So in the last installment we broke down a business idea into a simple sentence and then learned how to boil water. This is useful, but a sentence is not a viable business and a pot of boiling water will not make for a wonderful dinner when entertaining.
As of yet I have seen no responses to the sentence, "I am providing ________ to _______and I want to be able to make $_______ per ____ providing this." So I will go with my first incarnation of my former Linux Migration Business. When I started I was not consulting, I was selling computers with Linspire Linux pre installed. This began as a part time venture so it is a simple model for this sentence.
I am providing computers with Linux preinstalled to budget minded consumers and Linux curious people and I want to be able to make $300 per month providing this.
This was a simple enough model to go with. I had already made systems for people on the side, but I wanted to expand this. So now I needed to do some things. I knew what I was selling, who I was selling it to, and how much money I wanted to make. Now I needed to know how much it would cost me to make the computers. I needed to figure out how I was going to tell people about these computers, and how much it would cost to let them know about these computers, and I needed to figure how much to sell the computers for and how many I needed to sell to make what I wanted to make.
Building a computer by hand was something I knew how to do, but not something I wanted to do. I decided to purchase no OS systems from Tiger Direct's in house Systemax line and use those. I had found that with a vendor license I could get a system with an AMD 2800+ processor (state of the art at the time), 256MB of Ram, and a 60GB hard drive for $249. The Linspire Operating System with one year of CNR on it was costing me $49 a unit as a Linspire vendor. This made my cost per pc $298 per system. However, in reaching people I felt it would be prudent to have a web site and a dedicated phone line. I designed the site myself, but I had to host it at a monthly cost of $7.95 a month. My telephone bill, through a VOIP solution was $32.50 a month. I also decided to go into local marketing with brochures and business cards at a printing cost of about $100 a month. This brought my monthly operating costs up to $140.45 per month. I had to then decide what would be a realistic part time goal of configuring and sending computers out. I felt two a week would be good and not tax my part time work load. 2 a week is 8 computers a month. If I want to make $300 a month on 8 computers a month my profit would have to be $37.50 a computer. I took my operating expenses and divided it by my goal of 8. Came out to about $17.56 per system. Add that to my per unit cost to build of $298 and I had a price of $315.56 as my goal price per computer. Now I added my $37.50 to the cost to come up with $353.06. This is not a very sexy number. I would have to adjust my goal for a reason. I decided to set my price point at $349.95. This allowed me to say that you could buy a fully operation computer for under $350! So, using elements of my sentence I figured out how much this venture would cost, how much to sell the units for, and the beginnings of how to market.
In other words...you need to know how much this is going to cost you and how much you think your time is worth to establish your price. In my case it was a per unit cost. When I moved into consulting it was a per billing hour worth and I had to account for not every hour I worked would be a billable hour. More on that in later recipes.
From writing down one sentence that formulated my idea to being able to write another sentence that would sum up, very simply, what I did.
That sentence was this,"I sell state of the art computers with the Linspire Linux Operating System and CNR Gold for under $350.
I went from boiling water to a simple broth. In the next installment I will talk in FAR more depth about how I went about finding people to buy these computers. That involves words like marketing and sales....but when done right, they are not evil words. More to come on that on Friday. In the meantime. Here is a simple broth. Why? Because when you know hot to boil water you can make a broth. With a broth you can make a soup or a gravy, or a casserole or so many other things.
Boil (now that you know how) 1 cup of water in a small pot. When the water reaches a boil, place one beef or chicken bullion cube into the water. Cover the pot snugly with a lid and remove from heat after 2 or 3 minutes. The bullion cube will have dissolved into the water creating an attractive and flavor rich broth.
