Will my idea be profitable?

Guest post by Catherine Flannery

 

You’ve got the idea, you’ve prototyped your product or maybe you're already selling to the market, but have you remembered the basics? Do the numbers stack up? Are you going to cover your costs?

It’s not the exciting part of being part of a start up, no one wants to be the killjoy saying hang on a minute, have we looked at the numbers?! But whether you think you have the hottest new app, a must have product, or your opening a cafe, break even is key to the viability of your business and ultimately whether it will survive. 

The basics of Break even…PROFIT = ZERO

The Break Even Point (BEP) is the point at which your profit equals zero i.e. you are covering all your costs. To work this out you need to know your business well enough to be able to make some estimates,  easy if you’re already trading but otherwise requires some time and effort on your part.

We can use this formula for the Break even point:


FORMULA:

Break Even Point (BEP)

(BEP) = Total Fixed Costs / Contribution per Unit



Don’t worry about the jargon for now, we’ll work through it with an example but essentially it allows you to work out how many units i.e. products you have to sell to cover your costs. So let’s imagine we are opening that cafe. The key will be how many cups of coffee do we need to sell to break even.


Fixed Costs:

These are costs  that you do not change regardless of how many sale you make. So this might be thing like hosting fees for your website or your rent if you have a physical premises. High fixed costs can make for a very risky business, which is partly why so many big retailers saddled with high rental costs are going to administration at the minute. For our example of a coffee shop their monthly fixed costs might be include:


CALCULATION:

Rent = 1,000

All other bills (e.g. elec, gas, internet) = 500

Staff costs = 1,000

TOTAL Fixed Costs = 2,500



Contribution per Unit

So this is where it starts to sounds like proper accounting jargon but in basic terms this is just how much money does each product you sell give you towards covering your fixed costs. If we carry on with our coffee example, we are trying to find out how much money we make on each cup of coffee sold.

For that we know to know two things: how much we sell each cup for and what it costs us to make each cup (our variable costs). 

Sales Price: In the case of our cup of coffee, depending on location and quality there is likely to be a ‘market price’, so let’s say the coffee shop is in London and your expecting to sell your coffee for £2.50 a cup. Your own pricing will require careful research!

Variable costs: As the name suggests these are costs which vary with the amount of sales you make, so if you are send out a physical product it might include the postage and packaging costs i.e. only incurred when an item is sold. Or if you sell via an agent you only pay their commission when a sale is made. So what’s a variable cost in our coffee shop? 


CALCULATION:

Coffee Beans = 15p

Milk = 10p

Paper cup = 25p

Total Variable Cost per cup of coffee sold = 50p

Here our contribution per unit is:

Contribution = Sales Price - Variable costs

£2 =   2.50 - 50p

Each cup of coffee sold contributes £2 towards our fixed costs. And finally we can put these numbers into our BE formula.

Break Even Point (BEP) = Total Fixed Costs / Contribution per Unit

BEP = £2,500 / £2

BEP = £1,250 units (cups of coffee per month)


Translated this means in a month to cover our £2,500 of fixed costs (rent, bills, staff) we need to sell 1,250 cups of coffee. That’s approximately 42 cups a day.

 

What do you do with your Break Even Point?

The value in doing this is not just in getting to the number, it requires interpretation, is this 42 cups a day viable? You might have a coffee shop outside a mainline rail station and sell 42 cups to commuters before 7am. In another location this might not seem feasible and you might only sell between 40 and 45 cups a day in which case you might be dangerously close to the break even point. The closer you are to the BEP the riskier your business.

 

Taking your analysis further…

Once you’ve got your head around your basic break even you can also rework the calculation to factor in other costs, for example looking at how many cups of coffee you’d need to sell to give your business a certain level of profit, a salary for yourself or even how many extra cups of coffee you’d need to sell in order cover your childcare costs (this has certainly been a major factor for me when assessing the viability of my business)

If we quickly rework the calculation above, lets say you have childcare costs of £1,000 per month. All you need to do is add these onto your fixed costs to see how many coffee cups you now need to sell in order to break even and also cover your childcare costs too:


CALCULATION:

Required Output = (Total Fixed Costs + Childcare costs) / Contribution per Unit

Required Output = (£2,500 + £1,000) / 2

Required Output = 1,750 units (approx.58 coffee cups a day) 


The BE analysis is just a starting point and becomes more complex the more products you have or when you start to factor in things like semi-variable costs however, a basic break even is certainly a good place to start to make sure that you are on the right track to turn that  great idea into a sustainable profitable business.


