Build Your Business: Management

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January 13, 2023

Simply put, a business plan is a roadmap to success. It maps out who your most important customers are, how you can help them, how you will make money, what it costs you to service them, and what separates your business from everyone else.

Equally important, a business plan helps determine how you are spending your time.

You may have lots of customers, but are they the right customers to help you increase your bottom line? Unfortunately, many companies in the decorated-apparel industry with jam-packed production schedules are not as profitable as other companies with half the orders.

The reason is the smarter ones have figured out how to service customers who truly value what they bring to the table. At the end of the day, wouldn’t you like to make twice as much working half as hard? I know I would.

Put another way, a good business plan illustrates the best customers to pursue while also highlighting the ones to avoid. As we all know, not every customer is a good customer.

With this in mind, there are nine key areas you need to consider when creating your business plan.

1. Customers
2. Your Customer’s Problem
3. Your Solution
4. Value Proposition
5. Sales Channels
6. Revenue Streams
7. Cost Structure
8. Key Metrics
9. Your Unfair Advantage

What follows is an overview of how best to think about these vital aspects of every business and, through better understanding, turn them into profits.

Customers

Who are your customers? Better still, who are your best customers, i.e., the ones who give you the most profit per order.

To find out who your best customers are, you need to do some homework. Go through your sales records. Dig into whatever kind of accounting program you may be using and run a report. Pull up all your customers and their total sales from the past year, and then enter or export this data into a spreadsheet. Sort by total revenue so that your best customers are at the top and your worst customers are at the bottom.

The top 20 percent of your customers by sales will likely represent about 80 percent of your total revenue when you add up each of their individual totals. These are the types of customers you want to clone. Note their attributes, categories, problems and how they operate. We’ll be using that material later.

Inversely, the bottom 80 percent of your customers will typically only provide you with about 20 percent of your revenue. This is what I mean when I say your production schedule is choked with low-profit work. Are you busy being busy? Or are you busy being profitable? Once you have this 80/20 glimpse of your customers, ask yourself the following:

• What is the most profitable type of order from these customers? Be specific.
• How frequently do your best customers order from you? What can you do to increase that?
• Think about geography. Where are your best customers located? In your city? In you state?
• What about digital geography? Where are they online? Do you follow them?
• How about social geography? Do your best customers belong to trade associations, clubs, unions or any other kinds of organizations you can join?
• Who makes the decision to order? How can you find them on LinkedIn?
• What do they love? What do they hate?

Your goal is to focus on the searchable attributes of your best customer. Once you’ve done so, you can start trying to find more of these same kinds of customers out in the wild. The answers to these questions will also help with marketing.

Your Customer’s Problem

Do you know the solution to your best customer’s biggest problem? It may not seem like it, but we are problem solvers in this industry.

An HR manager needing shirts for their staff has employee-retention and morale challenges. Knowing which polo is stain resistant or won’t pill when snagged are the answers the person may be looking for in a vendor. For a touring rock band, the logistics of getting replacement shirts delivered by the next tour date is essential to the group’s financial health. For a restaurant, fun and vibrant T-shirts sold in a merch store can add revenue to the bottom line in a way that won’t spoil their food.

The more you think and act like a problem solver, the more alignment you build with your customers. The best way to do this by asking questions. Don’t assume you know the answers. Some possible questions might include:

• What are your customers’ wants vs. their needs?
• What are their biggest problems or struggles?
• How else could they solve these problems?
• What are they doing now? Is it working?

The point here is not to try to find customers for your solutions, but solutions for your best customers.

Your Solution

Like a magician pulling a rabbit out of a hat, your customers want you to perform miracles. So, what do you have up your sleeve?

This is known as “the offer.” How are you different from every other yahoo out there who can decorate a T-shirt? Here are some thought-provoking questions you should be asking yourself:

• What are the top features you offer?
• How can what you do best be in alignment with your customers’ biggest problems?
• What is unique about your company?
• Can your solution involve better technology?
• What about creativity? Art is what sells.
• How about experience and expertise? Can you be your costumers’ guide and mentor?

Note, your advertised solution can NOT be cheaper or better customer service or quality. Why? Because everyone says that about their business, besides which the last thing you want is to end up winning the low-price race to the bottom. Also, superlative customer service and quality are hard to prove, and nobody is going to believe you are the best anyway. Better to choose something else to hang your hat on.

Value Proposition

You’ve undoubtedly heard this term before. But do you know what it means?

For some, it is a promise they make to the customer in the form of a guarantee. For others, it’s the main reason someone is doing business with them.

