ebook-Feasibility-horizontal

SOLOPRENEUR BASECAMP: BEFORE THE BUSINESS PLAN

All Rights Reserved Solventurer TM Page 1

Table of Contents I. Before Starting….................................................................................................2

II. Self Feasibility ..................................................................................................10

III. Conducting Your Business Feasibility ...........................................................34

I. Before You Start Your Plan .............................................................................56



I. Before Starting…

“But risks must be taken because the greatest hazard in life is to risk nothing. The person who risks nothing, does nothing, has nothing, is nothing. He may avoid suffering and sorrow, but he cannot learn, feel, change, grow or live. Chained by his servitude, he is a slave who has forfeited

all freedom. Only a person who risks is free.”

-William Arthur Ward



A. About Solventurer

Solventurer (the combination of Solopreneur and Adventure) specializes in the journey that the Client-Focused Solopreneur faces when starting their business. Client-focused (“Clifo”) Solopreneurs are one-person entrepreneurs such as freelancers, consultants, coaches, and trainers. They supply knowledge-based services to clients, use technology to scale up rather than hiring people, and value the importance of life balance. Note the Clifo Solos are different from other Solopreneurs who run retail operations or less knowledge-based businesses like gardening, landscaping, fitness training. I just call them Solopreneurs or Solos for simplicity.

Many Solopreneurs struggle to get work and aren’t able to charge premium prices largely because of their lack of differentiation from others. Without a clear focus, value is lost. Successful Solopreneurs, on the other hand own a niche, are passionate about it, and are dedicated to business-life balance. By doing so, they are able to charge premium prices AND maintain long-term interest. I describe these qualities in detail on my blog.

I’m passionate about the narrow focus of what I write, train, and coach about. While there is a surplus of “small business” startup books and tutorials out there, there is a dearth of insight about the Solopreneur.

I not only focus on a specific business type—the Solopreneur—but also key in on one point in time for the Solopreneur—the startup stage. My material won’t cover business growth for existing businesses. Rather, it discusses how to start your business and how to position your business to grow before you launch. This specificity allows me to go deeper into the material and use real life examples to describe the startup process.

B. Other Notes

I hope you get value out of this E-book. If you have any questions, feel free to contact me at [email protected]. For more insight, check my blog, www.Solventurer.com.

I use the masculine “him” and “he” in this book for easier reading. I am not assuming that the audience is male nor female, but is simply a way to make the narrative easier to read.



C. The Startup Process

You might be asking, “Why am I wasting my time with Feasibility? I need to write a business plan and start my business.

Start by looking at your business’s future lifespan. You start with an idea. Through the startup phase, you develop it into a startup business. Over the next year or so, you build capacity and demand and grow the startup into a stable business. Finally, you exit the business by selling, handing it down, or dissolving your business. Then you can do something else, travel around the world, or simply relax.

Note that this lifespan, depending on your goals, can be anywhere to a few years to decades. Whatever the length, your future business lifespan looks like the following:

Total Business Lifespan

As I mentioned earlier, my business specialty is the Startup Phase.

This eBook only looks only at the first phase of the Startup Phase, between that initial idea and the point when you can consider your business a startup. Looking at the startup phase in detail, you can see all the activities that need to be done.

IdeaStartup

Stable Exit

The Startup Phase



The Startup phase starts with Feasibility. The business plan (and the rest of the activities for that matter) completely relies on it.

The Startup Phase

Perhaps the most difficult problem that you will face in starting your business is determining the feasibility of your idea. Many entrepreneurs start a business convinced of its merits, but they do so without evaluating its potential. Feasibility is the most critical step of the startup process because it will not only screen out any bad ideas; it will give you a foundation to build your business plan upon.

Surprisingly, Feasibility is often regarded as a tool for novices. This can’t be any further than the truth.

Even the most successful chronic entrepreneur utilizes a Feasibility study to ensure he doesn’t waste time developing an idea with a poor economic model or one that doesn’t dovetail with his life vision.

Feasibility

Write Business Plan

Build Initial Network

Build Website & products

Make first sales

STARTUP

What this eBook is about

IDEA



This E-book shows you how to conduct a Feasibility Analysis. The goal of the analysis is not just a litmus test (“go/no-go” decision) on your business idea. Instead, you can see the moving parts and work with them with little detail. Detail is Feasibility’s enemy. Commitment to understanding a big picture about your business is essential so that you can move to begin writing your business plan.

This E-book will show you a comprehensive way of looking at your business idea in terms of economics and life-balance. There is no wrong idea—everyone starts with ideas that are far from perfect. This process looks at how your business idea looks at 30,000 feet: how it ties in with your life, how to satisfy the tradeoffs between your service niche and customer base, and how much money you can expect to make.

After Feasibility, it’s on to writing a concise business plan. The information that you generate in the Feasibility will give you fodder for a running start: a rough idea of your Niche and what you need to do meet your financial and personal expectations. With these two big questions answered, you won’t be staring at a blank sheet of paper when you start writing your business plan.

The process of starting a Solo business is approached in an ordered process. After Feasibility, you will research to understand the market and competition. From that you’ll start to define how you create a business around your Niche. You will design a marketing plan to deliver your Niche service. Based on your marketing projections, you’ll construct financial statements and a timeline to move forward to complete your business plan. Finally, you’ll begin utilizing your business plan and testing the assumptions in it.

After testing the plan by launching your company and comparing results with your plan projections, you can feel confident in investing more resources into your company several months after you launch.



D. The Solopreneur Business Plan Process

The business plan process can be looked at 6 steps. Note that the only reason I list them here are because you want some foresight on what you will need after completing your Feasibility.

1. Do your base research to build your business foundation

Understanding your customer, who your competition is, and some industry norms is the basic stuff in this section. In Feasibility, you’ll have a rough idea of who your customer will be; in this section, you’ll research your Target Market to better understand him/her so you can market effectively and economically. You will develop the list of competitors generated in Feasibility. Through an easy-to-use Competitive Analysis, you’ll determine how they compete and what their internal strengths are. By understanding your competition, you’ll be in a good position to start developing your niche.

2. Develop your Niche

Looking at your Feasibility Niche and your Competitive Analysis together, do you see a service area in which you can compete? You will have developed a good starting point in Feasibility. Now, how does the insight from developed Competition and Target Market research affect this? How will you be able to own the Niche, i.e. prevent others from coming and stealing it away?

3. Implementing Your Plan

While you can spend less than the cost of dinner to get a Solopreneur business off the ground and running, generally it takes money and time to get business off the ground. You need to develop a marketing and operations plan to determine how you’ll create customers and then deliver to them. Client-based service businesses are deceptively expensive as the majority of your startup expenses will come in the form of marketing. You need to determine how to create effective marketing.

4. Draft Your Milestones and your exit plan



Start with your vision. Start with your short-term goals and work backwards. Assign a cost to each milestone. This section starts making your plan real.

5. Create Your Financial Projections

Projected Profit and Loss, Cash Flow, and Balance Sheet will round out your story. They’ll turn your concepts into real numbers.

