QUICK-LAUNCH BUSINESS PLAN AUDIO TRANSCRIPTION SEGMENT 1E *** We're ready to start talking about business feasibility. Now, obviously we've done some business feasibility already. Now it's time to do it a little bit deeper and to start thinking about how we're going to write it up. Sometimes business feasibility is the first thing that you do. But it's not always necessarily the first thing that you write. There is no rule on that. As you're starting to figure out all these other sections, you can move these around on the page. In your business plan you've made your case for the business. You've talked about your customers. You've talked about the competition. How is it now that you can justify what you've written? We're going to describe the techniques that we use to determine feasibility. One of the best ways to do this is to go out and sell some. With Anna's we went out to flea markets and on e-Bay. We sold 100 different pieces of jewelry. We got and idea of what people like and what they didn't like. This was really important, so we don't end up buying those anymore. We've also gone to zoomerang.com, which is a free service. You can do surveys of customers that are pretty easy to set up. You can send those out to various e-mails that you have of various potential customers. You can do polling of a variety of different kinds. Most of us have walked through a mall in a city and had somebody approach us with a clipboard. A lot of times they are asking about store placement or product placement in that mall. They identify that they are doing a feasibility study by asking your opinion. Sometimes people call at night. We do that a lot when we're on the road and we meet somebody during the day who has a business idea. We'll go back to our hotel room at night and write up a three-minute survey. The survey will have two or three questions about the business. We'll call maybe 20 numbers and end up talking to about 10 people. Basically we say, "Hi, I'm here working on a business idea. I would like to bounce a couple of ideas off of you. I'm not selling anything. I promise this won't take more than three minutes." Generally about 50% of the people will talk to you. About 50% will spend ten minutes on the phone with you. They'll engage you in a conversation. A lot of times you find out really interesting things about the community that you didn't know. You'll find other locations that you didn't know about. You'll find some real warnings out there about "Well, did you know that there's already somebody doing that or somebody has tried that four or five times?" It doesn't necessarily mean you shouldn't try it again. Maybe they did it wrong. Maybe they weren't selling the right thing at the right time. But it gives you some more turf to investigate. You can always do market analysis. There's lots of stuff on the Internet. Sometimes that works and sometimes it doesn't. A lot of times it's superfluous information you get. Let's say someone wants to start a hotel for dogs, boy, that might be a great idea. Typically when we get an idea like that presented to us, there will be a statistic in the feasibility study that says something like there are 8 billion dogs in the world. That's really an interesting fact, but it doesn't mean anything to the business. It doesn't mean that there are 8 billion dog owners who are ready to buy your service. Let's kick it down to the buyer level. Let's get right down into the neighborhood where you're going to do it and try to figure out if people are really interested in this idea. We're not spending hours and hours on this. Sometimes it can be a weekend of canvassing a neighborhood, putting flyers in mail boxes asking people to call you. We did this with a landscaping business not too long ago where we put out 2,000 flyers on a Saturday. By Monday morning we were receiving phone calls about people who wanted the landscaping service. We had enough customers signed up that we knew we could do the business. That's a paragraph in the business plan that basically said, "Here is where we went. Here is what we asked people." We attached a copy of the survey. We said, "In one Saturday, we got 15 customers all paying an average of $15 a week to get their lawn mowed." That's pretty simple and we can run that out. We can talk about how many more customers we can add and reasonably do in a summer. That generates our income statement and projection for the year. That tells us a whole lot about whether the business is doable, and whether or not it we should be funded, and how much money the person is going to make. Pretty simple strategies sometimes. Other times we have used web-based information. It's never a bad thing to look at other businesses on the web or to get some statistics. At one point, we were looking at an egg producer who wanted to raise chickens. We found this whole other niche that we didn't know about which were organic brown eggs. That led to a different business than what we had originally started with. Market analysis is really important. We understood what we should feed the chickens, where we should buy the chickens, how long the chickens would live, how many eggs they could produce in a week. All of those things were very important for us who don't work with chickens every day. What materials, resources and support are going to be needed to further test the idea? We may want preliminary funding for further testing. We may need to negotiate with the community rehab program to buy $200 worth of software to test whether this person should run a business tutoring children on Reading Rabbit and Math Rabbit. Those are the kinds of important little pieces that we might need to invest in up front. We want to craft a clear statement on potential success. Not pie in the sky that we're going to be Donald Trump millionaires - although that might happen! We want to say based on our best information to date knowing this is a guess. I realize that many of us get tenuous about committing to the future sometimes. We can say that, reasonably we think that Anna will sell X number of earrings, bracelets and necklaces in the average month based on sales so far. You can't predict the future but you can try. Describe the techniques that you use to determine feasibility. You're telling and writing the story to say, "We tested this and it really seems to work" or "We need to tweak it over here". But you're also trying to sell this business idea to a funder. Maybe we sold samples. Maybe we did X number of surveys. Maybe we called X number of people. We did this kind of market analysis. We went to the local small business development center. We asked them what they thought. Those opinions are really important. What do you think if we were to open a car wash here? Do you think there's a need for a car wash? Well, if the person at the small business development center says, "Well, you know what? Yeah, this is a growing community and we don't have a car wash. We have 3,000 people driving cars here," that might be a really great market to have. Again, those local resources like the small business development center, a lot of times they know what's been tried and what's succeeded and what's failed. They come with a lot of information and a lot of history about small businesses. They do it every day. So bounce ideas off of people and have someone who is respected in the field of small business development say, "Yes, this is a good idea. We've thought for a long time that somebody should start a car wash here. That's really impressive." Now, you need some data to go along with that. It can't just be somebody's hunch. But that's really important. Spend a couple of days testing that business. Figure it out. It may take you a couple of weeks to do this. But at this point, we would hope that you've already tested some business ideas. Try writing it down. How was it that you did it? What were the results? Why is it that you think you should move forward on funding this business? And then we'll do the next section. ***