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1 Click to edit Master title style brought to you by

2 Click to edit A Master Personal title style Touch We believe the key distinction between banks is the way they serve their customers. Through honesty, hard work and quality customer service, our knowledgeable, friendly staff is ready and willing to assist you. Whether you are banking as an individual, a family or a business, you ll benefit from sound, strategic advice, flexibility and locally made decisions from people who truly understand your needs. Dan Heitmeyer VP Commercial Banking dheitmeyer@minsterbank.com Member FDIC MinsterBank.com

3 Entrepreneur Bootcamp Series Date Topic Detail July 18 th August 15 th September 19 th October 17 th November 14 th Sales and Marketing Strategy Financial Management People & Partnerships Systems & Processes Feasibility and Action Planning Accessing contracts and targeting opportunities. How to manage the business from financial reports. Determining adequate levels of capital. Understanding forms and uses of capital. Developing and leveraging key relationships. Evaluating business process and systems for efficiency, opportunity, and need. Complete a feasibility plan and assess whether to drop, delay, or do the planned business startup, growth or expansion activity. Identify most impactful business tasks and make a plan to execute them.

4 Today s Presenters Donerik Black, MBA Jasper Browne, LLC RoShawn Winburn, MBA Minority Business Assistance Center C N. Dixie Dr. Vandalia, Ohio W. 2 nd St., Suite 100 Dayton Ohio dgb@jasperbrowne.com roshawn.winburn@daytonohio.gov

5 Determining the Product or Service Portfolio Product/Service Purpose Features vs. Benefits Related Products and Services

6 Product/Service Purpose Successful businesses share a common attribute: They do something useful for their customers. If you accurately understand your customers' problems and needs, your business will have a better chance of success. What problem does your product/service solve?

7 Features vs. Benefits

8 Related Products and Services A product portfolio is comprised of all the products which an organization has. 1. A product portfolio may comprise of: different categories of products, different product lines, and the individual product itself. 2. Management is needed on all the three levels of a product portfolio. You need managers for: managing individual products, managing product lines, and the top level management which manages the complete portfolio.

9 Essentials of Effective Pricing Need to cover your cost What are my expenses? Need to be competitive What price is right for my market? Needs to be in line with customer value Can often be a cue to quality.

10 Types of Business Expenses Cost of Goods Sold (COGS) The actual cost to produce the product or service Fixed/Operating Expenses Other operating expenses not directly related to producing products or services Overhead, such as utilities, rent, insurance

11 What Price is Right? The real price of a product or service is no more than the customer is willing to pay. Find out how much that is by using: Customer Surveys Competition Shopping Market Research Sales

12 Pricing Strategies

13 Pricing Strategies

14 When will you break-even? The break-even analysis tells: How many products or service units you must sell at a given price in order to cover your business expenses The point at which enough sales are made to cover your business expenses, but before a profit is earned Your minimal sales goals

15 Just a Few More Terms... Gross Income -- Sales revenue before expenses are considered Gross Profit -- What remains after subtracting the COGS from the Gross Income Net Profit -- What remains after subtracting fixed expenses from Gross Profit

16 Gross Income, Gross Profit & Net Profit Income Sales, widgets $500 Sales, gadgets $400 Gross Income $900 COGS Material $250 Labor $350 Total COGS $600 Gross Profit $300 Fixed Expenses Rent $100 Utilities $ 35 Total Fixed Expenses $135 Net Profit $165

17 How Break-even Works You need enough Gross Income so that after you subtract Cost of Goods Sold, there remains enough Gross Profit to pay Fixed Expenses Gross Income (price) - an educated guess based on what you ve learned about the marketplace Cost of Goods Sold - comes from researching the cost of creating the product or delivering the service Fixed Expenses - comes from researching the cost of operating the business

18 Break-even Formula Part one: Gross Income minus COGS = Gross Profit Part two: Fixed Expenses Divided by Gross Profit = Break-even

19 Sarah Sue's Sandwich Shoppe Fixed Expenses: Rent $ 600 Utilities $ 150 Telephone $ 100 Business Insurance $ 25 Owner's Salary $ 2,000 Miscellaneous $ 50 Total Fixed Expenses: $ 2,925

