For that reason, I have to emphasize to do a quick business plan first in order to know what you will have to have in order to replace your salary.

And speak of salary, when you do a business plan make sure to include your salary in it, so that you can calculate your expenses *including* this most important expense.

A lot of people will exclude it from the expense calculation and then look at the net income bottom line to see what's left for salary.  Well that's not the best way of doing it. 

First of all, if you do a business plan for the bank or for some investors, you have to have it in the proper place and that is within your operating expenses.

Secondly, your working percentages of expenses are affected by that large expense.  Let's face it salary is one of the largest expenses of a business operating statement.

If you read my last post, you saw a quick breakdown of initial sales and expenses to work out in order to understand how it works.

In this post, I'll just add a few more things that would be part of making a business plan, which take you beyond the initial instant overview.

Once you get the initial idea of what a business plan requires you will need to do these next steps:

      * Develop an Initial Operating Expense Projection

      * Do a list of Launching Expenses to incorporate into your projection

      * Expand the Initial Operating Expense Projection into a Year 1 Working Operating Statement

      * Include a Cash Flow and Accumulated Cash Flow bottom line to show your peak financial need

      * Expand the Year 1 Operating Statement Projection into a Year 2 Projection

      * Set up a Monitoring Worksheet for your Monthly Actual figures versus your projected figures

     A lot of people also do not see and understand how important the planning of *all* expenses is when thinking of starting a business. As I already said above, even the owner’s salary must be provided for in the vision.  They just think of the "self-employment" and the "sales" they'll be "automatically" getting, and assume they'll be able to live on it.

And it doesn't matter what kind of business it is -- whether it is ONline or OFFline -- this works for any type of small business start-up. It works on basic figures that you can expect a business to make no matter what product or service it provides.

How much money do you need to live? You need to pay for your shelter, food and necessary expenses. If you're single, you may get by with $25-30,000 to start. If you're supporting a family you'll need more! How about $50,000, $100,000?

In the financial business, everything is relative!

After all of the financial projections have been made, the next important and indeed "critical" step is to MONITOR monthly.  This is one of the most crucial function of a business plan. This is where a lot of business folks fail. They may do a business plan, but they never look at it again.

Does that sound like a lot of work?  Well, not really... it should be fun -- it's part of business. 

I can't cover everything about this on a post... however, if you click on the tab above under "Business Plan 201", you can read more details from where I leave off here... just go over now and see for yourself.

Blessings and Success,


How to Quickly Work Out a Marketing Plan and Cost/Price Per Unit.

How to Quickly Work Out a Marketing Plan and Cost/Price Per Unit.

by Diane M. Hoffmann, ph.d./th.

You've been thinking about starting your own business. You’ve worked out a basic business plan to see what it will take to start and operate your own business...

But now you need to know the figures within the ones you calculated in your initial business plan that told you what it will take to start and run your business.

How do you do that?

Let's take an example... Let's say that your business plan gave you some figures something like this:

Ok, how did you arrive at the $120,000? Did you just pick that figure out of the sky?

If so, how do you know what you will need to sell at what price to get to that figure?

Well, you need to calculate your product or service on a per unit basis.  Let's say you sell a product. You need to know how much that product is. Is it $10, $50 or $100 at retail?

Let's say it is $100 per unit. Dividing the $120,000 by the $100, that gives you 1,200 units. It means you have to sell 1,200 units at $100 per unit in order to get $120,000.

If you don't know what the retail price of what you will sell is... for example if you create your own e-book or product... how do you know how many units you need to sell, in order to reach your $120,000 sales projection?

Well, you decide how much the e-book or product should sell for and then use that to divide into your sales projection figure. Let's say you will sell it for $47 each.  then you divide the $120,000 by the $47 and you get 2,553 units.

Then you divide this by 12 and you get your monthly sales figure of 213 units per month. That's what you have to sell inorder to achieve your projected sales figures.

Now, is $47 the right price?  If it is an e-book, your cost of sales will be only on your original master copy. After that, it's just a matter of putting up the link that people click on. So your margin will be high. If you have affiliates selling the book for you of course you will give 50% to them so you will be left with $23.50.

But if you have a physical product that you either buy wholesale or build yourself, then you need to figure out exactly what your cost is going to be.  The example used above for the Cost of Sales is based on 25% (that's a pretty conservative figure).  So make sure you figure out everything that goes into your cost of producing or obtaining that product. It could be as high as 50%.  I used to have a sailboat dealership and my cost of sales was 80% -- because I only got 20% discount from the manufacturer.

From this cost, you can calculate a retail price. Just remember to put enough percent in it to cover a discount that you would give to a dealer or wholesaler.  In other words, if you have a hard copy book for example, you will need to give a discount of 40% (average) to a dealer and 50% to a wholesaler and 55-60% to a distributor. Find out what the going rates are and use that to build into your retail price. 

