All Wrong

I think I had it all wrong. The only correct part is the part where I admit I need professional help. I am pretty much deep into this business for thousands of years already and I still do not know what to do. I think I have to go look for employment, back to where I do not have to think. That is what I do best anyways!

Now, this is easy.

Yeah, really easy.

My expenses will total US$315,000 in one year. My inventory is US$200,000. If I want to break-even in my first year, my revenue should at least be at least US$1,575,000... that is if my projected margin is 20%, which will all go to my expenses.

But I also have to finance my 2nd year, from my revenues. If that is my plan, then I have to sell at least US$1.61M.

Easy, lah!

Now, problem is where will I get those revenues? And also, where will I get those cash?

Who wants to go with me to rob a bank? (My name is Rob, after all).

Hmmm. I think I need help. Professional help.

And now, Marketing.

Let me get straight to the point.

I need $8,000 to join exhibits. (4 of them at $2K each).

I need $5,000 for leaflets and mailers and to mail them.

I need $12,000 to advertise in a newspaper, or do I need that? I learned somewhere that I only need to advertise in publications that directly targets my customers, but there is no such thing in our country (Oh yes there are, but the targets do not really read them, they rather read the newspapers. Ok, as form of negotiated settlement, I can use the $12,000 for other things if later I decide the advertising in newspapers is not a good strategy.

I need $5,000 to build and maintain a website. This I have not done in the past so I do not really know the number that I need. I picked $5,000 randomly, purely a shot in the dark, a shot at the moon, a needle in the haystack (it looks like the last one should not belong here, but I include it anyway because it sounds nice for a non-english speaker such as I am, so please bear with me...).

I also need $0 and a good 24-hours per day time to build and maintain a (I like this part) blog.

And I need to get my suppliers, meaning I get to have some vacation.. ehe.. business trip to Japan, Korea, Europe and the USA which costs me $5,000 per trip and if I have to go for at least 6 trips, that's $30,000.

So marketing is $60,000 more but spread over the first year.

Now that's still $275,000 rather (hey I am not so sure) immediately, and something like $240,000 for 1 year.

Now, I can begin thinking of how much I have to sell. This is really exciting and exhausting. I think I have to go out for a while to get some fresh air (translation: puke).

How much, so far?

Ooops, I forgot to summarize the investment required (so far)...

For additional people, I need at least $35,000 immediately and say $50,000 to survive a year. I rounded off the numbers so do not ask me why there are some differences (hey, that is a quick way to explain my bad math!). I also need something more at the start of the 2nd year.

If I add all the other darn computations from the other posts, I now need... hmmm... poor math... yeah...rounding off... yeah... nice... oooooh...

What? US$275,000 now? And $180,000 more to survive one year? Plus US$33,000 more in the 2nd year?

And I still do not yet have marketing?

And I am not even sure if my math is correct?

Grrrr....

More People

And I would need more people, yes I know that. Yes it is part of Lesson Learned #1: I cannot do everything. In addition to that, here goes

Lesson Learned #1-1: Other people cannot do everything, too.

So true.

So I need more people. How many more people?

I think at least 3 sales people, no 5, no 7, no 9. OK, 9 sales people. And then I need that same number of service engineers. And then I need about 4 applications specialists. So that is 22 additional field people. Whew. Thinking about it, I think I made the wrong projections right from the start. I was planning for one small office, and now I am wrong.

And 22 field people need 22 cars. That alone is US$66,000 up front plus $6,000 per month. Now for gas and maintenance... that is $4,400 per month. How about their salaries? We give them average of $400 each per month or a total of $8,800 per month.

Great. Now everything is messed up.

Well, I do not need all these people at once, do I? I do not know, again. Well perhaps no. Because at first I do not have anything to sell yet.

Now this is what I can do. I can start with a few sales people and assign them to major accounts. Now these people are cream of the crop and they will soon be supervisors to the others when the company is fully blown. Let us say, we get 4 sales people first, and 4 engineers, and 2 specialists. That makes 10 or $30,000 up front plus $5,000 per month for gas, maintenance, and amortized cars, plus $4,000 in salaries.

Similary, I need more office personnel. 3 more at start then 3 more after one year. $1,200/month on first year. $2,400 per month on 2nd year.

So here is the plan:
Phase 1: 10 field people - good for 1 year.
Phase 2: 22 field people - after 1 year.