6. Test Your Plan and Modify it

At this point, you’ll have a great projected business. Launch your business and make it real. As a startup Solopreneur, you want to bootstrap the business…don’t spend all your savings and apply for loans at this point. Over the next six months, see which of your business plan assumptions hold true and which don’t. Many things you assumed in your business plan you’ll see are off which is to be expected. This is a natural progression in the startup process and experienced entrepreneurs know that many of their assumptions will be off. After testing for six months, you’ll then modify the plan. The modified plan will serve as the business blueprint to build your business from a startup into a stable business. Then you can confidently dedicate more resources to the business.



E. Understanding Feasibility’s Role in Your Startup

Before you even start writing your business plan, you want to see what your capabilities are. Do you have the right amount of personal resources like money, passion, and skills? Do you have a business model that can make you money down the road? I'll go through how to think of these so you don't start writing your plan when you're not "business plan ready".

Most people don’t do a comprehensive feasibility process, a problem because it’s the most important step in starting your business—bar none. Think about picking a career. How many people do you know who picked a career when they were in high school or earlier and still doing it full time? It’s because they never really thought it out. They only looked at their life through 18-year old eyes.

I’ll spare you from the standard checklists of entrepreneurial qualities like, “are you self-motivated, a risk-taker, able to handle ambiguity”, etc. Those questions are too easy to fudge the right outcome, i.e., “yes, I am entrepreneurial”.

In Self-Feasibility, you will work through a structured process to determine the best business niche for you. In Business Feasibility, you will use some simple tools to help determine if your idea can meet your needs.

Feasibility allows you to see the big picture before you waste time and money on a poor idea. It helps match your interests with your passion and your skills. It gives you a framework to start thinking about the appropriate business model to leverage your resources and to meet your expectations of your business.

Feasibility clues you into where your strengths and weaknesses are and what you need to do to address them. It also aligns your expectations with a basic business strategy. For example, if you’re looking to work 30 hours per week and make $150,000 per year, you aren’t going to wait until late in the business planning process to see if this is even remotely possible. You need to start designing your business around your income and time expectations now.



II. Self Feasibility

“Freedom is for honest people. No man who is not himself honest can be free –as he is his own trap.”

-L. Ron Hubbard



A. Traversing the River of Doubt

I like to think of the Feasibility process as the metaphor of a river you must cross to start writing your plan. You need to cross the river because on the other side lies a more idea place to start your plan.

On the left side of the river, you haven’t answered some basic questions. You don’t want to just start writing your plan until you are primed. Think of a doctor making open-heart surgery without scrubbing down, functional equipment, or prior training. I feel sorry for the patient! As ridiculous as that sounds, aspiring Solos do it all the time. They start writing a business plan before they write down what they are passionate about, how much money they have to invest, what kind of business they want to start, how much approximate money it will take to start such a business, etc.

So what to do? Think of creating a three-support bridge to span that river of uncertainty. The supports represent the elements of Self-Feasibility: Passion, Capabilities, and Market Niche. The road surface represents Business Feasibility. Just as a road cannot span a wide river without foundation supports, your Business Feasibility is a futile exercise if you

Where you are now

Where you need to be to

write your business plan

?



haven’t completed Personal Feasibility. Without just one of its three supports, the bridge will collapse into the water.

The 3 Supports of Personal Feasibility

It’s critical that you can define each of the supports of Feasibility before you write a single page of your business plan (or move onto Business Feasibility as your business plan needs each support to be accounted for.

Not only do successful Solos make sure that they have met all three Self-Feasibility supports before they move on, they realize these three elements need to be maintained to run a sustainable business! For example, they might need to refocus their niche to changing market needs or to re-align with their passion. Or they might need to acquire new skills or more money to expand their business in the future.

Passion Capabilities Niche



Most entrepreneurs start Feasibility by doing endless brainstorming session with poor results simply because there is no structure to the brainstorming. One second they are thinking of what market needs are, the next concentrating exclusively what they want to do, and then back to thinking of the most profitable service, etc. It’s a labyrinth of possible ways of approaching what the premise of your business is, and I’ll show you a proven way to navigate the process.



B. The 3 Supports of Self-Feasibility

Looking at each support:

1. Business Niche

Do you have a general idea of a) who your customer is and b) what service they need and c) what service will fulfill their need? If you do, you have the makings of a market-driven product. You don’t want to over-research when you’re at this preliminary step; instead, just use some common sense that answers all three of the aforementioned issues. Once you have a general idea, you can weed out any obvious ideas that have no prospect of making money. For instance, while consulting to dog groomers could answer all three questions, it probably



won’t make enough money to live on. Avoid the pointless exercise of listing niches with no profitable business solutions. We’ll get into creating your niche in a bit.

2. Capability

If you “stopped” Feasibility after doing the last step of creating a Niche, most people would rightfully call your idea pie-in-the-sky because it has no relevance to you. To fulfill you Market Niche, you need the Capability—the “know-how” and money—to start. You won’t need that much money to start your Solo venture. But if you have nothing to contribute and/or don’t have a chance of borrowing money (i.e. poor credit or preference), you’ll have look at other ways of accessing capital. For “know-how”, it will certainly make it easier if you pick a niche that you have expertise in. We’ll discuss situations where people pick a Niche that doesn’t tie into their background.

3. Passion

Does providing the service get you excited to think about? Would you like nothing more than telling others how you can solve their problem? Would solving the problem give you immediate AND deep-lasting satisfaction? Are you going to look back later and be proud that you did this? Is providing the service more than just earning a paycheck? If the answer is “yes” to these questions, you are passionate about your considered Niche. Passion drives Solopreneurs to get started sooner than later and keep them motivated when challenging times arise.



C. Where am I right now?

We just introduced how Passion, Capabilities, and Niche need separate considerations when starting your business. These three parts need to be thought of together, not independent of one another.

Now let’s look at their relationships. Each aspiring Solopreneur at a moment of time brings different things to the table when starting a business. For instance, someone has passion but not a clear market need. You will be in one of four situations, labeled in the below diagram as 1 through 4. Note that these are situations or moments in time, not unchanging people without hope to move to the ideal situation.

The Venn diagram below shows the relationships between the three aspects of Feasibility.

These overlapping areas represent situations where the Client Focused Solopreneur has two or all three of the qualities. It is the easiest to complete a business plan if you are in area 1, where you’re bringing your resources, passion, and a Niche to the table. If you’re not, in area 1, you will be.

Passion

Niche Capability

4 3

2

1



1. Good-to-Go

This is the culmination of all the desirable attributes. You are well-equipped, have a real need in the market, and are passionate about providing a solution to that need, you’re in a position to start writing a business plan and moving towards building a solid venture.

