Tracy strikes out

Tracy“Smarty Pants” McKnight (51) got retrenched last year (sad story of half the world population it seems). She realised off the bat that there was little hope of her finding another job and decided there was no other way but to start her own business to support herself and her four kids (husband’s been dead and buried a long time).

She knew however, she had no hopes of making a success of anything she lacked passion for (awful images of her doing stuff she hated made her brake out in cold sweat), besides her business course taught her that only folk with a passion for what they do, really make a success of anything in the long run; so she went through a period of intense soul searching and took a hard honest look at, among other things; her strengths, weaknesses, likes and dislikes.

This made her challenge old paradigms and develop new ones, ‘cause she knew, she either had to think differently about absolutely everything or maybe die a slow merciless death while watching her kids starve and become skeletons (perhaps even before her, bless their little souls).

This in turn led to her mastering some problem-solving skills and adding the needed business management proficiency to her toolbox.

Tracyfinally decided on starting a drop and go laundry service after several preliminary feasibility checks on other likely business ideas did not pan out.

This opportunity she felt, not only had distinct money-making possibilities, but definitely lined up with her profile and the emerging social trend of “99 Lives”. It was important to line it up with what’s in vogue now said her course, otherwise it’d be like offering ice to the Eskimos. Or sand to Bedouins. Nobody would want it.

So, she proceeded to win in some real quality info to work with, test the waters so to speak by hitching the necessary gear and parking herself where there were a lot of people, like the local mall, and doing a marketing survey.

Scouting the land

But, before going all gung-ho and investing what little money she still had left on some wise cracker idea that seemed promising from the survey she’d just done, she decided to do some further investigating like her business course taught her and…

…so, taking the plunge, she took the two steps needed to kick start a full scale feasibility study. First, she took an in depth look at her market (a whole lot closer than the survey) and identified the area she wanted to serve. Like how many people lived in this area and what their demographics were. To do this, Tracy took some trips to her local library and other institutions and looked up a few sources of secondary information that could give her the specs she needed:

• Geographic – the size and numbers of customers in an area. Collected by a census survey.
• Demographic – size and numbers of customers according to their sex, income, occupation, education, age, family size etc. also collected by census survey.
• Psychographic – size or number of customers according to specific lifestyles, consumer status and buying patterns. Some organisations specialise in this kind of info.
• Business – Detailed info on the number of businesses and their details, that could help her determine the size of her market.
• Economic – showing her the income potential customers have.
• Other sources – municipalities and business chambers. Government departments like Labour, Agriculture and Education. Churches, clubs, telephone directory, libraries for specific info and of course, the online army of info at her disposal.

Slicing the cake

After gathering all the relevant info about her market, she then sat down and grouped the laundry needs within that area into some generic need markets, dividing it into the segments she felt would be interested in her offering

This she learned is called target marketing and it’s a lot like shooting with a rifle whereas mass marketing has a shotgun or ‘aim for all, hit nothing’ approach.

She concluded that single grown-ups in the middle to high income brackets would be willing and able to pay for laundry services. So market segment one she aimed to serve was:  singles.

The second set she I’d, was the married couples where both spouses worked long hours and earned insanely high salaries. Thus segment nr two:  yuppies.

Third, she ogled the high income housewives that hated doing laundry and would pay her to not dirty their fine little hands. Hence, segment nr three: lazy housewives.

Tracydecided to focus on the single and yuppie segments. This of course in no way implied that she would exclude the lazy housewives, it only meant that she’d study the other two in detail and make sure she optimally satisfied their needs.

The market research also toldTracythat the singles and married yuppies would love to drop their dirty laundry off before work and pick it up afterwards. For this she had to stay open until 20h00.

She found a fantastic site next to a garage on the main entrance and exit to the suburb. The other three laundries in the area are located in shopping malls and open at 08h00 and close again at 18h30. Which Tracyfound won’t work well for her prospects as most of them already leave for work at 6h30. (called a gap in the market which the Smarty Pants of course immediately saw).

