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Opinion: Do the math to chase your fortune

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Can you make your business dreams come true in a small town? Is there enough market potential there? That’s a question you might ask as you sit on your porch and drink your lemonade, listening to the afternoon sounds of your small town. Let’s take a look using a plumbing company as an example.

Population math
Let’s use a town of 1,000 people for example. We’ll call it Yourville. Yourville certainly qualifies as a small town, and the nice round number will make the math easy. Let’s suppose your dream is to build a home service plumbing empire in Yourville. Now, let’s look at the numbers.

In most industries, a company is considered a major player with 25 percent market share. In a town of 1,000 people, that would be doing 25 percent of the total plumbing work done for those 1,000 people in every year. The beauty of a small town is you probably know just about everyone. Let’s assume that you are capable of doing 50 percent of all the work done per year.

Next, let’s address how often each person in town would need plumbing service. The “sales cycle” for home plumbing service is estimated at four years to six years.
That means, on average, a person will go that long until plumbing service is needed. Let’s assume that the average Yourvillian will call a plumber once every four years.

So, each year, one out of four Yourvillians will need plumbing service. That’s 250 service calls per year.

Let’s assume $500 is the average invoice per service call. That’s reasonable, perhaps generous, based on my real-world experience. It’s an average of all types of service calls, from faucet repairs to water heater replacements.

Therefore, the total plumbing service market in Yourville per year is $125,000 per year.
Should you tackle as much as 50 percent of that work, total sales for your company per year would be $62,500.

If your pricing creates 25 percent net profit – much more than the typical 3 percent to 5 percent – your net for the year would be $15,525. Will that float your boat?

You can substitute the population of your town and go through the same math. Review your numbers. In any given market, 25 percent market share would make you the dominant player. Be frank with yourself.

How many calls are you getting of the total number of service calls ringing in your market? Why aren’t more folks calling you and how can you change that?

This exercise will lead you back to your budget and business plan and cause you to make adjustments. You do have a budget and business plan, don’t you? If not, now is the time to put them together.

Diversify to thrive
OK. What else can you do? To make a fortune, you must supplement that income. Why not diversify? Heating and cooling? Remodeling and fix-it services? How about real estate? You could start an Internet business.

A friend of mine has a neat eBay business, selling scrap material recovered from his day job. The business owner is delighted to have the scrap hauled off the work site. And my friend is netting $300 to $400 per week.

Do you have something of value to sell? Maybe you can sell a product, an invention or a better-built mousetrap.

Maybe you can sell information. Do you have a hobby about which you are passionate? You could create an online community, a place for your fellow enthusiasts to meet and share, and buy, information. Maybe your site could be like a small town made up of you and your pals.

Do the math, and take a path that leads you to your dreams.

Ellen Rohr is an author and business consultant who offers systems for getting focused and organized, making money and having fun in business. Her latest book is “The Bare Bones Biz Plan.” She can be reached at ellen@barebonesbiz.com.[[In-content Ad]]

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