| One of the most difficult tasks a new
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| | you project to open each month. Allow for
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| prospective entrepreneur faces is the
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| | seasonal variations. Is the widget a
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| construction of a Sales Model. Many books
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| | summer item, a Holiday item? This will
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| devoted to instruction for writing a
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| | determine peak shipping months.The next
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| business plan devote little or no
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| | assumption is sell-in levels. How many
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| attention to this vital exercise. The
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| | units of the widget will a store
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| knowledge needed to assemble a
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| | typically carry in inventory? Competition
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| quantified, qualified and clearly
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| | averages 18 units per store. Is the
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| narrated Sales Model is essential to
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| | widget going to be promoted, placed on
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| convey the scope and validity of an
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| | end cap display, given a floor stand or
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| opportunity.The most elemental data point
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| | presented in a featured way? These are
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| required to commence assembling a strong
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| | questions that must be qualified,
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| sales proposition is the Cost of Goods
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| | quantified and narrated to justify the
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| (COG). Knowing with absolute certainty
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| | sell-in assumption.If the sell-in
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| the all-inclusive COG is the foundation
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| | assumption is 18 units per store, then
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| number necessary to build the Sales Model
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| | our next task is creating a retail sales
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| and ultimately a strong business plan.
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| | turnover. Again, if it is verifiable that
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| Guessing, estimating or hoping that the
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| | the competitive leader turns goods an
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| number you slot into your plan is
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| | average of eight times per year, we will
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| accurate will lead to a solid dead end,
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| | be conservative. An inventory turn of six
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| and very quickly.The Sales Model, just
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| | times during year one, seven times during
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| like the completed business plan, is
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| | year two and eight times in year three is
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| written based on a series of assumptions.
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| | easily defensible. This will, of course,
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| These assumptions are then qualified
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| | be average out as stores come on line
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| (given historical and current market
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| | during monthly new door openings.As we
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| perspective), quantified (COG and sales
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| | are not completing a proper spreadsheet
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| goals are utilized to extrapolate a
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| | here, reflecting 12 month flows in our
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| believable sales universe is available
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| | example, let us assume that year one
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| for the product) and narrated
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| | sales are for stores that have been
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| (explanation is provided to support the
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| | carrying the product for a full 12
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| basis on which the assumptions were
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| | months. Here is where our Sales Model
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| based). The Sales Model is but one
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| | construction for year one has brought
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| section of a business plan: however, it
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| | us.Doors Opened 2700 (2%
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| is the heart and soul of the following
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| | of 135,000)Sell-in per Door
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| financial section so crucial to
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| | 18 unitsWholesale Price
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| investors.I see so many business plans
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| | 4.00Inventory Turnover
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| that scream "this is guesswork"! First
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| | 6 TurnsSales Year 1 =
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| year sales are projected at a nice, clean
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| | $1,166,400Perform the same calculations
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| round number (so often $1,000,000).
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| | on the assumptions we have created for
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| Growth ramps up too quickly, and to
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| | years two and three and the results are
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| unbelievable numbers. The justifications
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| | $3,061,800 and $6,220,800
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| for these assumptions are based on
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| | respectively.The Sales Model we have
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| mirrors and hope.Let us make a few
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| | created for our mythological widget is
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| assumptions here to show a basic example
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| | built on assumptions that we have vetted,
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| of a method to build a believable Sales
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| | checked against historical norms and
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| Model. We will assume that research has
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| | properly support our theorem with logic
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| proven that our COG (remember, including
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| | and a conservative, believable rationale.
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| packaging, shipper, master shipper and
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| | The numbers work together and tell a
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| freight, customs and duties, if any) is
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| | story of strong sales traction with a lot
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| $1.00 per unit for our widget.Our next
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| | of distribution to be gained (after year
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| assumption to decide is the wholesale
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| | three we have 92% of the market still not
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| selling price: if the item is to be sold
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| | serviced).We now have the top line sales
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| through traditional retail sales
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| | number under which we can project a
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| distribution channels. The nearest
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| | financial picture that will excite
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| competition we can find on the market is
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| | potential investors, licensees and
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| selling in mass-market distribution
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| | partners. They will know that we are
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| stores (Wal Mart, K-Mart, etc.) for an
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| | serious, professional and knowledgeable.
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| average of $6.49. Assuming a 37.5%
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| | This presentation of a comprehensive plan
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| markup, the competitive item is being
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| | supported by reality based assumptions is
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| sold at wholesale for $4.06 (round to
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| | lacking in so many business plans I
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| $4.00). Assuming that our item has
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| | read.By definition, a business plan is
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| features and benefits that would be
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| | based on assumptions, and lots of things
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| perceived as similar to the competition
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| | happen to distort assumptions. Murphy
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| $4.00 is an acceptable wholesale. A 25%
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| | named a law after himself for a reason.
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| COG is well within industry parameters
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| | Stuff happens! Nevertheless, business
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| (based on historical norms).We now have
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| | plans that achieve successful results are
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| our COG, a wholesale sales price and a
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| | built on assumptions that mitigate the
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| pretty good picture of the retail price
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| | potential for ugly surprises. A business
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| that will enable the item to be
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| | plan without a well-constructed Sales
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| competitive and still offer excellent
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| | Model has no chance of overcoming the
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| profit potential. The easy part is over.
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| | natural cynicism inherent in investors
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| Here is where things get tricky.Our item
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| | and decision-makers.Geoff Ficke has been
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| will be sold in the hardware section of
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| | a serial entrepreneur for almost 50
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| stores. After studying industry specific
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| | years. As a small boy, earning his
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| data and researching the hardware product
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| | spending money doing odd jobs in the
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| category we determine that we will have
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| | neighborhood, he learned the value of
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| over 135,000 potential store placements
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| | selling himself, offering service and
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| if 100% of the American market could be
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| | value for money.After putting himself
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| penetrated. This is hard data. Now we
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| | through the University of Kentucky (B.A.
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| must leave science and become artful.How
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| | Broadcast Journalism, 1969) and serving
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| many of these 135,000 hardware outlets
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| | in the United States Marine Corp, Mr.
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| can we believably project to carry our
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| | Ficke commenced a career in the cosmetic
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| widget in year one of operations, year
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| | industry. After rising to National Sales
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| two, year three, etc? Making every effort
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| | Manager for Vidal Sassoon Hair Care at
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| to build our plan on solid assumptions,
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| | age 28, he then launched a number of
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| we are going to be conservative. During
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| | ventures, including Rubigo Cosmetics,
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| the first year after operations commence,
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| | Parfums Pierre Wulff Paris, Le Bain
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| we will open 2% of our potential
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| | Couture and Fashion Fragrance.Mr. Ficke
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| universe. Year two will see the widget's
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| | and his consulting firm, Duquesa
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| distribution add another 2.5% of the
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| | Marketing, Inc. ( has assisted businesses
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| hardware outlets and year three we will
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| | large and small, domestic and
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| gain another 3.5%. After three years we
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| | international, entrepreneurs, inventors
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| will conservatively projected 8% of the
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| | and students in new product development,
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| potential distribution points for a
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| | capital formation, licensing, marketing,
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| hardware widget.Another point to consider
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| | sales and business plans and successful
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| when building out a distribution model,
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| | implementation of his customized
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| not all of the stores will be shipped at
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| | strategies. He is a Senior Fellow at the
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| one point in any yearly cycle. It is
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| | Page Center for Entrepreneurial Studies,
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| important to have a line at the very top
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| | Business School, Miami University,
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| of the cash flow section in the
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| | Oxford, Ohio.
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| Financials that details how many stores
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