What did she do next?

Next, she had to figure out how much money these people were willing to spend on her service.

So Tracy then (closely following what her course manual lay out) drew up a new questionnaire for her prospective customers, with questions built around the marketing mix and aimed at getting more detailed info out of them.

She found out that in an area of approximately 10 000 households, 40% were in the high income bracket with 60% as middle incomers. 40% of the high incomers would make use of her service on a regular basis and spend an average of $200 per month per household.

Of the middle incomers again, 60% indicated that they would use her service regularly and spend about $120 per month per household.

Next, she calculated the income potential for this area as ± $752,000 per month for the middle incomers (10,000 x .6 x 120) and $800,000 for the high income group (10,000 x .4 x 200).

Now from her research, Tracy saw that the singles segment would by far the most viable in size and income, so she narrowed her marketing net more and decided to focus on them, also because her location would give her a decided Unique selling Point (USP). These people seemed to be on the run all the time, and did not want to go to the hassle of driving to laundries further away.

The figures she gathered showed her that 7500 single people were spread over 5 laundries at 1500 each. Give and take, and reckoning that not all people will want to make use of her service, she calculated her expected market share to be between 200-300 people.

Her next best friend…

…was the calculator of course!

In her final step before she would go over to doing an official financial viability study, Tracy took all this info (while squatting some flies and sending a most persistent little nagger to the store) and constructed a Sales Forecast:

Units per month

Sales in Dollar per month (selling prices are: Washing @ $20 & ironing $30 per unit

Absolutely exhausted but exhilarated Tracy could not wait for the next day to officially begin the financial viability study as these figures promised big things to come. Closing her books for the night, she and her four kids went out to celebrate with pizza and a movie.

****

This was part one of our feasibility study. Stay tuned for part two still coming up.

For more information or queries, please contact theEntrepreneurialBusinessSchool. There’s a whole plethora of experts waiting to cut, dissect and dry you.

Just kidding! No, we’re rearing to help wherever we can, and for that matter…nowhere else will you find the breadth of knowledge coupled with practical experience than in the flagship Entrepreneurial Business School Management Course. Why reinvent the wheel? Give us a call (you’ll find our contact details on the webpage) and let EBS guide you to successful business start-up.

Till next time,

Elmarie

Elmarie is a wordpreneur for theEntrepreneurialBusinessSchool(Pty) Ltd and a freelance creative-, web- and copywriter.

Resources

1. EntrepreneurialBusinessSchoolManagement Course.

2. Bekker, Mauritz. As always, thank you.

3. 99 Lives Heller, Robert. Business strategies: Adjusting to the Latest Trends. 8 July 2006. Accessed 29 June 2012. http://www.thinkingmanagers.com/management/business-strategies.php

Alex bought a health food franchise a while ago. This opportunity seemed like a wonderful idea in our increasingly health conscious society and besides, he’s always wanted to do something like this, being himself very health conscious and clued up on nutrition.

Well, instead of the ROI benefits he was looking forward to, the sizeable hole in his wallet was now bringing him worry and heartburn as there were not nearly enough customers and after he’s covered all the business expenses, enable him and his family to live as well. Now’s he trying to rescue his investment from bankruptcy by investing in other related projects that at the end of the day, is eating up what little he has left, while yielding as slight a result as the first deal.

Everything looked good from Alex’s vantage point. The ideal business opportunity he had been searching for became available on the franchise network he regularly monitored, the money to go for it was accessible and he was passionate about this particular kind of venture. So why did it not go according to plan?

The difference between an idea and an opportunity

The classic mistake Alex made was to not differentiate between a good idea and a real business opportunity with money-making potential. Quite frankly, he didn’t do his homework.

You see, all business ideas are indeed based on the premise of solving a need or problem for others, but many ideas do not represent genuine business opportunities. This distinction between ideas and opportunities is so important that failing to understand that difference, can and often does, lead to great money loss.