Content developed by Catherine Flannery.

 

Photo by rawpixel.com on Unsplash

How to use influencers to launch your brand

Guest post by Joana Ferreira

 

You’ve spent months planning out your new business, and now it’s time to think about creating a marketing plan for your launch. For a small business start-up, marketing budgets are often tight and there is no room for big advertising campaigns. There is also no scope to work with a celebrity to endorse your product and convince the public to buy. So, without a big advertising campaign, without celebrity endorsements, and without much money to spend on digital ads, how can you still make a big impact and launch your new brand successfully?

 

Have you considered social media influencers?

Influencer marketing is a topic that's growing in popularity, mainly because it’s a successful way for marketers to spread a brand’s message without relying on more traditional advertising methods. In case you’re not aware, an influencer is an individual with a large enough following to have the power to influence and affect purchasing decisions or lifestyle habits.

In other words, they are individuals with a substantial enough following on social media that their opinion counts for something, and if they advocate for a particular brand their loyal followers are likely to respond by purchasing from the same brand.

Many brands have found that by partnering with influencers and allowing them to spread their brand message, they are able to tap into an already engaged and loyal following, making for some pretty impressive results. Influencers have been known to cause brands to completely sell out of stock, simply with one positive Instagram post.

 

Is your business right for influencer marketing?

There is a common misconception that because influencers live mostly on social media channels, that therefore influencer marketing is for those businesses targeting younger audiences, or particularly for B2C lifestyle brands. However, the stats tell a different story.

YouTube, where many influential vloggers make their mark, boasts over 1.57 billion monthly users, and adults in the 35+ and 55+ age category are the platform’s fastest growing demographic. Instagram, where influencers are most prominent, is increasingly adopted by an older demographic, with 33% of users aged between 30-49 and 18% between 50-64.

Similarly, as much as influencers may live on social media platforms, many have made their mark by blogging, and for every industry there is sure to be a large group of influential bloggers.

So, ‘is your business right for influencer marketing?’ the answer is a resounding yes! It’s just a case of figuring out which type of influencer is best suited to your brand and what you’re trying to achieve.

 

The cost of working with influencers

Influencers come in all shapes and sizes, and costs can vary dramatically. Micro influencers tend to have a small but loyal following, mid-tier influencers boast a larger but still loyal following, while top-tier influencers boast celebrity-like status across social media.

For example, when working with a micro influencer with 3,000 loyal followers, it could be as simple as offering free product in exchange for a positive and honest testimony. Whereas a top tier influencer with millions of followers may demand over £15k for a single Instagram post.

It’s a good idea for a small start up with a limited budget to create solid and positive relationships with many micro-influencers, rather than go for the top-tier influencers which will demand a large chunk of the budget. However, a good influencer campaign should be about more than just exchanging money for an Instagram post, it should be about building long term positive relationships with brand ambassadors who will spread your message to an already engaged and loyal audience.

 

Creating an Influencer Marketing Launch Plan

Like most things in marketing, there is no one-size-fits-all. Every business is different; therefore every plan should be tailored to that business. In another article, I wrote about how to create an Influencer Marketing Campaign with step-by-step guidelines and these steps can be applied to a launch plan too.

Start by identifying:

1.     Launch objectives

2.     Target audience

3.     Key message

4.     Budget

Once you have identified the above in detail, it should paint a pretty good picture on where to go next. Your next move is to identify which influencers you want to work with and make a connection with them. This could be as simple as sending them a message via Instagram, Twitter, email etc. Or it could be as detailed as using a piece of software like TapInfluence to find, vet and manage your influencer relationships.

Finally, once all the above is complete, make sure you work with your influencers and give them some creative freedom to express your message in their own words. Don’t dictate how and when they should tell their audience about your brand but give them the information they need and let them decide how to tell your story.

Better yet, if you’re launching a product, why not host an influencer event? Invite relevant local influencers to the launch of your product, tell them about your product face to face, get to know them in person, offer free samples and request that they post a positive message to their audience if they like your product. This will likely help create long-lasting bonds between your brand and the influencers, ensuring that they remain loyal to your brand and continue to spread your message.

