Today’s small business challenge in the Globe & Mail concerns a small company called Beautifully Bare Hi-Tech Spa, a Toronto-based “medical aesthetics” company that offers laser hair removal, non-surgical skin tightening and teeth whitening. Key details include:
- They operate out of other people’s spas
- They are in 10 spas so far and have just opened a storefront.
- The article indicates rapid growth for 2012, implying perhaps doubling (or more) their locations.
- At only one year old this month, the company already achieved $200,000 in revenue in 2011.
In general, pretty impressive. For complete details see the online article called When talk isn’t cheap: How to bring down cellphone costs.
Their challenge: Because they work out of other spa owner’s locations, they rely heavily on their cell phones to carry on business. Their cell phone bills are high. Specifically, at $800 per month, the cost accounts for 15% of their expenses and they are very concerned. They want to cut their cell bill by at least half, and are desperate (their word) to do it now.
What to do? My suggestion:
Don’t ignore this expense but its CLEARLY not a priority to deal with now.
Let’s do some quick math:
- $800 for cell phones accounts for 15% of expenses. Annualized $9,600.
- Therefore, total expenses are $64,000
- With revenues at$200,000, this small company is already achieving $136,000 in gross profit. Margin 68%.
- As a % of revenue their cell bills are 4.8%.
- Assuming they double their business next year and their cell bills grow by 25%, its still amounts to 3% of revenue.
OK, seriously, in view of the positive financial position of this young company and their expected growth curve for 2012, why are they fretting about this expense? I have to assume that they have dozens of higher priority issues to deal with and this issue, to me, is just not urgent.
Being aware of the costs is good and it shows that they pay attention to the details of their business. Fine. And taking some quick actions to mitigate the situation and exposure is prudent (in the article, a panel of experts offer a variety of solutions including leveraging Wi-Fi networks, using Skype, etc). But the key is do it QUICK and not devote precious time to it. One to two hours of effort and this is done.
Every minute thinking about a somewhat benign expense is a minute not thinking about growing their business.
One last thought: This cell phone expense can be re-framed. Consider that this small business works out of other’s locations. So do not they incur any real estate costs for an office. In effect, their cell phone bills are a proxy for office rent which would likely be beyond $800 per month. Lots of smallbiz owners would make that trade.
Thanks for reading my blog and please visit again.
Vincent out.
Related links: Other small business case studies and challenges from the Globe & Mail:
- Hire a first employee or take on a business partner.
- Job Search: Temporary entrepreneur needed for 6 months. What to do?
- Small Business: Expand or play safe? Ask your employees.
- Small business trying to break into big companies? Think goals.
- Smallbiz dilemma: Invest, divest or status quo? Use your head.
Tags: gross margin, priorities, rapid growth
Smallbiz case study: Don’t ignore but also don’t sweat the small stuff….
Being aware of the costs is good but every moment thinking about a somewhat benign expense is a minute not thinking about growing their business….
Smallbiz case study: Don’t ignore but also don’t sweat the small stuff | BizCompare.com…
Being aware of the costs is good but every moment thinking about a somewhat benign expense is a minute not thinking about growing their business….
Smallbiz case study: Don’t ignore but also don’t sweat the small stuff…
Being aware of the costs is good but every moment thinking about a somewhat benign expense is a minute not thinking about growing their business….