The Small Business Doer

Semi-Annual Business Plan Update

While the monthly updates are good, you don’t get the chance to see the bigger picture as you’re looking at only one month at a time. I find it very beneficial to check out my numbers and business progress half way through the year. Taking the half-way-through-the-year look helps me to figure out why things happened the way they did and help me to figure out what to expect and aim for in the future.

The Bottom Line

Profit & Loss Budget vs. Actual - January to June 2011

I think the biggest takeaway in this budget is that while my Total Income (Sales) is 92% of the budget, the Net Income (when expenses are deducted) is 77% of the budget.

Total Income (Sales) was $3,723.05 lower than expected, COGS were $885.77 higher than expected and expenses $2,020.3 higher than expected.

Breaking down the sales, Video Production Income was better than expected, however business services income was about half of what I expected it to be. Those two facts alone are the reason why total sales were lower than expected.

Equipment Expense was higher by almost $2,000 in comparison to the budget, accounting for the $2,000 that the expenses went over budget. $1,400 of the Equipment Expense can be explained by the purchase of a new camera that I had to make when my main camera broke and I needed a replacement. Luckily, my main camera was under warranty. The downside was that it would need to be in the shop for 3-4 weeks, forcing that second camera purchase. Now I have a backup camera, so not a major issue.

I was a bit sad to see my Net Income numbers so low in comparison to my estimates. I also did a quick calculation to times that Net Income number by 2 (to give me a view of how I would do if I did the same in sales as I did in the first 6 months) and saw that Net Income would be virtually the same as 2010.

What I thankfully failed to see right away was that a huge amount of expenses, $9,600 to be exact, were expenses that only showed up in the first 6 months of the budget. That means that my second half, if the same as the first, would contain $9,600 more in profit. This is because I had budgeted $7,500 for Equipment Expense and $2,100 in Advertising and Promotions in the first half of 2011.

Still I’m $7,000 lower in profit than budgeted, which is a position I’d rather not be in.

Some other interesting items that popped out at me were:

• Input Supplies and Travel Expense: $420 and $482 more than budget. These are both variable costs associated directly with video production sales. There was little I could do to control these items.
• Interest Expense: I chalk this up to either a lack of financial management or a failure for me to see that some equipment purchases would need to be temporarily financed. Whatever the case, that’s $402 that was not in the budget but could have been controlled or should have been seen.
• Advertising and Promotion: $414 less than budgeted. I haven’t found places to spend that extra money on. It was in the budget, but I can’t see any use of this budget at the moment that will increase what I can bring in at the moment.
• Equipment Rental: If I underestimated subcontracted services, I overestimated equipment rental expense. Perhaps some of my equipment acquisitions helped counter-balance this.

All in all, you can see how a few numbers off by some percentage points can make a big difference to the bottom line. If only a few more sales and a little less expense, then voila, I would have been on budget.

Budget for the next 6 months

Purely looking at the budget, I have a feeling that my sales won’t hit what I’ve projected for the second half of 2011. I’ll be away for the equivalent of 3 weeks during the summer (Yay trip to Japan!) and my really good months in the spring felt more like exceptions than what is normal. My expenses I think I can keep fairly close to projections.

I think my business services income will be roughly similar to the first half of 2011, which would amount to half the projected amount. Video sales on the other hand will probably end up lower as well, due to my shift of focus. Shift of focus?

Shift of Focus?

If one looked at my updates for the past six months, you’ll see that I started off the New Year with a renewed vigor in growing the business and moving away from hourly work to work that can be produced once and continue to bring revenues in day-after-day.

One would also see that after about two months, once business picked up, my growth strategy switched from growth to survival. Survive the day-to-day of producing the contracts. Growing the business ground to a halt.

The good news, is that during the first two months where I was working on growth, I was able to get a glimpse of how my growth strategy worked. While what I was able to do wasn’t huge, the path and method was clear. If I produced information products (tutorials, reviews, small business help), this would bring in traffic to the web site. Traffic in the small business teaching niche, when high enough, can translate into cash.

So, here I am, about to leave to Japan for a couple weeks. When I come back I want to really go for that growth plan. While it was a fantastic feeling to be kept busy with paid work over the spring, I really felt that I was at my limit for what I could do.

I know that if I were able to completely switch from sub-contract work to all my own self-booked work that I’d be able to squeeze out some net income gains of maybe 25% over what I could normally do when producing sub-contracted work. After that, I’d be close to maxing out my Net Income, as I would have only so many hours a day. As I got better at my craft, I may be able to charge out 5 – 15% more per year and grow that way.

Another way to grow would be to start to hire staff (big risk in my eyes) and switch from doing the work myself to getting others to do the work. This would take a year or two of investment. The Net Income gains while trying to grow would be small at best, and there would be no guarantee that I would succeed.

The other option, information products, is in my eyes as likely as to succeed as trying to increase sales from my video production side of things. The difference? If information products takes off, there would be less limits to growth (meaning it would be easier to grow without adding extra resources or risk). This type of business would also mean that I wouldn’t be likely to face significant revenue drops if I didn’t produce new content for a period of time, as my existing content would continue to bring in revenues.

You might be wondering what will happen if this shift to information products doesn’t fly? Well, I’m going to put in some extra time on this and work harder over the next few months. I’m also going take on less paid work. So, I lose out on some cash for the time being. Maybe $5,000 or so. If I don’t see good progress by the end of the year, I push back towards the video production route. Since my information products are going to be closely related to video – video tutorials – I don’t see it as a large departure.

