- Brief # 20.22 One Page Gross Margin Calculation – Service
Note: Ignore the fixed costs, just see if the product/service sales price has enough margin to cover the “variable” costs. We will deal with volume and fixed costs later
Assignment 3 – Break Even Point
3. How much must I sell in a month to make a profit?
Assignment: Have client complete a one-page form that estimates fixed costs and then determines the volume of sales needed to make any monthly profit. Use instructions in Briefs:
- Brief # 20.31 One Page BEP Calculation - Product
- Brief # 20.32 One Page BEP Calculation - Service
Note: client estimates costs and then must up the sales volume until there is enough gross margin to cover it!
Assignment 4 - Cash
4. How much cash do I need to get started?
Assignment: Have client complete a one-page form that estimates the startup expenses and two months of operating capital needed (inventory, A/R) and then identifies where that cash will come from. Use instructions in:
- Brief # 20.40 One Page Needed Cash Calculation
Note: client estimates items and amounts then struggles with where all this money will come from. A rough but a good introduction that will let you know whether their business idea has the “smell” of practical.
Assignment 5 - Stakeholder
5. Do I have stakeholder buy-in?
Assignment: Have client complete the check list to introduce and document potential stakeholder issues.
-Brief # 20.50 – Stakeholder Buy-in Check List
- Stakeholders are any persons [wife, kids], groups [bank], organizations [employer], or system who affects or can be affected by the proposed business.
-Client will probably find this eye opening as they likely will not have thought about a lot of the support/time/other stakeholder issues. This will be used for subsequent discussion of participation in the business.
Use of Initial Five Assignments
Having simply raised these fundamental issues in the clients language, you have:
1. Identified the KEY issues to be dealt with before all of the confusion and secondary questions of a business plan are tackled.
2. Likely raised real questions in the client ‘s mind about continuing . Not committing family assets to a failure is a WIN!
3. Determine if an economic basis for the business exists.