If you’re Good –to-Go: Don’t fuss about details, proceed to the next step, Business Feasibility

As I mentioned, many successful Solopreneurs do not initially fall into the ideal scenario, Good-to-Go. They realize what they are lacking and adjust accordingly, either by getting access to more funds, taking a class, re-adjusting their business niche, etc. The following situations are where you might find yourself temporarily. Looking at the diagram below, you can see these scenarios:



2. Paying-the-Bills

While you might have the resources to meet a proven market demand of a service, you are not excited to perform it. Successful and happy Solopreneurs start businesses that they are passionate about. Having said that, the average consultant does the occasional job here and there that doesn’t exactly scream passion but pays her bills. The successful consultant however knows she must market herself in a way to attract the right job for her, not simply the ones that pay the bills.

This situation is familiar to me. In consulting work for a former client, I was periodically asked to update data and generate reports— mundane data entry for the most part. I was being paid a good amount of money because I created system that only I knew how to navigate. While these kinds of projects paid bills at the time, I wasn’t interested in building a sustainable business around this niche.

Even though it might be easy to start something that you know, making easy money is not as sustainable as making money you are excited to earn.

If you’re Paying the Bills: Re-calibrate your idea around your skills to align with your passion.

3. Inventing

This is a bad situation to be in. The extreme example: someone is comes in with an idea that they are in love with which has no clear market. Friends and family reinforce the idea by saying it’s a good idea and even purchasing.

All is not lost if you find yourself here. With a specific skill set and money to start a business, you just need to focus on a market-based service, not a you-based service.

I worked with a psychologist wanting to start coaching sessions that fall into this category. She had Capabilities and Passion to provide her service, but there wasn’t an apparent Niche. It’s not that there isn’t demand; it’s that she didn’t chose a need in which she could make money out of. She described her market’s need as “women stuck in their life need to feel better.” Who are they and what’s the service that will solve their problem?



If you’re Inventing: talk to people and try to get a sense of who would benefit from your service. How would they benefit? Once you get some ideas call up members from the related association to get advice. Contact people on LinkedIn or the Chamber of Commerce. Present your ideas to those other than close family and friends who will just say what they think you want to say.

4. Dreaming

With a passion for meeting a market need but not the resources—either skill or access to startup funds—the Dreamer needs to find a niche that he can focus his vision and passion into.

While the Dreamer can certainly the crazy person who wants to start the next Facebook but doesn’t have a dollar in the bank and a clue, the Dreamers that I work with are often much less than subtle than someone with a pie-in-the-sky idea looking to start the next big company with no experience and money.

One group of these people has an arsenal of skills that they are deliberately avoiding to tap when figuring out their Niche. For instance, a disillusioned accountant chooses a niche outside his immediate skill set because he is bored with it. Perhaps he has expertise in small business bookkeeping but is considering a general small business consultancy that advises clients in marketing, management, and operations. Not only is not a niche, the business is not building his bridge on a sound foundation.

Others aren’t avoiding their existing skills—they don’t have them yet but can develop them through starting their business.

I spoke to someone recently about starting a consulting company to help startup companies market themselves. She didn’t have any direct experience; her experience was in graphic design and she had a bachelor’s in marketing. She was yet to put her academic knowledge and her design background together in a business context. My advice was to start doing the work for free and build experience while expectations are lower. She would also be able to see what aspects of the marketing she liked to differentiate down the road.



Dreaming can also be a simple lack of funding. Many aspiring Solopreneurs wow me with their industry knowledge and passion but simply don’t have the required funds to start their venture in the way they want to. This is a less common problem than the lack of appropriate skills because Solopreneur businesses are generally inexpensive to start.

If you’re Dreaming: Everyone has skills but not every skill can be easily monetized into a company. Enrolling in classes or taking a job in the industry of interest is certainly a possibility if a skill gap exists. A more common—and less extreme example—is the situation where a person has many related skills but they don’t have the depth they would like to provide. The person must choose whether to brush up on the knowledge or simply not compete in expertise depth to compete on something else.

5. Idealizing

There is a final situation that doesn’t fit into any of these molds. The middle section (1) should be co-labeled “Idealizing”. The funny thing is, people that actually are ready to start don’t. While they might have the basic components needed to start writing a business plan, they won’t start writing either because of fear or an insurmountable notion that the moons have to converge in order to make the jump.

Idealizing (often mislabeled procrastinating) is usually from perfectionism, not laziness.

If you’re Idealizing: Make a plan to start and start.

Many of my clients can’t get out of Feasibility because they are thinking too many steps down the road. They could start smaller, but are overly meticulous at this point and need everything to come together now. Though they are actually ready to move beyond the Self Feasibility stage—they convince themselves that they need more money, need to go back to school, or need a more profitable market. Some people just wait and wait for the green flag and never start.



D. Identify Your Niche, Capabilities, and Passion

How do you know if you have enough skill? How do you know if you have enough money? Passion? A need in the market?

If you have been working in the industry for some time, you probably know the answers to these questions. If this is uncharted territory, you’ll need to do some light research (i.e. talking to people in the industry and looking online at what similar companies are offering) before assessing how set you are in your Capabilities.

The best way of moving through this process is not jumping back and forth amongst them from the onset. It’s much easier to move in an ordered process starting with developing a Niche, checking your resources for servicing that Niche, and validating your to provide that particular service. Let’s walk through the process:

1. How to Identify Your Market Niche

Identifying your Niche is one of the hardest activities in the business plan process. Many never get past this step because they get stuck in The Trap of Uncertainty, where the less clarity you have on your intended service and your customer, the further away from the solution you get.

Write down a Niche

Show how you can deliver

Prove that your

passionate



Your Niche consists of both a need/service and a market. If I say my service is going to be selling piano lessons to high school students, my Niche might be defined. But if I say I want to sell music lessons to local people that will set up too many possibilities of potential Niches. Remember, your Niche should be a micro-Niche: the small niche that you can think of that has a market. General music lessons for local people could be more than just a Niche if you are in a large city.

When you look at BOTH the market (the customer) and the service you want to provide, there is a large number of combinations that can be put together to form your Niche. If you have a few different ideas for your customer —and a few different ideas on what need to address with your service—you’ll have a mind-numbing number of combinations, about as pleasant to sift through as sitting through a Miley Cyrus concert. I’ve been there. You’ll be there. We are all there at some point. (I mean in the trap, not watching Ms. Cyrus).

In a perfect world, one could say his micro-niche is giving X (service) to Y (customer). Obviously, it’s not that easy because he doesn’t know exactly who wants something and what they want. The typical person ends up providing a handful of options for both to hedge his possibilities.

Let’s say you have 3 markets in mind, 4 different services to concentrate on, and 3 different passions you wanted to tap.

That’s 3 * 4 * 3 = 36 different paths to venture down.

This is the self-destructing path that many start walking down—and never come back from—because they don’t understand that they have to decide on first a Niche, then look at their Capabilities, then look at their Passions. There is a structure to this process.

Very few people just pick their customer and service out of the air. But through this process, you’ll have a good idea of each. A free-for-all brainstorming session of “What kind of business should I start” never works.



When defining your micro-niche, the web designer (let’s call him Jonas) knows his different choices of the ideal customer are business size (larger vs. very small), geographic proximity (online vs. local), and business type (non-profit vs. for-profit).

