What Is B2B Marketing? What Are Business-To-Business Markets?
What are business-to-business markets and what is B2B marketing? To answer these questions it is useful to consider the value chain that starts with a consumer demand and from which dozens of business products or services are required. Take the example of the simple shirts that we buy. They do not arrive in the shops by accident. There is a value chain of enormous complexity that begins with cotton or some other fibre that must then be woven into cloth, which in turn is machined into a garment, packed and distributed through various levels until finally we pick it from the shelf. This is illustrated in the diagram below. We call this the chain of derived demand since everything to the left hand of the shirt is pulled through as a result of the demand for the product. Businesses sell cotton to merchants who sell it to spinners who sell it to weavers who sell it to garment makers and so on. None of the businesses buy the products for pure indulgence. They buy them with the ultimate aim of adding value in order that they can move the products down the chain until they finally reach us, the general public.
Minimum Viable Income
Minimum Viable Income
In this post, we will we talking about minimum viable income and everything that you should know to be able to afford to chase your dreams.
Starting your own business is for many people ultimate freedom. You get to set your own hours, all your work you do for you and your business and when you do things right there are unlimited opportunities. However, it is not all sunshine and butterflies. Contrary of traditional employment, entrepreneurship does not guarantee income.
Now, personally I am very enthusiastic about the online business model and I truly believe that you can create a full-time income with it. As much as we sometimes wish to dive in and focus on our passion, it is important to know what the numbers are that we are working towards. It would be disappointing if you would have to beg to get your old job back.
The good news is that often this number is a lot lower than you might think, to make it even better I have developed an easy to use tool that gives you some quick information about your numbers. So let’s get started!
Minimum Viable Income – An Introduction
The key to knowing your magical number that you need to make to keep your life afloat is called minimum viable income. Minimum viable income means the least amount of money your business or side project would need to make in order to support yourself and those that depend on you.
Now minimum viable income could greatly vary per person. A student that lives with its parents needs less income to maintain their lifestyle than a single parent with two children. That is understandable and perfectly okay, it is important that you objectively look at your personal situation.
A keyword here is minimum, which means the most basic form of lifestyle that you and those around you can afford to live. Now I would, for example, wish to be driving a Ferrari now while starting my business, but that would not really qualify as a minimum requirement.
Often our fears, fears we won’t be able to live, fears we won’t be able to support those around us or fears we simply won’t have enough to eat, are holding us back.
Money should not be an argument to not get started and if you actually put a number on your fears you will find that the number is much lower and easier to work with. Yes, you probably will have to cut some corners here and there, but that is a small price to pay (or not) to chase your dreams.
Calculating your Minimum Viable Income
In order to calculate your minimum viable income, there are a couple of steps that you should take. Below we will discuss all the required steps.
Determine Fixed Costs
Your fixed costs are all the expenditures that you have to pay each month, this is always a fixed amount. Examples include mortgage/rent, insurances, tuition fees, loan payments and bills such as electricity, cell phone, internet and cable.
Take some time and write down all your fixed monthly expenses, you can fill them in directly in the Excel file that I shared above. You can also use your own Excel sheet or you can even write it down on a piece of paper.
Determine Variable Costs
Variable costs are all the expenses that are not fixed but that you are required to pay for, your groceries are a good example. You can also approach your variable costs by setting budgets or maximum amounts that you can spend on certain categories.
Run the calculations
Now that you have written down all your numbers it is time to check the final calculations. If you used the sheet I prepared this will be done automatically, otherwise you might need to add some quick formulas. Your total expenses number is the number you will be working towards.
Check your number, is this more or less than you expected? How much money do you have left in your current situation and do you see any potential areas where you could save money? These are important questions to ask yourself now.
Tighten your belt, how far are you willing to go?
Changes are that the number that you have calculated is not the minimum number, more likely this is the number of your current lifestyle. In an ideal world, this number would suffice, you start your business, you make ends meet and that marks the start of a successful entrepreneurship story. However, changes are that in the real world things might go differently.