And here is the plan for more office personnel:
Phase 1: 3 office personnel - good for 1 year.
Phase 2: 6 office personnel - after 1 year.

OK. What's next?

How much for Inventory?

How much money do I have to plan for my inventory? Based on my experience, I do not need to have an inventory on large items, as it is understood by our customers that these items are not stocked. But smaller items, I got to have them immediately available.

Of course, it will all depend on the number and types of suppliers that I have. Again, based on experience, I think I need at least $200,000 for inventory. Whew, that is a load of cash. Is this worth it?

Let me see... Now it all depends on how much sales I plan to generate from my operations.

So, I need US$40,000 immediately to start the company. I need another $130,000 to survive a year. Now I need another $200,000 to invest on inventory. And how much do I need to spend on additional people to do the work for me/us?

Whew, I am making progress here... am I doing great or what?

What?

What to look for in a Supplier?

I am in the medical equipment business. No... I do not plan to manufacture the machines myself, only to sell and service them. Needless to say, I need a good horse to ride on (Yeah... i read a book long ago called "Horse Sense - How to ride a horse without really trying" ...or something like that... Well, hey did you just saw that? I can't find a pic of this book at amazon.com but found at barnes and noble, wow!).

Hiyaaa... and a good supplier is my horse. Yup, that is another Lesson Learned...

Lesson Learned #8: Get good suppliers that would sell themselves.

But what is a good supplier. Well, simply some manufacturer who has at least one of these qualities (of course the best ones are those with all these qualities...).

1. One with a well known brand. This saves time and money. I now would spend some huge amount of money to buy the brand rather than spend the same amount in longer time trying hopelessly to sell losing unknown brands. But Oh my, where is the excitement now? Don't worry, there are a lot of other things to get really excited about, you'll see...

2. One with good products. But this is subjective. And it is very easy to say that everyone has good products, only that it is good for something more than another. Good for some is not good for another group of people.

3. One that will lend me inventory. Now this is really nice. I've got to sell them without first buying them. But, don't I need to establish credit line first? Can I make up in marketing my lack of number of years to build credit line? Yakitiyak... Gee, I don't know!

4. One that has good service. When I say good service for suppliers, I mean those that will help you right away when you have even some smallest problems with the equipment.. they will help you with parts and provide you technical information... etc. Yes, this kind of companies still exist but they are a rare breed...

5. One whose products are really used by people in my market. Yes. Ok. This is good. Ok. Yes. (I can't help it, I am really vocabulary-challenged especially when trying to come up with superlatives!).

So now, where and how do I get these suppliers? Will I raid my competitors, get their suppliers away from them, and create instant enemies along the way? Is this how my company's integtrity is all about? This is easy but is this ethical?

Again, I do not know what to do. Nothin' new.

Planning for Capital

Now, I have to plan how much capital I need for my venture. Also, I must have a plan on where will I get the money, or how I will finance the business.

Looking at the people that I need, I can see that I need a huge some of money just to get them. How can I plan for that now? Do I have to have enough cash to pay this people enough to last for a year? Is there a guide I can use as to how much I need to put in standby?

If I need four good people, that means there are five of us right from the start. Of course, we also need a secretary to keep us all together. Of course, we need to give these people (five of us plus one secretary) some decent salary as well as some sort of benefits/convenience. If each of us will have an average of US$1,500/mo in salary, we must at least have US$7,500 available per month plus say $800 for the secretary (or a total of US$8,300/mo.). I also need at least US$15,000 in cash for down-payment of some mode of transportation (car), plus US$2,000/mo. for the monthly amortization. Another consideration is how much will I have to spend in order to get these people. If I hire a consultant (recruiter) I most probably will have to pay him US$6,800 in consultancy fees (represents one month salary for everyone except for me). That means on start-up personnel alone, I need at least US$32,000 to survive one month and I need approx US$100,000 to survive one year.

Hmmm...

Now how much is office, furniture, computers, fax, telephone, DSL connection, telephone, utilities, support service, etc.?

Office: US$400/mo.
Furniture/computers: US$1,000/mo.
Telephone/DSL/utilities: US$500/mo.
Others/support services/etc.: US$400/mo.

That is US$4,600 to survive a month plus US$23,000 to survive a year.

Now, how much will I have to spend for licenses and government approvals and registration? Maybe US$2,000?

