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Lobby Articles topic #17

Subject: "Where do I began?" Previous topic | Next topic
revahawkinsThu Nov-16-06 04:33 AM
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"Where do I began?"


My sister and I want to open a show store. We've been told to make a business plan before we do anything. We've talked to people about grant money, and they are willing to help, but they need the business plan first. I have several samples, but I still don't know exactly what I should be writing. For example, how doI find out what the gross margin or the net profit will be? Where do I began with researching the shoe sales market? How do I figure out the start-up costs? How do we figure out a financial plan? We have no idea where to began our research or what to look for. We seriously need detailed advice.


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grafmanThu May-11-17 03:10 PM
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#1. "RE: Where do I began?"
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One of the first things I'd like to put to you is that starting a business can be overwhelming and taxing.  However, if you follow through and learn all the new things you are going to have to learn you'll not regret a moment of it.For plain English knowledge go to where you'll find articles and tutorials that will help you get together lots of resources in one place.Next, to help you interpret what you are learning and to give you personalized guiding hand go to  These folks offer business counseling from professionals around the area or in your home town.  They will meet with you and mostly guide you through questions and get you going.  They are a great bunch of folks and they do it all for FREE!  If you don't feel comfortable about meeting with these folks you can ask questions of them on the internet through their website.  I highly recommend meeting with them though.  Look them up at your local chamber of commerce or on their website for local reps.There are many flavors of business plan, but in essence all they to is take your thoughts about what you are going to do to run the business and how the business will work and put it on paper.Your first one should be pretty formal because you are describing your business to someone who knows nothing about what you do.  How will the business make money? Who are its most likely customers? Who is running the business and what are their qualifications? What are the expected start up costs, and the costs of running the business for the first year?  The second and third years?  Other things, what is your product and why do you believe that people will buy from you rather than the guy or gal down the street or over the internet?  Who are your competitors and what are they doing well and how do you plan to deal with them? Do they have any weaknesses that you can take advantage of?  The best thing that a formal business plan does, in my estimation, is to force you to find out the things you don't really know or to make you clarify the things you THINK you know.For instance, your location.  What is the location?  Why that spot?  What is the advantage of using that store front rather than another one.  If you say it has lots of walk by traffic, prove it.  What are the counts?  What is the speed limit on the street in front of your store.  If its 50mph no one is likely to see you.  If its 20 and you are visible what is parking and access like?  To get back to a point in your question: What will your net profit be?  If you don't know then how do you know the business will be a good one?  Net simply means what did you make in a particular period after everything is paid.  Margin is a calculation similar to NET but its expressed as a ratio of gross profit divided by total revenue.  Its the gap between costs and revenue or income as a percentage.  I answered another question earlier on how to figure out pricing. will help you figure out how to project how much you'll make.  As you write your business plan you'll find out how much it will cost to rent or lease a retail space, pay your staff, pay utilities, insurance, any debt and sales taxes, and all of your other costs in order to decide how much you need to make.  Remember to figure in enough in your costs to pay yourself.Lets say that your store is 2500 sq ft in a strip mall and that 1000 of that is back room storage.  That might mean that your store has the capacity to have 2000 pairs of shoes in stock (for the moment we'll assume thats all you sell).  Lets also assume that your total costs for each month will be around $5000.  If your average shoe sale is $30 to just break even you need to sell 167 pairs of shoes that month.  That means that you have to sell 5.5 pairs per day if you are open 30 days per month. Because you don't really want to sell one shoe well say 6 pairs per day To calculate your gross margin for the month you take your gross receipts, thats everything you made, and subtract everything you paid out.  In our example thats 180 pairs of shoes at an average of 30 per pair for a total of $5400.  Then subtract $5000 from that and your gross profit for that month is $400.  Now divide that by $5400 giving you a gross margin for the month of about .08%  Not a very good one.  Money folk look at that number to see if you are in line with industry statistics (normally around 42.6% for the shoe industry  This will tell them very quickly whether or not you will be a good risk.For our scenario to work and get that type of industry margin you'd have to sell just under $8800 worth of shoes or 293 pairs of shoes in the month.  That works out to a rounded average of 10 pairs per day.  That is where your other research on traffic, local population, proximity to people who will buy your shoes, local customs and practices, the average price of shoes at your competitors, and how many competitors are around you who can take away from that number.The business plan will also make you work through how you plan to achieve the numbers you put down.  For instance lets say you put down you will sell 10 pairs of shoes per day after the first 90 days.  Then you'll start selling 12, then 15, and so on.  A lender will say "prove it".  How are you going to achieve this?Your answers will have to come out of your business plan.  Here might be one marketing scenario:"Happy Feet Shoes will be located at the intersection of two main thoroughfares in a city of 50,000 people.  The store has very good visibility towards one of the streets and good signage space pointing to the second.  The store is only 2 blocks away from several residential subdivisions and 4 blocks from a local high school.  There are local free newspapers that get good local circulation in our market where we can run ads for our grand opening. These papers are always looking for copy so we plan on contributing articles on foot care and sports shoe selection that will be run as very low cost to free knowledge advertising.  Because we plan to sell merchandise popular with the high school aged child we will do special referrals and a crazy sock giveaway for anyone who comes back to buy a second pair of shoes at Happy Feet.  We also plan on taking advantage of the fact that we are near an ice cream and confections store that draws local youth by putting up age appropriate displays in our large parking lot facing windows."The SCORE counselors will help you by asking all of these questions then they'll point you in the right direction to sources of information for your research.There are also lots of good folks here at the cafe to help you.  Keep at it.  Once you get going this stuff is kinda fun!Gail

"Things are difficult only while you don't understand them."


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