Developing Your Business Idea 2 - The Numbers

AOBAKWE K. SENTLE

The famous saying about numbers goes like ‘The Numbers Don’t Lie” and this cliché means that the numerical data or computations related to something show the incontestable truth about the situation.

When you are working on your business idea there are a lot of numbers and information that you have to go through whether generated by yourself primarily or numbers coming from secondary sources such as business publications or any other data centers. Numbers will have to be an important part because of developing your business idea because they can give you a scope or guidance, in an objective manner, of what your business situation will be like or is already like.

There are different metrics that come as numbers that you have to take heed of when developing your business idea. First and foremost is the market size, that is, the maximum total number of sales or customers your business can see, often measured over the course of a year. It’s helpful to know the potential market size before launching a new product line or line of business, since that can help you understand if it’s a worthwhile investment of your time and money. What Am I Saying here? The fact that you want to sell fat cakes in your neighborhood means that you have to know how many people are there within the area that you want to reach and if they are a good enough number for your to pursue your business lest you open a fat cake shop and you find yourself with a few customers making the investment unprofitable.

Once you have established the market size and are completely satisfied with the number of potential buyers for your fat cakes, next is the start-up costs. Startup costs are all expenses incurred to plan, register, organize and launch a new business. It is the aggregated cost to bring any new business idea to the open market. A business is born with an idea, but a business has to be built around that idea. An individual with the desire to start a business has to pay for many previous expenses long before it starts producing any money. These expenses come from things like buying stock, business registration fees, advertisement, training expenses and other operating costs that come from organizing the business before it goes live.

Now you have the total number of potential buyers and you know how much it will cost you to start your business, the next most important number is the pricing of your goods and or services. Price is the amount that your customers will pay to acquire your product or service and many factors have to be taken into consideration when you do this exercise. There different types of pricing regimes but the most important thing is about price is that it MUST be able to cover the cost of acquiring whatever you are selling or service you are rendering and also leave you with something to take home, that is your profit. So what will determine your price after considering your costs? I think you have to look at the prevailing market prices of similar products and services so as to be able to compete with the market. Whether you set it lower than the market average or higher all depends on your business strategy and type of customers you are serving.

The above piece is the basics on numbers and some of the factors I regard as most important to know about your business in your journey to developing your business idea.

Aobakwe K. Sentle is a Motswana entrepreneur who runs a small and medium enterprise or startup consulting firm (BluStreak Consulting) Aobakwe Sentle is also partner at Fane Communications Media (A film production company).