Click here to post your answer to this month’s question. The best entry receives a $50 gift certificate at a local restaurant!
A few months back in this column, we had two businesses in which to invest. Now Mr. Investor has reviewed the two business plans and has some concerns about the financials on the two companies. The first business, called Clever Sub-Routine (CSR), is an Internet business that lets websites play acoustic sound messages just slightly below the audible range of most human beings but still “receivable” by the unaware listener. CSR delivers subliminal messages to website visitors in a way that has shown an 80 percent increase in purchasing of the website’s products and services.
The second business, called Peripheral Pet Marketing (PPM), takes advantage of the high number of pets in most urban areas that need to get out and play. PPM hires people’s pets at $2 per hour to wear sweaters that carry various marketing messages that promote PPM’s clients.
CSR has presented a business plan that forecasts escalating annual sales profits from $100,000 in 2010 to more than $500,000 in 2015. One of the business income models is to make CSR monthly fees very affordable at $8.33 per month ($100 per year), so CSR just has to get 1,000 websites to sign up in the first year. Although CSR founders know there may be some ethical and legal questions (subject to lawsuits), they want to be the first in the marketplace with this new program. CSR has used the program at its own website with great results.
Peripheral Pet Marketing has presented a business plan that shows $150,000 profits in 2010 but, due to the limited number of pets, that number is expected to top off at $400,000 per year by 2012. However, since there are other animals that can also be used, this business is expected to be financially sound and growing for many years to come…tweet about that!
Business development principles
The lifeblood of any business is its ability to collect cash and pay its bills and employees. Far too often, small businesses are profitable but don’t have enough operating capital to meet current needs. Consequently, they may be forced to sell out to a stronger competitor, sell a portion of the company to investors at an undesirable price, or close the doors and put the company out of business. None of these alternatives are typically what the owners intended when starting out.
Time to dig deeper
It’s come down to the final deadline on acquiring the necessary money to move one of these two companies into profitability. CSR states that Mr. Investor can rely on just the first graph on the left to see the success of its Internet business. On the other hand, PPM offers the second chart.
Do You Have the Answers?
1. Which company would be the best one in which to invest?
a. PPM because it shows a good performance on accounts receivable.
b. CSR since it has a very efficient HR-to-income ratio.
c. Neither company since we don’t yet know annual profits.
a. PPM because it shows a good performance on accounts receivable.
b. CSR since it has a very efficient HR-to-income ratio.
c. Neither company since we don’t yet know annual profits.
2. Which company shows the most potential for future profit?
a. CSR because it’s reduced its research and development costs.
b. PPM since it’s improving its AR collections efforts.
c. Neither company since the profit margins are too small.
3. Which company has the greatest potential to go nationwide?
a. PPM because there are pets everywhere, and this is easy money.
b. CSR because it’s an Internet-based company.
c. Neither, since both companies will run into resistance from various groups.
What would you suggest to Mr. Investor to make CSR and PPM successful?
You can reach the California Business Development Center at (707) 584-4529 or www.californiabusinessdevelopment.com.
Click here to post your answer to this month’s question. The best entry receives a $50 gift certificate at a local restaurant!
