THE KISS PRINCIPLE IN MICROBUSINESS

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CHAPTER 14

TESTING... TESTING!
MY GOALS

In the preceding chapters, I have defined my goals and realistically established them to be both attainable and measurable. Measuring is easier when the units used can be counted. In this instance, I use dollars.

Since the time I have started to plan my business and express my goals, I have gained much knowledge about the real market, the real costs of starting a business and the potential sales I can expect from my customers. I have summarized this information in several worksheets and financial schedules in the Marketing and Finance chapters, but this information helped me convince my banker and others that my project made sense. I now am at the stage of testing these figures against my goals. This test will tell me if I can reach my goals and, if not, whether I can modify my forecasts to reach them.

Using the financial forecast, drawn up earlier, I will take only the annual totals and draw up a profit and loss statement. This statement will not bother about collections or payment schedules, but it will totalize my expected sales and expenses to end up showing my profit or (loss) from my first year of operations. This apparent duplication of effort hides three main purposes:

a)  Will my profit or (loss) permit me to provide for my personal needs?

b)  Will I be able to pay back some of the money I borrowed?

c)  Am I reaching my business goals?

The first thing I must do is to draw up my statement, using information already written down in the sales forecast. The only exception is that I will not include my personal needs in the expenses to show a profit or (loss) before these needs.

Note: As a rule, I must never change expenses, as they have the nasty habit of turning out to be more than expected. I will not modify them to remain conservative. This way, I will avoid unhappy surprises.

If the answer to a), b) and c) is yes, then I am in good shape and can proceed with confidence to the next step.

If the answer is no to either one or all three, I must seriously reconsider my goals.

In the light of the knowledge I have now, were my goals realistic? Only I can answer this question.

Here are some suggestions to modify the results of my forecast:

- I can increase the sales forecast, but I must do this only if I am sure I can meet the new target.

- I must never modify expenses, as explained earlier.

- I can postpone my goals by one year or more.

- I can renegotiate my loans to spread reimbursement on a longer period of time.

- I can examine my needs and reduce them, if possible.

- I can rent more equipment or machinery with service contracts, this may prove to be cheaper than owning.

- I can look for cheaper premises. For this I might have to compromise on the location of my business. Or I can start my business at home, if feasible, it will be cheaper.

- I can hire employees part-time, instead of full-time.

If the last three suggestions seem to contradict the axiom of never modifying expenses, I must remember that I am in the planning stage of my business and, at this stage, I can still change certain things. Once I start, I will not have this flexibility any more. This is the whole purpose of this exercise, to make me aware of possible mistakes and give me the chance to correct them before I start, not after, when it will be too late.

The preceding exercise is strictly for my own benefit. With the information I will get and the modifications I will make, I can only increase my chances of success. I must remember that this is still a dry run, I will know more about the accuracy of my forecasts, when I have been running my business for a few months. I will have to monitor my progress very closely, to make changes, if and when necessary, in order to remain on track. I am almost there, only a few steps remain, before I can start my business. I will concern myself with the inside organization of my type of business, which permits are required and what regulations govern my operations, what type of insurance will protect me and my assets, how will I go about announcing to my customers that my business is there to serve them and what types of accounting books will I need to control my progress.

WORKSHEET