Sure enough, a lot of factors were in place, creating the illusion that everything was in place. The opportunity was there. The money to go for it was there. The passion to make a success of such a venture was there. But one essential ingredient was missing.

Alex never asked himself the crucial question whether his idea could be implemented in a profitable and sustainable way. He neglected to make sure that enough funds could be generated to not only start his business, but keep it running until it made a profit.

And that is something Alex should have determined before plunging headlong into something without the necessary hard facts.

To determine the real business potential of an opportunity, you need to do an in-depth market feasibility and financial viability study on it. Problem is though, that kind of study takes a lot of time, money and effort.

Solution: you need a way of doing a preliminary feasibility study and viability check on an idea or ideas before going to all the time, money and effort hassle a full scale feasibility and viability study would take. A practise run in other words, to see if the real deal is going to be worth it.

So, just how do you do that?

Easy…find the answers to these questions!

Such a prelim check can be done by finding answers to the following questions:

1. Does the idea / concept match my personal vision, mission, goals, qualities and skills? – Personal alignment
2. What will the product / service (material and labour) cost to produce per unit. – Direct costs
3.  At what price can I sell it? How much would potential customers be willing to pay for my product / service? – Selling price
4. How much profit can I expect to make directly from each unit of the product / service I sell? – Gross profit
5. How many people will buy my product / service on a daily, weekly and monthly basis? – Market potential & sales volume
6. How much income can I expect to generate per month? – Turnover
7. How much will it cost me to run the business per month apart from costs directly linked to producing my product / service? – Overheads or fixed costs
8. How much net profit will I make per month? – Profitability

9. How much money will I need to implement / launch my idea? Capital   cost

• Capital to buy equipment and machinery
• Capital necessary for daily operations

10. Why will my potential customers rather buy my product / service than those of my competitors? Competitive advantage or Unique selling point (USP)

11. If this idea should fail, what will happen to me and is the risk worth the opportunity? – Risk

A simple example

Let’s assume you have the following info available:

The unit selling price = $50

The direct costs in making each unit = $10

The volume you will be able to sell per month = 150 units

The expected fixed costs per month = $3000

Now by applying the formula given above, you can calculate how much profit you’ll be able to make each month:

[($50 - @10) x 150] – $3,000

= $6,000 gross profit – $3,000 fixed costs

= $3,000 net profit

So, simply applying the above formula to any idea you might have, will enable you to scan your ideas for business potential and then take only those that pass this prelim scrutiny further for the full treatment, investing the resources such an exhaustive scale study requires.

Well, there you have a prelim device to scan your idea(s)! Next time we’ll delve into the real deal with all its bells and whistles like market analysis, calculation of break-even point and developing a cash flow forecast.

See you there!

Elmarie is a wordpreneur for theEntrepreneurialBusinessSchool(Pty) Ltd and a freelance creative-, web- and copywriter.

Resources

1. EntrepreneurialBusinessSchoolManagement Course.

2. Bekker, Mauritz. Where will I be without your encyclopaedic knowledge of all things entrepreneurial and business? A million thanks!

Suddenly he hears the snap of a twig on his left. Immediately he crouches and scans the surrounding area, rifle on his shoulder, eye to the telescope.

Then he sees it! A spotted deer fills the rifle telescope, apparently blissfully unaware of impending danger. He almost feels sorry for it, it is so beautiful. But heck no, he’s tired; been tracking game all day, so…

…carefully he aims, making sure that the crosshairs in the scope’s lens are dead centre, pulls the trigger and…misses. Damn!!

Then it slams him! He forgot to have his telescope’s boresight setting adjusted, so no shot would anyway go where directed, even if he was to try again later. Tired, irate, hungry and miserable he drags himself home.

Are you tired?

Feel like that hunter?

Been trying to identify money making opportunities, but for the life of you just can’t see them? Or, if you did identify and exploit them, still very little or nothing you had done ended up in you bank account?