20 COGS For the Swiss Gobbler Supplier Price Sheet and Labor Costs Sarah estimates Ingredients per Gobbler COGS Swiss Gobbler $3.00/Lb 10 slices per lb. 2 slices $.60 $.75/Loaf 30 slices per loaf 2 slices $.05 Sw $3.00/Lb 10 slices per lb. 2 slices $.60 $2.00/Jar 32 ounces per jar 1 Oz. $.06 $1.00/Jar 32 ounces per jar 1 Oz. $.03 $.50 ea 8 slice/ tomato 1 slice $.06 $.60/Head 30 leaves/ head 2 leaves $.04 Secret 3.00/Jar 32 ounces/ jar 1 Oz. $.09 Wax precut sheets 1 Sheet $.03 $8.00 Hour 15 sandwiches /Hr 4 Minutes $.53 Total COGS: $ 2.09

21 Monthly Break-even Point Three things to calculate her break-even: 1. Monthly fixed expenses $2, COGS determined to be $ Sarah sets her price at $4.95 Part One: Gross Income - COGS = Gross Profit $4.95 -$2.09 = $2.86 Part Two: Fixed Expenses/Gross Profit = B/E per Mo $2,925 / $2.86 = 1,023 Sarah Sue will have to sell 1,023 Swiss Gobblers per month to break-even.

22 Product Mix When a business offers a variety of products for sale, that variety is known as a Product mix. 1. Compute a B/E analysis on each product you will sell 2. Estimate how many of each product will sell in a period 3. Multiply the gross profit for each item by the number you will sell 4. Add all the total gross profits together 5. Does total gross profit equal fixed expenses?

23 Pricing for Service Providers Step 1. Step 2. Determine personal income requirements Annual Operating Expenses $10,000 Owner's Gross Wages $30,000 Total Income Requirements $40,000 Calculate available working hrs. 52 weeks x 40 hours per week 2,080 hrs Minus 40 vacation & 56 holiday/sick hrs - 96 hrs Equals available hours 1,984 hrs

24 Pricing for Service Providers Step 3. Estimate billable hours 1,984 hours available per year divided by 4 Qtrs. = 496 hours per Qtr. Available Hrs. X Percent Billable = Per Qtr Qtr 1: 496 X 20% (1 day per week) 99 Hrs. Qtr 2: 496 X 25% (1 out of 4 days) 124 Hrs. Qtr 3: 496 X 30% (1 out of 3 days) 149 Hrs. Qtr 4: 496 X 40% (2 days/week) 198 Hrs. Estimated Billable Hours: 570 Hrs.

25 Pricing for Service Providers Step 4. Step 5. Calculate the Hourly Billing Rate Total income required (step 1) Divided by number of billable hrs. per Equals hourly rate $40,000 per yr / 570 hrs per yr = $70 per hr Decide If This Seems Reasonable Is this rate reasonable? Will the market bear this rate? Is my salary goal too high? Can I reduce overhead expenses or increase billable hours? Can I accomplish this amount of work and manage my business while maintaining a reasonable schedule? Is this business venture worthwhile given my financial and lifestyle goals?

26 LERONDA F. JACKSON PRESIDENT & INDEPENDENT AGENT Started LFL Insurance in 2001 to serve individual and business clients. Quotes several carriers, including Erie, Travelers, Pekin, Safeco, Progressive, Anthem, Humana, and others. The only African American female to own an independent insurance agency in Dayton. Member of Dayton Rotary Club, the National Council of Negro Women, Optimist, and Kiwanis. Inducted into the Black Who s Who of Cincinnati & Dayton. Writes insurance articles for the Dayton Weekly News and speaks to various groups regarding the insurance industry, entrepreneurship, and walking with the Lord. LFL Insurance Agency, LLC 8141 N Main St, Suite C Dayton, OH leronda@lflinsurance.com

27 Some Final Thoughts.. Don t try to be all things to all people. Start with the conceptual Move to the tactical Have a clear positioning and let that guide your strategy and tactics.

28 Help Us, Help You Please give us feedback by 1. Completing a survey 2. Sending an to bootcamp@minsterbiz.com Registration is live for the next bootcamp on June13 th. Reserve your spot & tell a friend!

29 Click to edit Master Contact title style Us (419) Dan Heitmeyer VP Commercial Banking Member FDIC MinsterBank.com