How Effective is My Business Plan

Ralph4Ralph4 subscriber Posts: 3
edited December 2007 in Business Planning
I am a frustrated established business owner trying desperately to keep pace with a competitive market. I`m currently sustaining my business expenses with my personal credit cards, and I have been doing so for quite some time. I have successfully maxed out each of my personal credit cards. Because of this situation, I am trying to get a loan in an effort to pay off all my personal credit cards and then, hopefully, be able to establish a business line of credit.However, I find that most banks view me as a considerable risk because of my maxed out credit cards, and each attempt I make to acquire a loan is denied.I am not quite ready to give up on my business.  It is all I have.I believe that by paying off my personal credit card balances I will take the noose of the neck of my business.With a business line of credit, I will be able to allow my business an opportunity to stand on its own two feet. This is not how I planned to operate my business.  But, it is what is actually happening.Any suggestions?

Comments

  • johnqhjohnqh subscriber Posts: 4
    If you maxed out your credit cards, I am more worried about you are operating in negative profit margin. If that`s the case, the more business you do, the more you lose and you will never be profitable.
    So, first thing is that you need to figure out your profit margin. Then add up the fixed cost and figure out how much business you need to do to break even. Then study your target market to figure out whether it is even possible to reach the break even point.
    Regarding credit cards - try Costco. I obtained Amex line of credit through Costco for 10K (which I then never used). But please figure out your gross margin first to make sure you are not diggin yourself deeper in the hole.
  • Ralph4Ralph4 subscriber Posts: 3
    If you maxed out your credit cards, I am more worried about you are operating in negative profit margin. If that`s the case, the more business you do, the more you lose and you will never be profitable.
    So, first thing is that you need to figure out your profit margin. Then add up the fixed cost and figure out how much business you need to do to break even. Then study your target market to figure out whether it is even possible to reach the break even point.
    Regarding credit cards - try Costco. I obtained Amex line of credit through Costco for 10K (which I then never used). But please figure out your gross margin first to make sure you are not diggin yourself deeper in the hole.I fall more into the category you first described in your post.  I am operating in a negative profit margin, and, like you, I am worried about how long I can go on like this or if it is even possible to get out of this situation.That`s why I am researching aggressively to identify the best possible solution for my situation.
  • Ralph4Ralph4 subscriber Posts: 3
    Good stuff, John/.
    Ralph, I was in a similar situation after starting my business but I stopped paying for expensive dinners and lunches (local coffee shop is a great alternative), really held my clients accountable for expenses relative to their businesses and have since managed to almost pay off my debt and built a habit of working off cash.  There`s no information about your business on your profile, otherwise I would offer some marketing tips for you that are free or extremely affordable.  I alway say "network, network, network - business is about relationships". 
    Please let me know if I can help you further.
    JenniferHi Jennifer,I agree with you that John gave me some wonderful advice.  With regards to my limited business information, I am sought of new to this blogging forum thing, and I am not very sure I wanted to broadcast the name of my business, which happens to not be doing well, as far as I am concerned.But for a bit of clarity, I am into retails.I don`t often take out clients to dinner and that type of thing.Let me know what you have in mind.  I am open to all suggestions and comments.Thanks again for taking the time to reply to my post.Ralph
  • Ralph4Ralph4 subscriber Posts: 3
    You`re saying at the moment that "your business is all you have." If
    you continue on the road you`re going, you`ll not only lose the
    business, but have nothing left on a personal level.

    When you ask how effective is your business plan, I`ll agree with
    JohnQH that you don`t have a business plan. Ergo, it`s completely
    ineffective. So the best idea for the moment would be to sit down, and
    either with current knowledge or some help (maybe from SCORE), draft a
    completely new business plan.

    What is your product; who is your market; what solution does your
    product provide; and how can you increase your sales, thereby
    generating some new revenue.

    Believe me, I understand completely---as do I think many people
    here---the lure of hanging on and hanging on. But somewhere along the
    line, reality itself will demand that you walk away. Knowing that point
    is very hard, particularly when you`re deeply vested in having your own
    business.

    But a business is that---a business. And it means having revenues on a
    regular basis. If your credit cards were sporadically supporting some
    fairly well-spaced slow times, that`s one thing. But if your credit
    cards are subsidizing the business entirely, a business loan or line of
    credit only will dig you into a deeper hole, with bankruptcy the
    probable outcome.