Immediately, I need at least US$40,000. I also need an additional US$130,000 to survive for 1 year.

I now have the requirements for projected salary, office, etc expenses. I still do not have the marketing expenses. I will have to get suppliers and customers. I will have to get additional people to do the legwork, etc. Is there a short-cut to compute all of these?

Oh my... I think I still do not know what I am doing.

Jack, where are you, Jack? Jack?

Business starts with the Capital "F"!

The last time, I started business with a very poor sense of what business is. I just want to have work, I just cannot find one, so I made one. That is hardly what one must do in business, now I realized.

Soon after that I formed my business, I began looking for suppliers. When I got my first suppliers, I then tried selling their products. After trying to sell within a few months, I soon received an order. Amazingly, an order which I cannot fill, because of the lack of the Capital "C", as capital in cash to buy the product I have sold. So after the order, what I did was I scrambled talking to my relatives and friends who could be gullible enough to invest in my sales project. Of course, there could only be one such gullible person in the world, my mother.! Lucky, she has the cash or I could have been dead.

Business is an investment, not only of money, but also of time. Well, time is money (yeah, I heard it somewhere - time is indeed gold). Business needs time and money to run. That is what you call capital. But capital surely can prove itself to be very elusive. The lesson there is that you have to know where to get the capital before you go into business. Some call it financial planning. For me, it is

Lesson Learned #7: Business starts with the Capital F

or your real capital is when you know how to "F" (Finance) your business.

So that is what I am gonna do right this time. I will have good financial planning right from the start or at least right before I "f---" it up!

On a Mission

I am reading Jack Welch's new book "Winning" which first chapter deals on Mission and Values. I felt as if my ol' pal Jack is talking right straight to me. Here I am, getting right into business and here comes Jack telling me, "Hey, you got to know what you want to do, and be able to clearly tell yourself what it is"!

OK Jack, if you say so...

I did not do it (mission) the first time, and I guess that is one additional lesson learned.

Lesson Learned#6: You got to know what you want to do and how to do it before you do it.

So here is my mission:

To be a profitable company which runs by itself yet steered by professional people who are passionate, caring, cheerful, confident, creative and with high IQ/EQ. The company will sell (with integrity) and service different high quality medical equipment directly to customers who buy them. The company will succeed with the highest business ethics, through unheard of customer service by making the customers really happy and cheered themselves, and through bold industry-leading marketing campaigns. The company will care for its own deserving employees, like family, and make their jobs worth their while, while giving its investors a high rate of return on their investments.

The mission has got to be short so that it is easily explained. So you see, I was already trying to make it short (but without success).

My mission is directed to serve three groups of people, the customers, the employees, and the investors (which is essentially myself). It has got to be profitable, because there is no point in doing it if it is not profitable. I am not running a charitable institution. I am not rich (not yet). I want to have a steady job worth my while and I am making a company that will give me one.

But how do I define profit? I am the investor and I have to define it. Well I am a simple person and I have simple wants. I just need that after the company feeds, clothes, houses, educates, entertains me and my family, I would have $200,000 in clean profit (after taxes) within 3 years. Now now, can I do that? Already, I think I need to review my mission. Oh well, let us leave it as it is right now.

The mission also says that people who'd run it better be good people (professional, passionate, cheerul, etc..) for I have learned my lesson already (see Lesson #4, previous article).

The company will sell with integrity, meaning will not tolerate giving bribes (hey, let us change the way things we do business in this country for once). The key here is we will sell directly to the people who are paying and not to those who merely recommends. Now, if the customers has their own integrity problems, say they don't pay their taxes, we won't mind as long as they do not ask us to get involved or do anything illegal for them.

The company will win with unheard of customer service. The company will have the passion to make the customers happy, really happy, happy as in smiling and cheerful and happy to see us and buy from us and recommend us and buy from us again, and again.

The company will make and win through great bold creative marketing campaigns, conceptualized by its own creative employees. I really cannot over-emphasize how employees are important to the success of the company. That is why the company should also make it worth the employee's time and energy, by truly caring for them, like family.

There is one more important thing. The company should have products that are really of high quality, because high quality is part of good service (How can you make customers happy when they are not happy with the products?).

So, is my mission clear enough to me? Oh my, I am not sure. I might again be making some major mistakes here. Hey Jack, what do you say to those people who are not sure that what they want to do is really what they want to do? Jack, where are you, Jack?