Plan B.... explained

After my last post, you're wondering WTF is Plan B?

Sorry I didn't dive into it too much, if any at all. I try to keep my posts short and interesting. And while I appreciate everyone who reads it and appreciate the comments even more. My posts aren't really short and interesting, they're very long and sometimes I waffle on.

So, without waffling on too much further, Plan B is simple. Plan better.

I recently downloaded this great application called Freemind. This basically allows you to come up with a big idea. It goes in the middle. Then you have your thoughts of the idea, like basic needs to get the idea off the ground, then those basic ideas have your more elaborate points.

You might be opening a store, so you'll have an idea about decor. From that will stem things like colours, seating, front desk, shelving, and so on.

I wrote one out for this Plan B after thinking about it a lot.

Plan B is basically to open a guitar teaching school. That's it in a nutshell. There are a couple of small problems. On one hand there's competition. The first one being a company which one of my friends whom I've discussed in the past goes to for singing and guitar lessons. The other being the shop I looked into for a franchise. I have no doubt I can compete with them. But I also know them both well and don't want them to think "That bastard Steve, we let him have an opportunity to do this with us and now he's gone and done it on his own."

Another part of me says "Who cares what they think, just do it." I just don't want to burn any bridges.

Apart from all that, I have looked into a premises already using realestate.com.au and found one within 10 minutes walking distance. The rent is priced brilliantly and with a small spreadsheet I did, I worked out that I can realistically have a maximum of 4 students a day based on the idea that most will be school students and that they'll only be available after 3 pm. So, from 3:30 pm to 8:00 pm I will have a total of four 1 hour lessons.

Now, I don't know how much other places charge for their lessons. But I did my calculations on $45 per hour. I think most places charge $50-$60. But at $45 per hour (or per lesson), if I have 4 students per day at 5 days a week. I can have a total of 20 students and that works out to be about $900 a week. Minus my rent $300 per week, and I'm guessing I'll have wireless internet, electricity, phone (Mobile) and stationary, adding another $100 per week, I still walk away with $500 per week as a startup. If I work 7 days a week, then I make significantly more.

So, on paper it'll work. Getting students will be the hard part, and I will no doubt run at a loss for the short term. But I think I can get 20 students. When I look at the other two places I mentioned above, they all have over 200 students on their books. The branch of the shop I looked into had 35 students on the books already.

One thing I did notice as well was that they made the students pay up front for a block of lessons. Like for a whole term at school. Then offer holiday activities where you can charge extra, which some parents love because the kids spend the whole day there and they it's cheaper than daycare or a babysitter. This also keeps them coming back. So you don't have any stragglers after the school holidays who got lazy and said "Meh, I can't be bothered going to lessons any more."

I also did some calculations on who I can increase business if my limit has been reached. Bring in some teachers. My $900 per week on my own sounds great to start with, but after expenses, it only works out to be $26,000 per year. And I haven't taken out tax yet.

By brining in some teachers, I'll make less money as I have to pay the people. However, this doubles the capacity I of students I can bring in to 40 per week. I've calculated that the teachers on a wage will earn $25 per hour for each lesson. So I keep $20 from that and with 4 teachers the business earns $74,000 (these figures are approximates). So, I go from $24,000 on my own to $74,000 with 4 teachers running the lessons and I just run the business.

This is working out to be ideal because if the business can bring in revenue of that sort of money without me being there, then I've reached my goal. I can take a holiday with the wife and not worry about coming back to disaster, all my clients leaving, finding another IT guy because I was unavailable.

People have said to me, why not just find IT guys like how you'd find music teachers. The story is very different. For starters, you can't pay an IT guy in Australia $25 per hour. $125 is more realistic, but that leaves me with a few dollars to run the business. So hiring someone for my current business just won't work. I've don the maths. It ain't gonna happen. And since it isn't going to happen, I will never be successful in my current business.

While it has taken me 7 years to figure it out, I won't say it's been a total waste. I have learnt so much from running my business, and in a sense I have gained more from the fact that it really was a dead end business to begin with. I didn't know that at the time, in fact I didn't realise that until only a few months ago when a business broker friend I met told me so, then illustrated it all to me. Hence the start of my decision to shut it all down and start something else.

I hope it all goes to plan.