Minimum viable income is all about finding your absolute minimum, what is the lowest number you could work with. This is all a matter of how far you are willing to go, some entrepreneurs move back in with their parents, some stay with friends and some even live out their car. I am not saying that you should, but you should figure out what is in your situation, the absolute minimum you require.
Making ends meet is easier than you think!
Now say that you have calculated your numbers, you have objectively assessed your financials and determined that your absolute minimum totals to £2,000 per month. Next step is to determine how many of whatever it is you are selling you need to sell to make your number, it is easier than you think.
Say you sell eBooks and the profit you make per book is £15, that means you need to sell 134 books per month to make your number, which is approximately 4,5 book per day. That is not impossible if you have taken the time to organise your business in the right way.
Say you sell courses and the profit per course is £200, not taken into account the time you spend to create this course. To make your magical number you would have to sell 10 courses per month, again not impossible.
If you know your magical number, your absolute minimum viable income, you can start calculating how many sales or referrals (if you are into affiliate marketing) to make your number. Often it is much easier than you imagined. If you do not put a number on it, you do not know, after you set the number and the target, all you can do is make it work!
What if you are not making your number?
Entrepreneurship comes with many uncertainties and it is likely that it takes time before your business starts generating the money you envisioned. Below I will share some tips and tricks that you can implement if you are not yet making your minimum viable income and how you can be independent faster.
#1 Save up your runway
A popular term in entrepreneurship is runway, in other words, how long of a runway can you afford with your savings. Say your minimum viable income is £2000 and you have £ 10,000 in savings, that would mean that your runway is five months.
Saving up enough money before you start your entrepreneurial life is not a guarantee of success but it certainly helps you to focus on your business.
#2 Supportive spouse or partner
Does your spouse or partner has a steady income and does he/she support you in chasing your dreams, a supportive spouse can add that extra financial security that you might need to build a business. It is important to go into this with mutual understanding.
#3 A regular job
There is nothing wrong with having a regular job aside from starting your own business. Having a job would provide you with the financial security and puts less stress on making things work as soon as possible with your business.
#4 Part-time work
Working part-time frees up more time in your schedule and gives you financial security. If you do not want to work full-time because setting up your business is too time intensive, working part-time might be more suitable for you. Having a steady side stream of income takes off some of the pressure to make money as quickly as possible with your online business.
#5 Go freelance
Working freelance provides you with the opportunity to already work in the field of your business. Are you setting up an online design agency, it is great to start building a portfolio by doing freelance work. It helps you to create an additional income, polish and build on your skills while also building your personal business.
Managing your financials and knowing your minimum viable income is a vital step when it comes to building a successful business. Using this simple exercise you will gain the required insights of the numbers that you need to make to be able to live off your online business.
How did you start your business and how did you figure out your minimum viable income, let me know in the comments below! For now all the best and stay awesome!
How To Create An Operations Manual For Your Business
Having a written plan is important to any business, big or small. Putting the standards you set for yourself and your business on paper will not only help you create consistency for your business, it will help you to avoid a pitfall that many small business owners face; Being able to maintain the quality the business owner has set for the business as they grow and hire new employees.
Too many times a business with a rock solid level of service starts to slowly degrade as they grow and new employees are added to the mix. A written operations manual will help give you the discipline to stay on track as your business grows.
A Business Plan is Not an Operations Manual
Most likely when you were first starting your business, everyone was telling you that a written business plan is a must. You need to get your vision, your plan and financials on paper so you (and your bank) can see that you have thought things through and have a clear plan of how your business will make money.
Once your business is actually up and running, how many times do you think you will refer back to your business plan? If you are like most people, the answer is somewhere between rarely to never. A business plan is just that, a plan for your business. It’s an overview of what your business is about and how it will make money. It’s your vision of how you see your business now and in the future. While this is very important, you also need a written plan on how you will run your business, day in and day out. This is where a written operations manual becomes so important.
The Entrepreneurial Model has less to do with what’s done in a business and more to do with how it’s done. The commodity isn’t what’s important—the way it’s delivered is. – Michael Gerber, The E-Myth Revisited
What is an Operations Manual?