It won’t be until September that I can get started on this shift of focus, so I’ll have four months to see what I can do…

Working From Home

I work from home. I hate commuting, so it works out quite well for me.

The biggest downside when working from home is focus. It’s not that I can’t be focused while at home, it’s more that when you’re working from home people don’t always think you’re at work, namely family. For example, you wouldn’t be asked to watch the kids for an hour if you were at an office. That’s also the benefit, in that you can be more there for your family when need be.

I have two kids, one that is five and one that is almost three. They love to visit daddy about every hour or so. Unfortunately, daddy’s mind isn’t so sharp that it can keep on working at the same pace right after a visit by the kids. It takes me about 15 minutes to get back in the flow. I assume this may not be so different than co-workers stopping by the cubicle.

In any case, the kids are off to Kindergarten and daycare come September, so we’ll see how that affects productivity. I’m thinking that this change will give me some extra time to work on those deep-thinking projects.

Distractions

I, like many others, can be easily distracted. New email! Got to check. Cool article, sure, take a 5 minute break to give it a read – and then another 20 minutes after that for all the other articles the first article links to. Phone call, got to answer. The list goes on.

I’ve tried some things such as the pomodoro technique and Getting Things Done. Pomodoro gets you to focus on things 25 minutes at a time Getting Things Done is a way to organize all your incoming to-dos into their correct places so that you can focus on only the thing you need to do at that moment in time.

Those methods have helped. One simple step for my email was to unsubscribe from a large amount of newsletters, lists, and other places that would email me once-a-day or once-a-week with information that would simply distract my attention when they popped in my email inbox.

Probably more important was the realization that even when I thought I had sorted my to-do’s in proper fashion and was working quite productively, I never had enough time to do everything. This signaled to me that I was simply trying to do too much.

When you’re packing a moving truck, organization will only do so good for so long. There comes a point where no amount of box shuffling will fit any more boxes in that truck. You simply have to leave some things behind or get another truck. To me, another truck is another employee, which is not somewhere I want to go. So, I have to leave behind the things that aren’t as important and keep only the essentials.

That’s why the shift in focus. That’s also why I’m ceasing to do more web or small business consulting beyond my existing clients. My best bet is to help out small businesses by providing self-help tutorials so that they can help themselves.

Self-booked Work

The big difference between my revenues this year and last year is self-booked work. In 2010, most of my work came from being sub-contracted to do work for other companies. This 2011, I’m doing about the same amount of sub-contracted work, but this extra revenue (and most profitable), has been work that I’ve booked myself. As my business continues to roll-on, the trend to self-booked work will continue.

That gets me to think if I’d be further along if I would have put more time one year ago in building a stronger video portfolio. The more solid work I have to show, the more work I feel I’m able to book. It’s impossible to go back in time and try again. Now, one year out, I have a more solid portfolio; so we’ll see how this goes in terms of sales from my video website.

Local Small Business Videos Plan

One year ago, I wrote about a plan to do local small business videos. This involved buying a URL, www.vancouvervideographer.ca, that was ranked for number one in google when you searched vancouver videographer. Knowing the power of search and its ability to bring in business, I purchased that URL with the mind that even if I broke even at the start, since I’d be owning the URL, that’s a semi-permanent investment into an advertising method that will continue to bring in revenues year after year. I say semi-permanent as your position in google’s organic search rankings is not a guarantee. As long as I maintained the site, I believed that I’d be able to keep that position.

I’m relieved and happy to say that the plan paid off and that everything I spent on acquiring the URL had been made back and more, and all in the period of a year. Now, whatever business I get from the site I’m considering gravy. The other upside to this is that the URL is an asset. A few years from now, if I wanted to sell the URL, I would get the money back and more (provided that I maintained its top position).

It’s this self-booked video plan that is going to aid me in paving my way to the second part of my overall business strategy, which is to produce information products online. With the extra revenue brought in by the self-booked videos, this will give me the leeway to work on those information products. So, here I go!

Conclusion

I’ve gone through the process of trying to go bigger, do more, and in general being ambitious. I’ve always found that I rarely achieve what I want to in the time frame I initially lay out. I’m taking a risk in going after this informational product focus and will pay for it in time and money. My biggest fear is that if I don’t get into it fast enough or hard enough that I won’t see the results I’m looking for by the end of the year. It is also my fear that I’ll start off good, but won’t be able to keep up the pace and will burn out after a few weeks.

I’m making this up, but I’m going to go out and say that I want to get 10,000 visitors a month to my smallbusinessdoer.com site by the end of 2011. I’m currently at about 400 a month. Most of that is from a few posts. If I can push an average of a post a day, I do think this number achievable.

I’ve considered what I’ve done in the past two years, since I exited my last small business, to be semi-entrepreneurial. I have my own business, sure, but the work is mostly made from sub-contract (freelance) work that I’ve gotten from connections I’ve had. The local small business video plan was more a step in the entrepreneurial vein, it had some risk and it paid off. This shift in focus is what I would consider completely entrepreneurial. If I make it work, it’s because I put in the research, the vision, and the work. Nothing was handed to me.

Updates

1. Check out the next update Business Plan Update July 2011
2. Check out the previous update Business Plan Update June 2011
3. Check out all the updates