learn.fast - Success Test

Congratulations ...

... on taking the plunge and starting a new business. Each step of The Success Test will help you to evaluate the most critical parts of your business and assess where more thinking might be required, particularly related to your estimates of sales, pricing and cost management.

Work through the Test slowly and carefully consider each question.

Don't be too concerned with having exact figures for the Test. It's merely a guide to help you understand the financial potential of your business.

There are audio guides to help you complete each step and an example based on setting up a typical "One-man band" Lawn Mowing business. You can find the examples on the ‌‌ symbols.

When you have completed the Test, it will suggest one of three action points for you to consider - Good To Go, Getting There or Stop (and re-assess your direction).

It's not uncommon for businesses to complete the test several times before determining the best way forward.

Once you have a clear picture of the financial model for your business you will find the planning process easier.

The Success Test.

1 What is your name?

Enter your name here...

2 What is the name of your business?

Enter your business name here...

3 What is your business idea?

You need to be clear about what your business will do. Does it sell products or services, or both? Sum up your idea in a short sentence that clearly conveys the purpose and market for your business.

Describe your idea here...

4 How many sales could you make (volume)?

Think through a typical month, week or day. How many product sales or billable jobs will you get? Ignore the financial value of each sale and just count the number of individual sales you will secure. Assume a typical 12-month period.

Enter the number of sales here...

5 How much will you charge for each average sale (value)?

How much can you charge for an average sale or job? If you have lots of products and services, guess the average value across them all. Don't be too concerned about calculating an exact figure. You only need to be close enough for the test to work.

Enter your average price here...

6 Total estimated revenue

Based on the sales and price data you have provided in boxes 4 & 5, you will see an estimated annual total revenue in the next box. Is it what you were expecting? If not, have another look at the average sales value and volume of sales you plan to achieve.

7 Direct costs

Are there costs you incur every time you make a sale? If you mainly provide services you can skip straight to Box 8. If you sell products you need to guess the average costs for the average sale you entered in box 5. Total the average costs and write a single dollar amount in the Direct Costs box.

Enter your average direct cost here..

8 Margin per sale

Our clever Success Test system will automatically calculate your average margin - the amount you retain from each sale after you deduct costs that directly relate to making the sale. Your margin is typically shown as a percentage of the total sales value. Don't worry about calculating every direct expense or exact quote. Expenses missed here can be picked up in box 10.

9 Gross Profit Calculation

Here the Success Test goes to work again, multiplying your Total Income (box 6) by Margin (box 8). Gross Profit is the amount you get to keep after you have deducted costs directly relating to the sales.

10 Other Expenses

How much will it cost to run your business each year? Don't include any expenses you have already in the Direct Costs (box 7).

Enter your 12-month total expenses here...

11 How much do you want to earn?

Be realistic here, you may want to earn a $1M but your earnings target needs to be the amount you expect to earn in a year to cover all your personal living costs. This figure will be your target and your business will be successful if you reach or exceed this level of earnings.

Enter your target earnings figure here...

12 Test your income

The Success Test calculator kicks into gear once more by calculating the difference between your Expenses (box 10) and Gross Profit (box 9). This is the level of income your business would generate for you based on the figures you have provided. If you have not included a wage for yourself in any of the expense boxes, then this figure is your wage/profit. How does your business idea shape up?

ERROR

You have not filled in all the fields

GETTING THERE ...

Looks like you're not far off. Think about how you can increase the number of sales and/or prices while reducing costs (increase margin). A change in one or more of these areas should make a meaningful difference.

GOOD TO GO

Well done. You are set to reach or exceed your target earning figure. You have a basic business model that should get you started with confidence. You're ready to develop a full Business Plan.

STOP

Is your Test Income well below your target earning figure? If so, you need to do more work to increase your average number of sales, your prices or margin to reduce the level of business expenses.