Jonas also knows that once he identifies the customer profile (i.e. a tiny, local nonprofit) he’ll need to know their primary need that he’ll fulfill. For the service that Jonas is considering, again, he’s going to have a lot of options to pick from. Perhaps he’s wavering between general webpage design to blog construction to social media consulting.

Pictured below are his customer and service together. See how many combinations you can form if you have more than one idea for a service and one idea for a customer?

The Moving Parts Trap

Some never get past this situation because the possibilities overwhelm them. The key is committing to ideas by writing things down and overcoming tendencies to figure it out in your head or wait for an epiphany. Your Niche won’t just come to you—it is discovered through a disciplined process that you’re building up to.



One of the most common questions I hear is about the finality of this Niche. I.e. Once I figure out this Niche in Feasibility, is this is it? Should I be worried about picking the wrong one?

No! Realize that you are not carving your Niche in stone upon completing Feasibility. It is a big picture sketch of your potential business to be modified and strengthened during the actual business planning process. It might be off but you need to start somewhere and this is the fastest way of doing it. Now let’s talk about how to define your Niche.

There is an endless numbers of potential niches you can define but ultimately it is simple: solving someone’s problem with a specific service.

Look at a few example market niches. Each of these examples is a concise statement broken down into three parts, denoted by a superscript.

Develop online teaching materials explaining website 2.0 integration1 for website developers2 looking to become current3.

Coach1 local watercolor artists2 on the know-how on placing their work into galleries3.

Consulting1 regional corporate executives2 on improving negotiating skills3.

Training1 tri-state nonprofits2 in need of funding and a larger donor database how to use internet-based marketing vehicles to meet their needs3.



Looking at the structure of each of these Niche statements, you see how they are formed. Our web developer Jonas crafted his Niche below:

Jonas’s Niche

Develop WordPress blogs1 for local nonprofits2 looking to promote their work and build a donor database3.

The structure remains the same: who has a problem, what the problem is, and what the solution (service) is. Develop WordPress blogs (your service) for local nonprofits (audience) looking to promote their work and build a donor database (need).

Notice in the examples how there are no ambivalent words. For the action of delivering a service, you are not saying, “providing” or “helping” but rather using clear terms such as “coaching”, “consulting”, or “training”. For the Target Market, you aren’t saying, “small businesses” or “people in need” but “local artists” and “tri state nonprofits”.

If you aren’t 100% clear on how you will deliver your solution or who your market is, take your best shot. No one gets it perfect the first time.

Identifying Your Niche

We will (do) _________________________ (your service)1

to/for _______________________________ (for who)2 looking for___________________________ (their need)3



2. How to Identify Your Capabilities

Your skill set can also be complex because of all the variables involved. You want to be careful NOT to just list all your skills, i.e. public speaking, one-on-one consulting, website design or development, networking, etc. A surplus of skills often ends up breeding more confusion because it creates more possibilities of where to focus these talents.

Start with the Market Niche box. THEN fill in which of your skills (and startup funds) are required for that Niche. Make sure that each skill adds value and delivers a solution for a need.

Detail is not recommended and don’t worry about administrative and in-house marketing skills (such as how you’ll get the clients) yet. Only consider the core service. After you have “Skills Required” filled out, then list which of those skills you have and which you need to acquire.

My Niche Capabilities

Developing WordPress blogs for local nonprofits looking to promote their work and build a donor database. The blog will be complemented with Social Media compatibility

WordPress blog development: build complex blog from scratch using WordPress Themes

Incorporate widgets into blog Setting up Linked In, Facebook, Twitter and linking to the accounts from the blog

I have all the above skills except Facebook. I’ll do Facebook work for free to gain experience



3. How Your Passion Fits In

As mentioned earlier, you need the Niche and Capabilities to be confirmed by your Passion. After you’ve identified your Niche and shored it up by showing you have the resources to provide the service, you need to ask yourself the following three questions:

Would I enjoy (not, “can I do this”—that’s Capability) doing this?

Does this fit into my life plan?

Does this fit into my vision of my normal day?

The second and third questions will be further explored in your mission statement, but if anything jumps out at you now, you should adjust your Niche to one that is appropriate for your goals. For instance, if you’ve gotten this far and realize that this will jeopardize your vision of a lifestyle, you should go back a few steps to accommodate your personal needs.

My Niche Capabilities Passion

Developing Wordpress blogs for local nonprofits looking to promote their work and build a donor database. The blog will be complemented with Social Media compatibility

Wordpress blog development: build complex blog from scratch using Wordpress Themes Incorporate widgets into blog Setting up Linked In, Facebook, Twitter and linking to the accounts from the blog I have all the above skills

I enjoy working with nonprofits and helping them establish an identity online

I love the process of working with a client’s needs, resources, and time constraints to develop the right kind of blog. I have been using Twitter for



except Facebook. I will research and do some Facebook work for free to gain experience

about a year now and love the reach that social media has. I look forward developing my skill set here.

You’ll notice that the above was fairly easy to put together. Take a look at another example before you fill in the template.


We will create and manage Facebook ad campaigns for online retailers looking to increase their Facebook page “likes”

Facebook ad management Other social media I have all the relevant skills

I have been doing this part-time for a year now and have had success.

4. How to Fit Your Niche, Passion, and Capabilities Together

I think it’s beneficial to learn how to do something by seeing the wrong way. Let’s start by looking at a poorly-done Self-Feasibility example done by Jonas, our freelance web developer who is starting a business out of his PT venture.

How You Don’t Do It



My Niche Capabilities My Passion

Small businesses wanting websites

1-on-1 coaching

Building websites Social networking tools and blogging

Helping others

In the above example, there are problems.

First, the market need and audience isn’t defined. The audience stated is “small businesses” (which ones?) that “want websites” (for what reason?). With no need declared, it isn’t a surprise to see an unspecified customer. Jonas needs to go back to the Market Niche formula.

Moving to Capabilities, the bullet points have no direct relevance to the Niche. I would tell Jonas that he can build websites for the need of a website, but what kind of website? That broad statement in 1990 might have been enough, but with the evolution of the type of websites, “building websites” is not a niche anymore. It’s like saying, “I’m starting a restaurant that serves food”.

Another question for Jonas is how does the social networking and coaching relate back to the Niche of building websites? Remember every Capability that you list MUST tie back into the Niche. Anything extra is superfluous.

Finally, his Passion has no relation to Market Niche and Capabilities. I have no clear idea if Jonas is even excited about building websites, because “helping others” tells me nothing. If he were to move forward without making revisions, he would have difficulty writing the business plan because nothing about him, his product, or the need has been outlined.

Below is the second—and notably better—attempt to provide more clarity. He is revealing his desire to help struggling nonprofits and gives a more relevant description of Jonas’s skills.