An operations manual is something different for every business. For some it may be a 1000 page, phone book sized manual, detailing every little detail of the business in a step by step guide. For others, it may simply be a series of checklists that are stored in a binder or as an online document. The only requirement is that you have some sort of written plan that you and your employees can reference when they need to know something. While many operation manuals will be chock full of details such as the company’s mission statement, values, organizational charts and sections for each key component of a business, you do not need all of that. At least not when you are just starting out. I think this is the misconception that many people face when it comes to writing an operational plan for their business, it does not have to be large and comprehensive, it just needs to be useful.
“Planning is an unnatural process; it is much more fun to do something. The nicest thing about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and depression” (Sir John Harvey-Jones)
Why Do You Need an Operations Manual?
There are lots of reasons for having a written operational plan for you business, the ones I feel are most important are:
Create a standard for your business. For the most part, customers would prefer consistency from a business over random and inconsistent acts of awesomeness when it comes to customer service. If the owner gives a customer one experience but your employees give that same customer (usually not as good) another experience, it will confuse and diminish the quality of the business in the eyes of that customer. A written plan will make sure everyone knows what expectations you have set for your business and employees.
Better trained employees. If you are like most small business owners, you probably walk new employees through every step personally, explaining what needs to be done and what you expect from them. Do you do the same exact thing for every employee that you hire? Probably not. What will happen if your manager needed to start training new hires? Would the training be the same? A written training plan will ensure that all new hires are given the same information to help create consistency among all of your employees. It will also allow you to delegate some training responsibilities to other employees without diminishing the impact of that training.
Easier to scale your business. To take a quote from Michael Gerber in The E-Myth Revisited, “How is it that McDonald’s can deliver on it’s customer promise in every one of it’s 20K plus restaurants, each and every day, when a small business owner can’t do it with a single location?” You can say alot of things about McDonald’s but the one thing you can’t say is that they are inconsistent. When operating multiple locations, or even franchising your concept, it’s impossible to deliver on your brand promise without a comprehensive operational plan in place.
Make your business more valuable. One day, for various reasons, you may need to sell your business. Telling a prospective buyer “This is the way I do it” and “This is what I tell my employees” is much less valuable in the eyes of a prospective buyer than “Here is the way we operate our business”. Nobody is going to want to buy the ideas in your head, they want something tangible, proof that your business is an actual business, not you running around telling everyone what to do. An operations manual will be proof that there is an actual business going on here, something that can run with or without the owner present. Now that is valuable.
“Reduce your plan to writing. The moment you complete this, you will have definitely given concrete form to the intangible desire” Napoleon Hill
What Should You Put In Your Operations Manual? The most important thing when writing an operations manual is for it to be useful, otherwise it won’t get used. Start with the information that you will need to reference the most and would like to keep handy. Whenever I help to create a written plan for one of my clients, I usually start with the following:
Once these sections are complete I like to concentrate on the daily operations of the business. I start here because this is (hopefully) the first part of the business that you can start delegating to others. Just like in the “how to guides” above, start creating “mini guides” of your daily operations. It may include ordering procedures, daily tasks that your manager must ensure is completed every day or anything else that is relevant to your business that needs to be done on a daily basis. If you only created the above sections for your business and stopped there, you should be proud of yourself because most small businesses will go their entire existence and never even get that far.
As you can probably see by now, a written operations manual is made up of a series of short sections that are strung together to create a bigger manual. It’s actually very easy to start creating one, just start with the sections outlined above and you will be on your way to having your own written plan for your business.
Start Creating Your Manual
I have outlined why and how to start creating your own operations manual for your business. As you can see it’s easy to get started, you just have to start. Making it relevant to your business and employees is the key. Your operations manual will never be complete, it will always need revising so don’t think of it as something you need to do all at once.
When you find things that work for your business, take the time to write them down and add them to your manual a little at a time. It should grow and change over time, just like your business. I usually take a few hours quarterly to update and revise my manual. If you have questions about getting started, you can contact me.