If that sounds like you, then that rifle scope has a lot to teach you.

A telescopic sight is like a super magnifying glass that sits atop a rifle and is a sighting device that helps the hunter aim accurately at a target. It enlarges the target many times, thereby making it much more visible while the crosshairs in the lens allow the huntsman to precisely align his aim before he shoots.

Last time I spoke about looking at your talents and skills to see what you had in the way of using them to make an economic difference to your life. But why stop there, unless you want to?

Also look outside yourself to life in general when searching for opportunities. But from different angles or points of view. This will allow you to see much more that you couldn’t previously and can bring surprising rewards in terms of identifying problems people experience. And solving people’s problems is the bedrock of business.

In this post I’d like for you to come along as we take a look together at some of those angles, but unlike the hunter in the story, we’ll have our telescope’s boresighting adjusted beforehand, to not only magnify what we see, but also aim at specifics. Why?

Because it is absolutely useless knowing that the herd is out there, but you don’t know at which deer to aim. Then it was a waste of time writing this post and you’ll waste your time reading it.

However, if you look through a super magnifying glass like a rifle scope, you’ll be able to identify detail, not just generalities. Will hone in on specifics, be helped better in identifying some real opportunities…

So, get your gun and scope and join me as we go hunting for those opportunities and zoom in on them. But before we do that, you first need to do something else.

Searching for lucrative business opportunities is a lot like hunting game. In both pursuits, the physical position you assume during the process is critical. So before we set out on the expedition, we first need to work on our position.

Position…aim…!

Imagine yourself belly crawling on the wet, muddy forest floor as you hear a snort on your left, but cannot see much. So you shift your legs to a somewhat better position, one that will actually enable you to see past some foliage obstructing your view.

Looking from this different position or angle, you can see a spotted deer a short way from you, and as you move sideways even more (carefully, so they don’t hear you) an unbelievable, out of – this – world scene suddenly pops into view that seconds before was not there:

A whole herd of deer, chomping on grass!

In like manner, there can be a whole herd of business opportunities skulking out there among the foliage of life; you’ve probably just been unable to see them!

Maybe because you did not know quite where to look.

So, if you’ve been unable to spot them, it’s just a matter of looking from a different angle.

But apart from this, it’s absolutely impossible to fire off a well aimed shot from anything other than a secure position with your eye firmly trained on your target.

So, take off the eyepieces you usually wear (meaning the way you usually look at things) and put on a whole different set of blinkers, wear a different set of goggle – call it what you will – when looking at these angles.

This is the secret to success in seeing them. Keep those specs on. Even after you’re done reading here. You might be surprised at what you actually see.

So, pick up your rifle scope and snap on your goggles please. We’re going to hone in on specific parts of our money making forest and see what materializes in our crosshairs.

The different angles of the money making forest

These parts of our forest are called angles and there are seven in total. I will discuss the first three in this post and the last four in part two (coming next week. Be sure to watch for it)

I’ll start off each time with a brief overview of the angle in question and when the icon of a hunter appears, that’s when we’ll zoom in with our scopes to some specific areas within that angle where opportunities may lie hidden. Ready?

1. The Angle of Direct Problems and Frustrations People Experience.

In a sophisticated economy, problems can usually be found in areas such as administration systems, production bottlenecks, repairs and maintenance areas. There are also usually problems present in the limitations of existing products / services and their production systems.

   Admin systems: Small companies cannot always afford an adminclark. You could start a business doing admin services for small businesses. Who knows, if you’re good at what you do, word of mouth and advertising might even land you bigger clients some day than what you started out with.

Production bottlenecks: You could identify the bottleneck and create an outsource solution. Depending on the problem, unemployed labour could solve it. American engins for example, are sometimes assembled inChinato solve bottlenecks in their production processes.

Maintenance and Repairs: E.g. Companies with car fleets will outsource the maintenance and repairs to an entrepreneur who performs this service for more than one company.