Improved



Market Niche Capabilities Passion

• Nonprofits in need of donations and internet presence

• Social networking tools like Twitter, Facebook, MySpace

• Newsletter design & implementation

• Creating simple blogs complete with polls, surveys, comments

• Website consulting for functionality, design, and branding

• Helping nonprofits with social cause

• Providing web expertise

This is much better, yet there is no correlation between the market need and the Solopreneur’s skills. If nonprofits need donations through the web, how are these skills going to solve it? Jonas needs to think about using his skills to solve the specific problems the market has.

Successful Solos don’t start by identifying the demand, then start with a clean slate and write what he’s good at and passionate about. They start with a single market need/potential business idea. Then they list their skills that are relevant for the business idea. Their passion is associated with providing the service.

5. Niche Scenarios

We already talked about the Moving Parts Trap. Solopreneurs stuck in it don’t move forward because their brain is trying to figure out all three ideas simultaneously, an extremely difficult undertaking. I first suggested that you should simply choose one Niche. However, sometimes it is prudent to work with two or three ideas to see the best fit for your skills and interest.



For example, an accountant may see two distinct niches to work in: local small business taxes and local small business bookkeeping. He has the skills and interests to do both. But which one is the best fit?

If you have a few different service ideas and/or markets you’ll need to show all of these niches together to see which scenario makes the most sense for you. To do so, use Niche Scenarios.

By working through Niche Scenarios rather than just one ideal Niche, you can be clear on who you are and aren’t. Jonas doesn’t have deep knowledge of any of the web vehicles but understands how they can be pieced together to form holistic marketing solution targeted at a small group of people. The first and third scenarios seem like good fits. The second scenario, while there is a need and he’s passionate, doesn’t seem to have the skill set to provide this.

By providing three scenarios, the Solopreneur can minimize the confusion of multiple moving parts. These moving parts often are the root of exacerbated consternation. The number of possibilities of types of businesses can be overwhelming, with several possible markets to sell to, several scope of services, passions and skills sets, etc.

Let’s continue looking at Jonas, and see his three scenarios for a different combination of niches and skills/interests. See the Niche Scenarios Worksheet below.

At the end of this phase you want to be clear on which “situation” you fall in. If you think you are not currently in the “Good-to-Go” situation, now’s the time to chart a course to get there using my tips. Be sure to use the Niche Scenarios worksheet if you have many ideas for your business.



Niche Scenarios Worksheet

Scenario 1 Market Niche Capabilities Passion Local area nonprofits in need of greater publicity for increasing donations, building their donor base, and leveraging their brand, especially online. Looking for general web design & production services with emphasis on strategy, training, support.

I build simple websites, blogs, & newsletters. I can link the websites to social networking sites and maintain a consistent brand. I understand how to track effectiveness for all of them.

I love to help struggling nonprofits get their message out to the world. I love tracking results b/c it allows a long relationship with the client as I prefer that then heavy turnover.

Scenario 2: Market Niche Capabilities Passion Same client need as above but focus NOT on linking website with social marketing written content but exclusively on developing video content: streaming live events, documentaries, photo galleries into movies.

I don’t have as much video experience and would have to outsource much of this, especially backend development.

From the limited amount of film work I have done, I loved it. Plus, I would be doing it for a great cause.



Scenario 3: Market Niche Capabilities Passion Same client need but an emphasis on setting up marketing campaigns, not establishing a brand presence. Would produce online activism and social marketing campaigns.

A little bit of experience on how to set up online activism campaigns. Might require out-sourcing or training for required skill set, both I have resources for.

This would tap into my strong social desire to give back. The results of an activism campaign are in real time.



III. Conducting Business Feasibility

“Begin with the end in mind”

-Stephen Covey



A. Why You Need Business Feasibility

As the counterpart of Self-Feasibility, it’s ½ of the most important part of the Business Planning process. It serves as the second step before actually the writing begins. Business Feasibility is less about what you are bringing to the business but rather about the business itself. It covers the basic economics of your business and will help you develop a broad understand of your business numbers before you drill down into any kind of detail. The stage requires you to come up with ballpark numbers that you might already know (if you previously worked in the industry), and if not, are a phone call away. You are not looking for detail here.

Not having a minimal understanding of your niche before you start looking at details is a sure-fire way of getting stuck later. Can you imagine starting to build a house’s foundation without knowing what’s going on top of the foundation?

Those who skip Business Feasibility due to pride, ignorance, or haste are essentially building a house on shifting sand.

Business Feasibility comes down to a really basic understanding what is done in your industry/market now and then setting up your company to be similar. You don’t want to be too creative in this stage. You simply want to benchmark or “fit in” with your competitors in this stage. You’ll have a chance to differentiate yourself later!



B. Introducing Our Model

Business Feasibility will lead you through a basic understanding of your business before you start drafting your business plan. It’s outlined below in the 9 steps of the Business Feasibility Roadmap.



The Business Feasibility Roadmap

You might already know partial answers of the first few steps—your competitors, your prices, costs, and volume. And if you haven’t worked in the industry, you might have to make some calls to determine some of these answers. Some of the basic questions you’ll be answering in Business Feasibility:

Who are your key competitors?

What’s the average price of their service?

What’s their cost to provide that service?

9. Massage your assumptions

8. Set up your Simplified Profit & Loss

7. Determine your business drivers

6. Estimate your volume

5. Ballpark your indirect costs

4. Calculate your gross volume

3. Ballpark your direct costs

2. Pick your price

1. Identify competitors



How many sales do they make per day/month?

Upon finding the answers, you are able to set your pricing, ballpark your costs and volume, and through a Projected Profit and Loss Statement, compare your projections to your expectations of how much you will earn through this business.

It is here—not deep in the business plan—that you’ll determine what kind of business will work for you. Let’s start looking at the Business Feasibility questions now, starting with identifying your competitors.

1. Identify 7 Key Competitors

Make a list and fill in a table with the top seven competitors.

An aspiring Solo named Jonas is conducting Feasibility for his web design company and lists the following competitors.

Jonas’s Competitors

1 EFX Web Consulting

2 Introspective Design

3 Platinum Production

4 Brooklyn Y & A

5 SquarePeg

6 Tech Dinosaur

7 ABC Design Stew



You’re not doing yourself any favors by writing down many more than seven because you only want to focus on the most direct competitors.

Your competitors are those companies that your potential customers are buying from now and who might buy from rather than your business. Right now, I want you to just write down whom you think you would be competing against. This list is certainly going to change later, but you need a place to start. If you have no idea, do some basic research.

For traditional small business—like a retail store or restaurant or local professional service company, it’s easy to compile a list of competitors. You see them down the street. It’s not as easy for other Solos, who are mostly flying under the radar. (This is due to a lack of business acumen, marketing expertise, and a general lack of funds.)

Many people going through this step do a little research conclude because they can’t find competitors, assume there must not be any. You can use the following sources of information:

Google Local Business Center (Google Maps)

Google Search

Local Search (Insiderpages.com, yelp.com, citysearch.com, etc.)