    How about if you were to change your question: "How can I sell more of my product?"

    Thanks CraigL,Your post is not a far fetched concept.  However, I am just making sure that I implement every viable option before I simply walk away.What would be the essence of my livelihood at that point.What if I did change the question around and asked how can I sell more of my products?What would you suggest then?
  • johnqhjohnqh subscriber Posts: 4

    If you maxed out your credit cards, I am more worried about you are operating in negative profit margin. If that`s the case, the more business you do, the more you lose and you will never be profitable.
    So, first thing is that you need to figure out your profit margin. Then add up the fixed cost and figure out how much business you need to do to break even. Then study your target market to figure out whether it is even possible to reach the break even point.
    Regarding credit cards - try Costco. I obtained Amex line of credit through Costco for 10K (which I then never used). But please figure out your gross margin first to make sure you are not diggin yourself deeper in the hole.
    I fall more into the category you first described in your post.  I am operating in a negative profit margin, and, like you, I am worried about how long I can go on like this or if it is even possible to get out of this situation.That`s why I am researching aggressively to identify the best possible solution for my situation.
    I can start selling $20 bills for $14.99 tomorrow, and have my sales reach 1billion in a month. However, that doesn`t do me any good, does it?
    It is not a business if you are operating in negative margin. Take a hard look at your offering and your market. You have to figure out how to get to positive margin first before doing anything else.
    Giving up may be a good option in this case, if you cannot get it to the positive margin.
  • Ralph4Ralph4 subscriber Posts: 3
    I didn`t propose changing the question as a theoretical device. I`m
    suggesting that unless you sit down and figure out how to sell more
    product, reality is going to put you out of business pretty soon. This
    is YOUR business, not mine. I have no knowledge or experience as to
    your situation, only you have that.

    WHEN you figure out how to sell more product, you`ll increase your
    revenues and pay off your debt load. What you do after that is up to
    you. I tend to suggest, because it`s not my place to "order" you to
    change the question.




    Hi

    I didn`t take your suggestion as an order, in any way.  In fact, I have found the suggestions on this
    thread both realistic and knowledgeable.

    However, I won`t hide from the fact that I am just not ready to give up on my
    business, not just yet anyway.

    I have turned the question around.  It
    led to me wondering how exactly I would assess my local retail market since I
    am already operating in the red.

    That specific bit of information would be helpful.

    I don`t want to introduce more products that won`t sell, obviously; but, how
    can I determine what new product or products can be introduced, in the most
    economical way, that would cause my profit margin to increase?

  • Ralph4Ralph4 subscriber Posts: 3

    If you maxed out your credit cards, I am more worried about you are operating in negative profit margin. If that`s the case, the more business you do, the more you lose and you will never be profitable.
    So, first thing is that you need to figure out your profit margin. Then add up the fixed cost and figure out how much business you need to do to break even. Then study your target market to figure out whether it is even possible to reach the break even point.
    Regarding credit cards - try Costco. I obtained Amex line of credit through Costco for 10K (which I then never used). But please figure out your gross margin first to make sure you are not diggin yourself deeper in the hole.
    I fall more into the category you first described in your post.  I am operating in a negative profit margin, and, like you, I am worried about how long I can go on like this or if it is even possible to get out of this situation.That`s why I am researching aggressively to identify the best possible solution for my situation.
    I can start selling $20 bills for $14.99 tomorrow, and have my sales reach 1billion in a month. However, that doesn`t do me any good, does it?
    It is not a business if you are operating in negative margin. Take a hard look at your offering and your market. You have to figure out how to get to positive margin first before doing anything else.
    Giving up may be a good option in this case, if you cannot get it to the positive margin.Thank you for your suggestion.I have heard it so much in this thread of discussion that I am beginning to be convinced that it is the only option that makes sense.I am still hoping that someone will provide me with a saving grace or a resource that caters to individuals in this desperate financial situation that I have created for myself.
  • Ralph4Ralph4 subscriber Posts: 3
    I received a post from Infopreneur suggesting that I build a
    team and not go at it alone.

    While your suggestion`s logic is obvious, I perceive that any attempt to build
    a team with require additional financial resources.