As you can see, your cost of sales varies depending on who you sell to.  So you can take an average.  But just a moment, it's not that simple yet... before you do that, your next step is to figure out how much you will sell direct to retail, through dealer, wholesaler and distributor.  You make more percent selling to retail, however it's more costly for you to operate a retail store.  You make less percent selling to dealers but, collectively they bring you more volume; and the wholesaler more volume than the deale, and the distritubor more volume than the wholesaler --  you don't have to do the selling.

So figure out how much of your sales will come from each of these distribution venues, than calculate the total income from each one and then you can take an average.  If it is different then what you had originally projected, then go back and make that change in your Cost of Sales line of your business plan. If your cost is higher, then you'll have to sell more in order to bring your top Gross Sales up so that you don't get a lower profit at the bottom.

And there is more to it yet but this is a good basic start.  As you work with your figures, things will come to your mind that you can add to all this.  It's always a good idea to let an accountant look at it to make sure you didn't miss anything. And then you must monitor monthly to make sure your figures make sense to the reality of actual figures./dmh


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Does Starting an Internet Business Require a Business Plan?

by Diane M. Hoffmann, ph.d.
Hoffmann-Rondeau Communications

For some reason, it seems that many people who would like to start an Internet business from home do not think a business plan is needed. I don't know exactly where this idea comes from, I guess it's the "lone and now" feeling of the instant Internet business expectancy...

But whether it be an ONline business or OFFline, one does need to plan before plunging into the commitment of starting a business, especially when 70% of businesses do not make it. It is not funny to start a business only to lose money, and sometimes even lose everything!

Another reason for avoiding the business plan, is that most folks are scared by the prospect of such a laborious undertaking. We are used to seeing lots of work sandwiched into big binders that represent business plans.

But we do not need to go to that extreme at the very beginning. We need to just satisfy ourselves (before doing a plan to satisfy bankers or investors), in order to see if we feel comfortable starting a business. From that initial stage we can go to the next step and expand on a full presentation format.

That is why I put a series of steps that lead us to the process which I share with you in this article.

Step 1 deals with finding out, first of all, right now, this instant, if a business idea is feasible. First, how much sales do I need in order to pay myself a salary of $25,000, $35,000, $50,000, more? What will I need to sell in order to achieve that. Do I quit my day job? If I am out of work, do I get a job and build this up evenings and week-ends? And if so, how long will it take me.

Step 2, if the idea is feasible, then I can expand it into a more detailed informative breakdown. If it is not feasible at this time, I can put it aside and go on to something else that might be more attainable. But if it is worth pursuing, I need to know what I will need to do on a daily, weekly, monthly basis to reach the goal.

Step 3 is the next phase of the feasibility process which deciphers what I now know into some marketing figures which will be needed to reach the projected sales. All this you can see before you on paper. Just like a road map. You can work various scenarios until you are satisfied that it makes sense. Figures do not lie and pleasantly keep you on the straight and narrow.

And you know what? Even if you're not ready to start your dream business now, you can work on this and have it ready for when you are. Then when you are ready you can go to the next step.

Step 4 is then the planning phase of Step #3 that will make your dream a reality and give you the tools to work with as you measure your results day to day. One cannot manage something that one cannot measure.

Making a business plan need not be complex and difficult if it is done comprehensively one step at a time. It should be -- it has to be -- a fun, simple and exciting experience. And it is only then, when you have a visual, physical business plan in front of you, that you should begin to work on your vision, knowing where you are now and where you are going at all times. Nobody can afford to lose money. Getting into business has to be for making money to survive and grow -- both personally and commercially./dmh

Article copyright(c) Diane M. Hoffmann. You may print this article making sure to include the following bio without any changes:

Diane M. Hoffmann is the founder of Hoffmann-Rondeau Communications and the web site which is the home of her e-books and articles on Business Plan 101 series.

Happy and Prosperous New Year!

Wishing you a most happy and prosperous new year.

Of all the advice that one could get if you're thinking of starting a business in the new year, working out a business plan is the best way to start.

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BEFORE Writing a Business Plan.

A lot of people want to start a business.

They know that they should first write a business plan. but, often, they do not know how to do it nor where to begin writing one.

But, before one sets out to write a business plan, there is something one should know first.

Why spend hours and days and even weeks searching for a business plan that will work for you, and then writing it all up only to find out that the idea is not feasible for you?

Well, I like to share a quick way of knowing what you can expect a business to achieve in sales in order to give you the salary you need BEFORE starting the planning of your business. Because let's face it, if you're not going to be able to make a living out of your business, there's no point in starting one.

You need the right business. What products are you going to sell? Will you be able to sell enough to cover your operating and salary expenses? Watch this blog, I'll cover all about these issues in my posts...

And if you want to check my First Step Series Business Plan e-books, just click on the tabs above.

Check again for more posts on this topic...

Success and Blessings,