Because I have asked our Millionaires … In Training! to take a “dry-run” at the financial section of a business plan – to see if the ‘growth engine’ that they have selected to reach their Number – is “an opportunity worth pursuing”*, now seems like a great time to tell you how I go about business planning …
… also, it’s an excuse to share a business planning model that I built – keeping in mind that finances and numbers are actually NOT my strong point.
NOTE: Since I can’t work out how to attach spreadsheets to my posts here, you will need to go to this forum thread and scroll down in the comments until you find a reply with the same heading as this post, the spreadsheet IS linked as an attachment there: http://shareyournumber.ning.com/group/7millionairesintraining/forum/topics/will-your-craigs-list-ad-take or try this link: http://shareyournumber.ning.com/group/7millionairesintraining/forum/attachment/download?id=2494516%3AUploadedFi38%3A4669
Once you download it (hopefully, it works with most versions of excel?), you use it like this:
[Hint: double-click on various cells to see which ones are data and which ones are formulas]
1. Start with the Pricing Tab, and set up your pricing model – if you are going to use this sheet, which is designed for an online subscription-based business (like SurveyMonkey.com, but with the usual 7m7y Patented ‘Twist’) please try and keep the data in the same places unless you are comfortable fiddling formulas … each sheet is tied to data in the other sheets! But, it shouldn’t be hard to create your own, either …
2. The go to Business Volumes and try and work out what your potential market it, and how many you will get for each product type that you are offering … we are offering survey services to all businesses but feel; that out ‘sweet spot’ will be in businesses with 10 to, say, 100 employees.
3. Then go to the Subscriptions tab, which is simply where I summarize the info that I came up with in 2. … it’s not hard to think ahead, here, and see that my SALES REVENUE will be be based on this info multiplied by what’s in the Pricing tab (1., above), which is why we work in this order.
4. Your major cost will PROBABLY BE PEOPLE -and, the space to occupy them – so let’s move on to the HR tab; since this is an IT-based business you may need to modify the categories to fit your job titles, and the salaries and numbers of such staff. You can see that I am paying commercial rates, even though I will do this and ‘frank’ will do that … we want to see if our business can ‘stand alone’ if it needs to. You can then rerun a ‘bootstrap’ version of this plan where you eliminate as many startup costs as possible by having your relatives do all the work 😉
[HINT: in the startup phase, though, $85k is plenty to pay a CEO who is getting some ‘sweat equity’ as well]
You will see that I have built in models of occupancy costs (which includes an allowance for rent, desks, and chairs) based upon some USA industry chamber of commerce-type estimates that I found online.
5. Now, the P&L should VIRTUALLY produce itself!
[HINT: Again click on cells to see which ones are formulas and which ones are numbers; IN GENERAL: leave the formulas alone, but check the numbers in case you need to put in ones that you prefer]
Voila! … 7Million7Years Instant Business Plan 🙂
* Thanks to Michael Gerber for teaching me that you need to find out UP FRONT if your business is “an opportunity worth pursuing”.