Starting a small business Part 2

Really, I can’t emphasize this enough – DON’T START A BUSINESS!  You’ll go broke, destroy your marriage, and hate your life.

If that doesn’t dissuade you, you’ll need to start making a list of customers.  Do this before starting a business.  Building on the first post, you need to know your customers before you can figure out if you can cover your costs.  In other words, the last post gave you a formula to figure out how many transactions you need in order to pay the rent.  Now that you know the number of transactions, you need to figure out the number of customers.

McDonald’s and other fast food franchises have figured out how many households are needed in an area in order to supply enough customers for a profitable restaurant.  I believe that Dunkin’ Donuts uses 10,000 households as its’ threshold for a new restaurant. Are they expecting 10,000 customers?  No, they have other formulas to determine how many of these households will be customers and whether they’ll spend enough to provide for a new restaurant.

You need to take a similar exercise.  Start building a list and include how much that list will generate in monthly and annual revenue.  Too much work?  Fine, go ahead and fail.  No one will care that you took out a second mortgage and cashed out your retirement plan.  Maybe your old boss will take you back.


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