If hosting your own event is beyond the scope of your budget, you can host virtual events (why not experiment with Periscope, Instagram Live video or Facebook Live to stream an event in real-time), or partner with an existing event.

Wherever your budget can take you, the options with influencer marketing are vast and there are no limits to how creative you can get. A good influencer marketing plan will get your brand in front of your target audience in a genuine way, where they’re likely to pay attention to the message and want to find out more. So, don’t hesitate, get started with your influencer launch plan today.


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Joana Veiga Ferreira is a Digital Marketing Consultant specialising in digital strategy, content marketing, social media and PR. She loves working with businesses on how they should be marketing themselves online.

 

Photo by Elsa Noblet on Unsplash

The top 50 tools you need to boost your business

I couldn’t have started my business without these tools, they’re like unicorn tears to a budding entrepreneur. 

 

Business Operations:

1. Trello – great for product development, tracking to-do lists and basic project management.

2. Asana – my go-to project management tool that sends reminders by tasks, alerts when tasks are missed and keeps me on track for each project.

3. Evernote – the easy way to keep all my business ideas and notes in one place that’s available at all times.

4. Canva – my favourite way to create graphics for e-courses, social media, newsletters etc.  Pay only for the images you use, not a subscription.

5. Pic Monkey – photo editing and design graphics.

6. Lastpass – the best way to keep all those millions of passwords.

7. Squarespace – my website that makes me look a tad more professional than I am!

8. Mailchimp – free business newsletter service up to 2,000 subscribers. Simple, free and effective.

9. Screencast O-Matic – free software I use to capture screens for e-courses and record videos.

10. Teachable – the platform I use to host my e-course, after trying 3 different providers this one rocks!

11. Zapier – manage all app integrations in one place.

12. PayPal for Business – payment gateway for business.

13. Stripe – similar to PayPal and integrated onto my website on Squarespace.

14. PDF Escape – free and easy to make all PDFs interactive.

15. Dropbox for Business – easy way to store and share files with teams and customers.

 

Social Media:

16. Instagram – need I say more?

17. Facebook – need I say more?

18. Pinterest – need I say more?

19. Twitter – need I say more?

20. LinkedIn – need I say more?

21. Medium – not really social media per se, but more of a content platform I use that gets your message out there.

22. Buffer - a perennial favorite for scheduling social media posts because it’s easy, cheap, and effective. 

23. Hootesuite – similar to Buffer but more robust in some ways.

24. Coschedule Headline Analyser – similar to above, but I only use the Headline Analyser to help create engaging blog post titles.

25. Bit.ly - at its most basic, Bitly is a link shortener. But it also offers statistics and data about how many people are clicking on your links and where they’re being shared. 

26. Ow.ly – similar to Bit.ly, but 1 digit shorter.

27. Continual – turn long videos into 15 second stories on your phone for Instagram.

28. Rev.com - transcribes audio or video to text. Great for turning FB lives or podcast into a blog post.

29. Trint - same as rev.com but cheaper.

 

Free images:

30. Unsplash – this is the photo sharing platform I use most often.

31. Death to the Stock Photo – similar to above.

 

Community management:

32. Meetup – platform to create, find like-minded groups that meet up regularly.

33. Mighty Networks -  a new(ish) platform for building communities.

34. Facebook Groups – doesn’t need an explanation.

35. Slack – messaging system and file sharing and community building platform.

 

Self-management:

36. Headspace – meditation app great for starters.

37. Calm – similar to above.

38. Pomodoro Keeper – time management technique to increase productivity.

39. Interval Timer – similar to Pomodoro.

40. Way of Life – break a bad habit.

 

Product Development:

41. Mindmeister – mind-mapping tool.

42. Sketch – easy-to-use prototyping tool.

43. InVision – interactive protyping tool.

44. Balsalmiq – rapid wireframing software that helps you design your interface fast.

45. Github – build and test code launches.

46. Trello – see above in Business Operations, great for planning out digital products (I use it for my e-courses during the ideation phase) and can be used for Agile product development.

47. Bubble – build software or an app with zero coding knowledge.

 

In addition to these great resources, we also offer:

48. FREE Startup Mini-Course - to get you from start to finish in 6 days.

49. Idea Generator Toolkit - to help you find your ideal business idea.

50. Idea to Impact Accelerator - to get you from a business idea to launching your business with your ideal customers in 6 weeks.

 

Photo by Javier Quesada on Unsplash