Tuesday, July 3, 2007

Speaking of plans... where's all that data coming from?

So you've started writing your business plan and you've hit the financial section and said to yourself "Eek! Where's this data going to come from? Is selling this much in my first year or five years realistic? How is any bank or investor going to believe my numbers? "


When I wrote the business plan for The Pot & Bead, I got a little lucky - but I also did a ton of research. There is an active trade association of paint your own pottery studios, and through them, there are several new business consultants. I consulted with another studio owner located many states away from where I'd be located and she was willing to share her financial data with me as part of her consulting service. Because her store was in a similar demographic to mine (similar average household income, similar density of people), the information was useful and I was able to make a case for having realistic numbers. In fact, my business plan was called "realistically conservative".

This doesn't mean you can just walk into any ol' store similar to yours, ask to see the owner and ask him or her for financial data. I would never ever hand over any of my numbers to a complete stranger and most people would find it rude to ask/be asked. Just saying your planning on opening up a store a long way away isn't going to work - LOTS of business owners I know have been flat out lied to about that.

So what can you do? Here are a few ideas:

1) You still might be able to meet a business owner in a similar situation through your own trade association. If not, ask people who know people. Can someone you know introduce you to someone in a different location? Does your cousin and her husband who live on the other side of the country know someone?

2) http://bizstats.com - in particular, look at their "sales per square foot".

3) The US Census has a whole division devoted to "company statistics": http://www.census.gov/csd/ I recently used this website to research the percentage of growth of Hispanic owned businesses in the US.

4) Call up your potential suppliers or manufacturers. They are a great source of info for your industry. Manufacturers want you to be able to sell their product so they're often willing to give you information and/or advice to help get you. They might know what's hot in your area, who else is carrying their product in your area and all sorts of other good information.

5) Contact magazine publishers. Often, when things become popular, magazine subscriptions go up. For example, say you want to open a store just for dog owners. Call the publishers of dog magazines. They might be able to tell you that subscriptions have gone up X percent over X years - which will help you make your case for the potential popularity of your store or service. They also might be able to break down increases in subscriptions by region.

6) Landlords. In order to attract new tenants, landlords often have statistics and numbers for their properties. Usually it's just demographic information (which you need, too), but if you ask, they might be able to tell you how sales have been for their tenants in general. If they're a large company, ask if they'll put you in touch with a business owner in a similar business, but far away location.

Good luck!

(Note: Sorry for the long delay between posts. Retail is a seasonal business and occasionally takes over your life completely... At The Pot & Bead, we just started summer camp and 3 of my employees graduated from high school last week!)

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Monday, May 14, 2007

Other ways to look at your sales data...

Last week's blog about how to figure out how your business is doing got me thinking about other ways to track data and I came up with this idea...

How about amount of sales per employee? I don't mean specific employee by name. I mean divide your sales for any given month by the number of employees you have that month.

For example: Let's say your sales in December 2006 were $20,000 and you had 10 employees that month. $20,000 divided by 10 is $2,000 per employee.

Why might this be interesting? Well, let's say that in December 2005 your sales were $18,000 but you had 8 employees and in December 2004 your sales were $16,000 and you had 5 employees. Your sales each year has gone up and so has the number of people you have employed.

So for those three years, your sales per employee were:
Dec 2004: $3,200 / employee
Dec 2005: $2,250 / employee
Dec 2006: $2,000 /employee

On one level, business is good - sales went up each year in December. But your sales per employee has gone down - way down. Given the increase in employees, your payroll has gone up which means any profit will have gone down. So the question is: Are having more employees worth it? If I had a metric that had this kind of trend, I'd start to wonder about the effectiveness of my employees. Why aren't they able to keep up the $ per employee? Do they need more training? Is having more employees making them prone to "someone-else-can-do-it" syndrome?

This is just one metric to think about if you're wondering why your sales are increasing, but your profit is not. There might be a correlation, there might not - it's just one thing to think about. Go ahead and try it. (Other calculations you could do: sales per thousand dollars of payroll; sales per hour the business is open; sales per # of hours of payroll, etc)

Have fun!

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