Yellow pages (online and offline)

Local newspaper

Chamber of commerce events

Trade associations

Social media doing keyword searches of your niche



Competing blogs and the people who comment on them

2. Document Industry and Market Pricing

You next want to see what the basic going price is. It’s important not to write a price down without looking at your 7 competitors. Take the average of all the prices you find. If you find a relatively huge disparity of prices—like a $50/job to a $500 range (a 900% difference)—you need to be more clear on who your competition is as you probably have identified two different markets.

If competitors aren’t using the same pricing scale (i.e. apples to apples) make them so. For instance, if Introspective charges hourly and Platinum charges per job, put them on the same unit you are considering (or if you don’t know yet, just pick one which makes more sense for now). The above table converts all of them to the price per job. The job in this case is building a “standard” website.

Your opening day price will most likely NOT be the average of all your competitors; you just need a starting point (your Feasibility Price) to understand your business’s economic model.

Don’t fret about this locking you into your “opening day” price—this is only a first step, a benchmark if you may.

As always, Jonas’ example is below and you can fill out your competition’s pricing on the last sheet.



Jonas’s Competitive Pricing 1 EFX Web Consulting $500

2 Introspective Design $750

3 Platinum Production $350

4 Brooklyn Y & A $450

5 SquarePeg $500

6 Tech Dinosaur $550

7 ABC Design Stew $700

Average (and our Feasibility Price)

$550

3. Ballpark your Direct Costs

Direct Costs are the costs of providing a sale and the costs that you can “turn off” simply by not making a sale.

If I sell you a t-shirt that costs me $5 to make, my direct cost is $5. If I don’t get any more orders for the t-shirt, I won’t produce any more shirts, thus I won’t have to shell out $5 for each shirt. I can “turn off” the costs for the shirts.

Direct costs are sometimes called Variable Costs. They are also called Costs of Goods Sold, or COGS. I like to think of them as the ingredients involved in making a sale. I’ll stick with the Direct Costs terminology to avoid confusion. Looking at the “traditional” business sectors, you easily understand the costs associated with each sector.



Manufacturing: all raw inputs

Restaurants/bars: raw food, bottles of liquor, beer kegs, boxes of wine.

Storefront Retail/E-commerce/wholesale: inventory, inventory, inventory

The typical service business has several Direct Costs albeit they are relatively minor in comparison to the business’s Fixed Costs.

Service business (larger than a one-man shop): commissions to sales force, hourly labor, and other inputs when delivering a sale

Manufacturers, restaurants and retail are more straightforward than the service businesses. For instance, an aspiring entrepreneur of a landscape company would count the Direct Costs as 1) the laborers’ hourly wages, 2) the costs of transporting equipment to the site, and 3) the fuel used to transport and to power the equipment.

You’re not going to have any of these costs. When each of your sales involves 99/100-part expertise and only 1/100-part physical materials (printed materials you give to your client), you’ll be in the dilemma that all Solopreneurs face. Is everything overhead cost or should I count something as direct costs?

It’s a little more difficult to think of the costs of your future one-person service business because you can’t use the “turn-off” or “ingredients” analogies. If you are selling your expertise through a coaching or consulting or training workshop platform, you’re probably spending a trivial amount of money to generate a sale. You’ll consider your Direct Costs zero.

In Feasibility, treat your Direct Costs as zero.

Meaning all your costs will be Indirect Costs—to be discussed in the next section.

But before we move on, I should point out there is another way of looking at your Direct Costs.



We just explained how for Feasibility, you ignore your Direct Costs. However, if you were to put a value on your time, you would assign a cost to it. To do this, estimate what your rate would be if you were charging per hour. (So if you think you’ll charge by job, how many hours will each job take from you?) Then set your Direct Cost as a function of your rate.

So if you’re hourly rate will average $150/hr, and you work 20 hours for a job, your Direct Costs are $20,000. This is a truer way of thinking about your business as a Solopreneur because your primary cost is not taking another job. This is called your Opportunity Cost.

This is in direct contrast to how many Solos work. They make decisions as if their time had no value (zero cost). For example, a consultant won’t market/advertise because of the costs involved. She convinces herself that, “at least I’m not spending any money.” She might not be shelling cash out of her wallet, but in fact, she is spending money by leaving money on the table. That is, her time COULD be used to do a job. Another way of looking at it is “it takes time to earn money.” If she isn’t promoting or seeking work, she is incurring a cost of lost jobs. Her Opportunity Cost will be that lost job that she could have if she worked for work.

Both ways—counting your time as a Direct Cost and disregarding your time (Direct Costs as zero)—are right, but at different times.

In Business Feasibility, count Direct Costs as zero to make things simple.

When you get to your business plan’s financial section—after you’ve identified your Customer, Competition, and Unique Selling Proposition and established your Marketing and Operations sections—you can use an hourly rate in your projected Direct Costs. It will keep you cognizant of the tradeoffs of spending money and working.

The last caveat is about outsourcing. If you know you’ll be subbing out parts of your work to others, the subcontracting cost will be your Direct Cost. This is always true—in Business Feasibility and in your developed Financials. So if Jonas thinks that $250 will be paid to another company to do a part of the job he can’t or doesn’t want to do, his Direct Costs would be $250, not zero.



4. Develop Your Unit Profit Statement

By now, you should have the ballpark price you will charge and plan to treat your Direct Costs in Feasibility as zero unless you plan on subcontracting. This leads us to your Gross Profit.

The Gross Profit is the amount you get from your sale after the costs associated with the sale. The first “financial statement” you’ll use—the Unit Profit Statement—is shown below (by Jonas).

Note that your Direct Costs are zero (again, assuming you do not expect to subcontract your work out). You will use the price you determined in Step 2. So Jonas’s price is $450/job, and his Unit Profit will be $450, shown below. Be sure to fill your worksheet in.

Unit Profit Statement

for Jonas’s Web Company

Approximate price: $ 450 Less Direct Costs - $ 0 Unit Profit $ 450

Just a reminder on why we are going through these steps. Through these numbers, you will begin to see the big picture of your future business and whether the business projections satisfy your income needs and effort expectations. (In contrast, the big picture for Personal Feasibility is how the business connects with your personal life).

Jotting these numbers down in a structured way will reveal to you how viable and appropriate the business idea is for your financial and life dreams. Now let’s look at Direct Cost’s sister cost: Indirect Costs. After you establish these costs, you’ll almost be ready to run your Feasibility Test.



5. Ballpark Your Indirect Costs

Indirect costs, the direct opposite of Direct Costs, cannot be “turned off” by simply not making a sale. Rent, marketing, insurance, monthly marketing, and payroll are the most common Indirect Costs. You’ll incur these costs whether you make a sale or don’t.

The day you open your doors to the world, you will start paying these costs. Indirect Costs are often called Fixed Costs (as in they are never changing—they are always there) or Overhead (as in, “they are always hanging over my head.”) Indirect Costs are determined over a monthly period.