2. The Angle of Unsatisfied Needs.

Certain needs must be met for humans to be able to stay alive and enjoy life. Go figure! Now some needs are more important than others so they can actually be grouped in a hierarchy. Here is one by a man called Abraham Maslow.

At the bottom of the hierarchy is the need for the very basic things in life, like food, water and shelter.  On the second level, the needs for safety and protection.  The third represents the need for social interaction and recreation.  The fourth, the need to be recognised and respected, also called the “ego need” and the final level represents the need for self-actualisation.

A need is anything human beings need to make their lives easier and more meaningful.  Once a person perceives that he/she has a need, but can’t satisfy it because of some obstacle, a problem is created.  If you can solve this problem for the person at a fair price, he/she will be willing to pay for the solution, and then you’re in business!

How much this person would be willing to pay will depend on how strong the urge to satisfy the need is.  To satisfy a need, implies that the obstacle has to be removed – this is the solution. The gap between a need and the satisfaction thereof is therefore created by an “obstacle”, which in turn causes a “problem”. Solve this and you’re golden.

Physiological:  E.g. Health foods and going natural versus fabricated. Home made sweets for example are free of the additives and colourants avoided by mothers with kids who suffer from ADHD and you can make them and successfully market them as such.

Safety: Offer for example to computerize  people’s homes to make them safer etc…

Social: Social media for instance is BIG. But time is very limited and busy small business owners have a hard time managing social media marketing themselves. Offer your services in this regard, stating the importance of the issue and how you can help the company  make a success of the marketing endevour by their outsourcing this function to a guru – you.

Ego: Yep. We all have one, so capitilize on it!  Apart from brand products and unique cuts in clothing, see where you can make things personal and exclusive. Unique and personlized handbags, stationery, paintings, gift cards, shoes, bedding etc…

Self-actualisation: A great commodity to promote here is self study programmes that will empower people’s lives and dreams.

3. The Angle of Wants

As soon as our needs are fully met, they tend to expand into all kinds of related wants. As man’s standard of living improves and becomes more sophisticated, the want for new things appears.  The effect of this improving lifestyle is that new needs appear along the way all the time.

If a want becomes strong enough and is satisfied, it often changes into a need.  Due to human nature, the urge to satisfy a need is much stronger than the urge to satisfy a want.  So a want could therefore also be described as a weaker form of an unsatisfied need.

For example: You live in a small apartment. But soon, wifey says she’s no longer satisfied with it and now wants a nice little house instead. So you buy the nice little house, pack up and move. But lo and behold, not long and she’s up to her tricks again (when’s it gonna end!), so once again, you buy a bigger house and do the whole trek thing again, wishing fervently it’s the absolute last freakin’ time.

Nowadays, man perceives not having a nice house as an unsatisfied need, and possessing a mansion as a want.  Social trends play an important role in people’s wants.

The higher the level of economic development, the more new problems and consequently opportunities emerge.  This can be illustrated by the simple fact that people in poorer communities are inclined to personally perform maintenance jobs on their cars, but in the wealthier communities this is seldom the case.  It becomes a situation of the more a person has, the more he/she wants.

This is good news, because the bigger the demand for services/products, the more business opportunities you’ll have!

The sky’s really your limit here. Look at people’s wants with new eyes, they’re emerging all the time. Listen to them as they talk about what they still want to do or have (their bucket lists, you know as in the movie “The Bucket List)), read the media with a focus on this angle, soon you’ll notice waaaayyyy more wants and desires than before.

Now, climb in there and cater to some wants. You’re sure of the money.

Well, that’s all for now. Watch this spot next week for part two of the discussion on looking from different angles for money making opportunities.

See you there!

Please leave a comment, telling us about your experiences in scoping for business opportunities! We always answer queries and reply on all comments.

Resources

1. Bekker, Mauritz. Entrepreneurial BusinessSchool. Email him at mbekker@ebschool.com