    So basically, I would need to find the resources to acquire a team to help me
    resolve my financial crisis and increase my profit margin.

    It sounds almost impossible; however, when I look at the level of loss, I am
    certain I don`t have the financial capacity to build a team.

    However, I may not have all the current information available out there.

    If anyone knows of resources described by Infopreneur, please feel free to
    suggest them.

  • johnqhjohnqh subscriber Posts: 4
    If you are operating in negative margin, having a team will only pull you in deeper. What`s the point of having a team to "increase your sales", thus increase your loss?
    A team will only make sense if your margin improves with scale. That is common in manufacturing - your unit cost decreases a lot when you make large quantities.
    We still don`t know exactly what your business is. However, just think about my example of "selling $20 bills for $14.95". If I do that by myself, I can have 100 sales per day and lose $500. If I have a team, I can have 1000 sales per day and lose $5000. In that case, having  a team doesn`t help, does it?
  • robertjrobertj Tampa Bay, Floridasubscriber Posts: 0 Member
    Ralph,
    There are 3 possible reasons for your current situation:
    1 Negative gross margin (aka gross profit)on sales. This is the situation John describes with the $20 dollar bill. Your Cost of Goods Sold exceeds the net sell price.
    2. Expenses too high
    3. Sales too low (this applies only if you have a positive and adequate gross margin.
    If you have a negative gross margin on your sales, you need to either reduce the cost of goods sold (COGS) or increase the sales price.
    As to your team, I would look to SCORE as a place to get some help. Once you have a "plan" for making the future different from the past - you have a chance to convince some lending source to support you.
     
  • Ralph4Ralph4 subscriber Posts: 3

    Ralph,There are 3 possible reasons for your current situation:1 Negative gross margin (aka gross profit)on sales. This is the situation John describes with the $20 dollar bill. Your Cost of Goods Sold exceeds the net sell price. 2. Expenses too high3. Sales too low (this applies only if you have a positive and adequate gross margin. If you have a negative gross margin on your sales, you need to either reduce the cost of goods sold (COGS) or increase the sales price.As to your team, I would look to SCORE as a place to get some help. Once you have a "plan" for making the future different from the past - you have a chance to convince some lending source to support you. 

    You are indeed correct about one thing in your post, with regards to my situation, my sales were too low.  This resulted in me reverting to sustaining my business overheads with credit cards. 
    Out of desperation, I have been on a mad hunt for an outlet, some viable solution to me situation.  I just needed to find the it. 
    Anyway, most of the times, as Robertj brought to my attention, many of the thread participants do not post back with an update on their situation. Hence, I am making a point to check all the thread I can remember to update them.
    I saw a post referring to www.thesnaploan.com.
    It sounded like an option so I gave it a try.  Actually, I`m waiting for my approval.
    However, I just followed the instruction on the homepage.  They are very specific about what they need from you and how they need you to do.  You are told exactly where to go to find all the required paperwork, if applicable.
    I am really hoping things pan out.  I intend to keep you posted.
  • robertjrobertj Tampa Bay, Floridasubscriber Posts: 0 Member
    Ralph4,
    If as you said previously, your main issue is low sales level - then the major focus of any new capital should be on improving sales (revenue).
    Good luck with the loan application.
    Robert j
  • mallocmalloc subscriber Posts: 7
    Ralph4,

     

    You mentioned being in retail. Is this a virtual business or a brick-n-mortar store?

     

    One question I have not seen in this thread is “Do you have a web-presence?” (If indeed someone asked and I missed it then I apologize)

     

    If not, why not? A web-site is something that you can set up very cheaply and with a little planning can give you a wide, international presence.

     

    If you do, what is your search engine ranking?
     
    Regards,
     
    David
  • Ralph4Ralph4 subscriber Posts: 3

    Ralph4, You mentioned being in retail. Is this a virtual business or a brick-n-mortar store? One question I have not seen in this thread is “Do you have a web-presence?” (If indeed someone asked and I missed it then I apologize) If not, why not? A web-site is something that you can set up very cheaply and with a little planning can give you a wide, international presence. If you do, what is your search engine ranking? Regards, David

    Brick and Mortar...no web presence yet.
    It is certainly in our future plans.  However, I am waiting for my business to show consistent stabilization in its numbers before I make any more moves right now.
    I am far more safe now than in the past.
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