Unlike Direct Costs, you won’t be able to gauge your competitors’ Indirect Costs. You can’t call them and ask them, “What are your costs?” as they’ll either hang up on you or cruelly laugh at you. Instead, you need a way to estimate them. Don’t stress about this ballparking, because prior to reaching the meat of your plan, you won’t know exactly what you’ll be paying for on a monthly basis.

The following tally is a good guide for a Solopreneur to use to estimate Indirect Costs in Feasibility.

Let’s continue working with Jonas, the home-based web design business. He won’t have to pay Rent or Utilities. His Indirect Costs look like:

Jonas’s Indirect Costs Tally



Internet/Phone $100

Mobile Phone $100

Insurance $100

Website maintenance $200

Marketing/advertising $500

Total Indirect Costs $1,000

Note that we also aren’t including a line item usually included in Indirect Costs, your withdrawal/salary. That will be considered later. Also, many Solopreneurs are home-based and won’t include Rent or Utilities.

Jonas ballparks his Indirect Costs to be $1,000. Notice how he’s not overly precise, rather trying to arrive at a big picture number.

6. Estimate Your Volume

The next step is to know how many jobs you’ll be doing per month. You’ll have to make some assumptions based on what you know about the particular niche or do some light research.

When people start traditional brick-and-mortar businesses like the retail and restaurant businesses, they “spy” on competitors to see how many people are buying.

The aspiring traditional business owner will estimate volume by looking at similar businesses, determining what the sales average is, then adjust his/her numbers to arrive at the projections. He’ll then adjust his projected volume by benchmarking to competitors’ locations, clientele’s buying patterns, or marketing effectiveness.



Jonas looks at his competitors and determines that the average volume is 4 jobs per day; he will use that number as a starting point. Then, he can raise or lower it depending on differences between the average business and what he imagines his business to be like.

For instance, he assumes that his location has more foot traffic than the average competitor— raising his sales volume to 220 sales per day. His customer profile, however, has a lower propensity of customers buying that kind of item, so he’ll mark down his number to 210. He also notices that his competitors rely on a certain kind of marketing giving subpar results; he thinks he’ll do more in marketing, raising his volume, this time to the point of say 230.

Notice that estimating volume is not science, advanced formulas, or zany math. It’s simply rough estimations.

Jonas’s problem—and your problem— is that your competitors aren’t going to be as visible as storefront businesses; gauging competitor volume is difficult to know unless you previously worked in or with the industry. Many of your competitors have virtually no presence, procuring work through referrals.

Even if you can find a few of them, when you do, you won’t necessarily see how much they sell. If a competitor delivers value in the form of publicized workshops, lectures, and other events, you’ll at best see the possible range of volume (you’ll see the advertisement but won’t know the average attendance). But many competitors—those who meet clients privately, don’t have detailed information on their website or simply don’t advertise—are nearly impossible to find.

Your best bet is to talk to industry insiders and form an educated guess based on assumptions about the type of business. The thought process would go:

Jonas’s contacts say that the majority of local web developers do around 3 jobs per month. The larger project firms do less, and the un-advanced firms do quick simple sites but probably do a few more. Jonas uses this information down to guess where the competition lies in terms of both quality and volume.

So Jonas’ research led him to the following competitors’ information. He found it by looking on websites and calling contacts. He then estimated how many jobs each business does per month.



Even if the numbers are a little off, it’s a great start.

Jonas’s Competition’s Volume

# Competitor Name Volume Info Estimated jobs/month

1 EFX Web Consulting Does mostly large jobs with corporate clients

2

2 Introspective Design Highly specialized design firm 3

3 Platinum Production Very, very high end coding. No design

2

4 Brooklyn Y & A Company does many jobs per month—not great quality

6

5 SquarePeg Well designed but fast 5

6 Tech Dinosaur Fast jobs with cookie cutter process

7

7 ABC Design Stew Well designed but fast 3

Average 28/7= 4

Note that the information in the above table could have taken no more than a few hours to dig up. You want to be careful not to dig too deep (read: perfectionism) for information in this step.

As I’ve said before, the key in Business Feasibility is to move quickly without getting stuck in the mud (details).

You can fill your in the template in the template at the back of the eBook.



From this information, Jonas benchmarked his volume to be 4 jobs. If he thinks he will be more of a high-design, slow production type of company like EFX or Platinum, he can lower the job count. If he thinks he will do more jobs, he will raise it.

By using this common sense modification, he will have arrived at his Estimated Sales Volume:

Jonas’s Estimated Volume

Average Sales Volume of Competitors: 4

Adjustments

1. We are a little faster than most +1

2. We will build more advanced sites (thus more time)

-1

Estimated Sales Volume 4

This estimation can become a fallacy if you make bad adjustments. For instance, if you say that you can triple the workload of everyone else, and yet you don’t have any reason for it, the quality of this exercise will be counterproductive.

This isn’t an exact science but a approximate of the volume that you expect.

The reason you want a good idea of your sales volume is to see if it ties into your preconceived notions of how much you want to work on a daily basis.

If the estimated sales volume is 2 jobs per day and each job takes a 3 hours, that’s 6 hours of projected work. If you’re thinking that you only want to work 3 hours per day, you’ll have to modify your expectations. Set up your own estimated volume here and use adjustments that are relevant to your business.



7. Determine Your 3 Business Drivers

You’re almost finished your Business Feasibility. For the remainder of the process, you’ll work through the Simplified Profit and Loss (P&L) Statement, which combines your Basic Profit Statement (Price and Direct Costs), your Indirect Costs Tally, and your Estimated Sales Volume.

The 3 Business Drivers are the fundamental elements that your business is derived upon. By paying close attention to these, you’ll drive your business forward and put money in your pocket now and in the future. The 3 Drivers:

• Volume. How much time will you need for this quantity to be provided

• Salary. How much will you take home (and out of the business). The more you take, the less the company can grow

• Price. A higher selling price than competitors requires differentiation

Each has a positive and negative course of action for long-lasting business success. High prices are preferred over low prices, high volume over low volume, low salary over high salary.

Of course, that is over-simplifying. We all know that price and volume usually go lockstep together in business strategy. You set a high price and your volume goes down as less people buy from you. Businesses that establish a high volume strategy set low prices to induce more sales. So you see the tradeoff.

You don’t want to set your prices so high so that only a few people would buy from you. And on the other hand, you don’t want to undercut yourself to the point where you have to sell one million units to cover other costs. Salary is a good thing for you, but for your business health, it’s one more thing draining the available cash reserves.

Because, the more salary you take, the less reinvestment into the business you have. And if you can’t reinvest, the company can’t grow the way you want it.



Before we go through the P & L, you’ll need to start with the above table and determine which drivers you insist on dictating (i.e. “I know I have to have $4,000 in salary) and which drivers you have a good idea of (i.e. I think my price will be $1,000).

If you are certain that your price is going to be X, your volume is going be Y, and you want to make Z, you still have to use this tool to make sure it all works together. I’ve seen many people skip this step only to realize that their small volume doesn’t cover their assumed salary.

