I am often astonished by people that get caught up in minutia in their personal and business lives. These people search for answers everywhere when the basic answer at how to succeed in almost everything is something they learned in grade school.
Basic mathematics are the key to achieving all of your largest and smallest goals.
Let’s run through an example of this theory:
Entrepreneur A decides that he wants to follow his life long dream of opening a restaurant. He has worked in the industry for years and decides what he needs is a unique gimmick and lots of space to capitalize on volume. He decides to focus his menu on your standard Pub foods, and invests about $30,000 in television for the establishment. Based on his theme he also invests quite a bit on the bar. By month 6 of this restaurants existence the owner is $100,000 in the hole and decides what is needed is a revamped menu to attract more customers.
His restaurant is doomed.
Entrepreneur B decides to open a restaurant to follow her lifelong dream as well. She plans the menu, and creates a business plan based on a fixed price model. She knows her market so she can gauge that based on her style of cuisine she will attract an average of 3.5 people per table. She estimates her revenue per table at $75 and profit per table at $35. She wants to maintain profit of 20%. This leaves her $20 per seating to pay for utilities, rentals space, vendors, and marketing. She decides based on this that she will start her dream in a small 10 table bistro and focus on remaining profitable. She leaves the decor simple to maintain low maintenance costs, and uses foursquare, Groupon, and word of mouth to grow the foot traffic because she can get a CPA of $5 per table through these routes.
If you think Entrepreneur A doesn’t exist you are incredibly wrong. People who bank on their ideas more than the value those ideas will bring to consumers, and more importantly how profitable that value can become, are jumping into business ownership everyday. A good idea is just that, a good idea. It is nothing without basic math based planning that makes them tangible concepts.
A word of advice to people going into business relationships with people like Entrepreneur A, these are the types, that once they fail from the lack of planning begin playing the blame game. It is best to stay clear and brush up on your math for your next big opportunity.