Jonas is fairly confident that his price will be $1,000 and that he will sell 4 jobs per month. He wants to see how much money he can expect to draw a salary and still reinvest in the business if his price and volume are set this way. He fills in the table as follows:

Jonas’s Business Drivers 1 Price $1,000

2 Volume 4 per month

3 Salary Not sure

8. Set up Your Simplified Profit & Loss Projection

The three drivers are the foundation of the Profit and Loss statement, a staple in every company in the world. We are going to use a stripped-down version of the P&L, and call it the Simplified P&L projection, which will be your best guess at this point in time on revenue, costs, and salary. The reason we introduce it now is you need to understand the basic profitability of your idea NOW, before you proceed into the business plan.

It is easiest to understand the Simplified P&L by following it from top (the Price you will sell at and the Volume) to bottom, where you see how much money is left over after sales, expenses, and salary.



The Simplified Profit & Loss

Price

$ Price

# of Sales per month

X Volume

Gross Income per month

$ Gross Income

Less Indirect Costs per month

-Indirect Costs

Net Income Before Salary

$ Net Income

Before Salary

Less Salary -Salary

Net Income (to be reinvested)

$ Net Income

The Gross Income is the Sales minus the cost to make the sales, or Direct Costs. We’ve already shown that you most likely won’t have direct costs selling services.

Then, subtract your Indirect Costs to give you the Net Profit Before Salary. This is the amount of money your business will make before you pull anything out.

Finally, subtract your Salary to give your projected Net Income; this is the amount you’ll reinvest into the company for growth.

Many people just say, I won’t take a salary, but that’s a bad assumption because we are projecting an ideal model, not how things will operate in the first month of business (where in fact you might not take a salary). After you deduct salary, you’ll see the Net Income that will be re-invested into the company to purchase more marketing, buy equipment to improve capacity or quality, etc.

Let’s revisit Jonas and look at his Business Simplified P&L.

Based on a still-rough idea about his niche, his own capabilities, and desired working schedule, Jonas estimates that he can do 1 job per week, or 4 per month (already determined in Step F). This has two assumptions in it: how many jobs he thinks he can obtain (through marketing) and how many jobs he can service (his operational capacity). Simply multiplication will give him a Gross Profit of $4,000 per month.



While he has no Direct Costs, he will certainly have some Indirect Costs that he calculated in Step E. His Projected Indirect Costs will be $1,000 per month. Using all these numbers in a Profit and Loss, his projected Net Profit Before Salary is $3,000.

Jonas’s Simplified P&L

Price

$1,000

# of Sales per month X 4

Gross Profit per month

$4,000

Less Indirect Costs per month

-$1,000

Net Profit Before Salary

$3,000

Less Salary If he takes only $2,000/ month, he will only have $1,000 left for business

Net Income (to be reinvested)

It is from the last number that he has figured out—the Net Profit Before Salary—that he can now consider how much he will take out to pay himself. Looking at $3,000, he realizes that there isn’t much left to pay himself a full-time salary—especially if he’s interested in reinvesting into his business. Maybe he pays himself a salary of $2,000, leaving him only $1,000 to reinvest into his business.



With these current business assumptions, Jonas will be working in a low-paying job that doesn’t have much long-term potential. Jonas shouldn’t stop there if these aren’t satisfactory numbers. He might change his assumption (to be discussed in the next section). Of course, if Jonas’s spouse had a high-paying job or Jonas came from money, this number might not be a problem.

Put yourself in Jonas’s shoes and look at the financial implications. Based on your living situation, is a $2,000 salary considered a goal? Most people will say definitively not. If you want earn more than this, you must raise your price or lower your work/life balance expectations (another way of saying do more jobs).

Now look at the time requirements. Jonas expects to do 1 job per week. Understanding the length of your jobs, is this realistic? Too much? Not enough?

You want to approach these questions sticking closely to this set of steps. Start by defining your business drivers. What do you know (i.e. “I know what my Price will be”) and what will you require (i.e. “I need $4,000 take home per month)? If you are very confident about the pricing, write this down. If you are financially committed to taking home a certain salary, write that down.

9. Massage Your Assumptions

We just looked at business questions like, “how long does it take to do the average job” and “about how many jobs per month can I do.” Most entrepreneurs stop at this point as they are taught to discount—even disregard— their own interests when looking at Feasibility.

The rationale behind this poor advice is that your business supposedly has to keep its eye on the bottom line, full stop. If you want to run a business, you can’t mix outside concerns (owner happiness, work-life balance, etc.) with the bottom line. But successful Solopreneurs design their business to balance business needs with personal needs.

If your business model (namely the time involved) seems as if it will threaten your vision of a balanced life, you can do one of two things: raise your price and do less volume, or simply do less jobs and set your financial expectations



lower. If you can’t rework the numbers, you can revisit the assumptions that you’ve laid out for your Niche or modify the Niche itself.

Before you rush out of Feasibility and into the business plan, I encourage you to look at these numbers in your final Profit and Loss you arrived at in the last section. You’ll start tweaking those 3 Business Drivers—effort involved (through volume), pricing, and take home income—to arrive at the ideal set of assumptions that you are comfortable completing Feasibility with.



IV. Before You Start Your Plan

“Every new beginning comes from another beginning’s end”

-Roman philosopher, mid-1st century AD



If you have been following along doing the work, and you completed everything, I commend you!

Let’s summarize what you have done.

You started the Personal Feasibility to identify your niche, skills, money, and passion, and maybe even used the Niche Scenarios worksheet to look at the best combinations.

Once you developed a combination that made sense, you went to Business Feasibility and started a process to fill out a relatively accurate Simplified Profit & Loss Projection which shows how much money your business would make, how much you would make, etc.

Once you are finished these, you have to be proud of yourself. And then start thinking about writing your business plan. If you have done the work with honesty, you are in great shape to begin planning of your business.

***

The following pages have all the worksheets that we used.



Identifying Your Niche

We will (do) _________________________ (your service)

to/for _______________________________ (for who) looking for___________________________ (their need)




Niche Scenarios Worksheet

Scenario 1:




Scenario 2:


Scenario 3:




My Competition’s Pricing Competitor Name Avg Price $

1

2

3

4

5

6

7

Average (and my Feasibility Price)

My Unit Profit Statement (for Solopreneurs)

Approximate price: $ Less Direct Costs - $ Unit Profit $



Unit Profit $

My Indirect Costs Tally Rent

Utilities

Internet/Phone

Mobile Phone

Insurance

Website maintenance

Marketing/advertising

Other

Total Indirect Costs

My Competition’s Volume # Competitor Name Volume Info Estimated

jobs/month

1

2

3

4

5

6

7

Average



My Business Drivers 1 Price

2 Volume

3 Salary

My Initial Profit and Loss

Price

# of Sales per month

Gross Profit per month

Less Indirect Costs/month

Net Profit Before Salary

Less Salary

Net Income (reinvestment)

Date post:	21-Jan-2018
Category:	Documents
Upload:	rob-place
View:	141 times
Download:	0 times

ebook-Feasibility-horizontal

Documents