Try this experiment. Pulling up that 80/20 exercise, find your top 10 customers and ask them the following question: “Why do you do business with us?” Your value proposition will probably show up in their answers. If you need some additional help, consider the following:

• What makes you unique?
• Why would anyone do business with you?
• What are the benefits of a relationship with you?
• What do you bring to the table that is unmatched by others?
• In your customer’s eyes, what is the No. 1 thing they value the most? How do you know?

As always, the key here is to focus on what makes sense for your own business in terms of helping make it grow.

Sales Channels

A sales channel is your customers’ path to ordering from you. While you may think there is only one way to attract customers, there are many. It is therefore essential to align your sales channels with your top focus-group customers in mind. You want to sell to your best customers in a manner that is most convenient for them. The more friction in the sales process, the more likely your best customers won’t buy.

With your top customers in mind, consider these popular sales channels and what you can do to build a more frictionless sales experience:

• Salesperson
• Web site
• Dedicated online store
• Order form
• Referral program
• Contract
• Subscription
• Affiliate

You don’t have to only have one. Plus, some customers might like one way but hate another. It’s good to have options!

Revenue Streams

How many ways are you making money? That is what revenue streams are all about. Revenue can be simply transactional, taking the form of a one-time order. Or you can create a service-based model, like a contract for an online store with fulfillment.

Sometimes, with more significant customers, you might want to consider a year-long program with multiple layers of complexity. There is also the option of recurring revenue-type streams, like licensing artwork or building a subscription service.

Some thoughts here:

• Sales: Direct, wholesale, retail, online, contract
• Service Agreements: Set up a contract for a limited duration of time
• Subscriptions: For example, a T-shirt-of-the month club
• Licenses: Can you license the art or intellectual property you’ve created to someone else?
• Fees: Do you charge for things like art, screens, delivery or post-production?
• Live Printing: Bring your press and print at an event!

Be creative. Think outside the box. You may be surprised at the profits you’re able to make by simply taking better advantage of the assets you already have.

Cost Structure

“Money. Get back. I’m alright, Jack. Keep your hands off of my stack.” The band Pink Floyd debuted that song in 1973, and it’s the perfect lead into this section, which is all about the costs of doing business.

To calculate your profit, you have to understand your costs. This is vital, since a big part of your business planning has to revolve around the financial end of your company.

• Do you know your gross profit, i.e., your profit after subtracting the cost of making and selling your products?
• Do you know your gross profit percentage, i.e., the margin earned on the products or services you’re providing?
• What about your net profit, i.e., your profit after factoring in the sum total of your business expenses, including taxes; what about your net profit percentage?
• What is the break-even point for your business, i.e., the dollar amount in sales you need to hit to cover your monthly costs?
• What are your gross and net profit goals for your business this year?
• Is your pricing built with your costs in mind in order to guarantee you make a profit on every order?
• Are you getting 100 percent of the money upfront for your orders, thereby allowing you to establish a solid financial base and cash flow?
• What are your quarterly and annual top-line revenue and bottom-line sales goals? How are you going to achieve them?

Ultimately, this might be the most critical section of your business plan. I often see shop owners build their pricing based on the “average of everyone around me.”  This is foolhardy. How do you know the other shops you’re comparing yourself to are profitable? How do you know if their costs are equal to yours?

Your pricing and goals should be based on the math of your business and your business alone. Don’t worry about other companies. Get your own house in order.

Key Metrics

As the saying goes, “You can’t manage what you don’t measure.” This is 100 percent accurate. If you run any kind of business, you must keep track of the essentials. The formal term for these kinds of measurements is “Key Performance Indicators,” or KPIs.

Everything in your business should have a number. Yes. I know…math. Again, though, keeping track of the crucial metrics for your business can help you understand where you are, what you need to do and when to intervene. There are dozens of things you can track. In addition to the cost-structure metrics already mentioned, I would start off with the following:

• Breakeven Point: Again, this is the dollar amount you need to hit in sales to cover your monthly costs. For discussion purposes, let’s say that is $10,000. On what day of the month do you hit $10,000 in sales? On the fourth day? On the 23rd?
• Total Number of Quotes Outstanding: These are the number of potential orders that may drop at any time. Can production handle this number if they all go through?
• Total Sales Dollars of Quotes Outstanding: What is the financial impact of the orders that haven’t closed?
• Total Number of Impressions to Produce: This is the amount of work booked currently. A 100-piece order front and back constitutes 200 impressions. This metric will help you focus on your capacity level.
• Average Cost Per Impression: What does it cost on average to produce the work? If you spent $10,000 last month for all shop costs and produced 10,000 impressions, your average cost per impression is $1. Once you’ve calculated this number, ensure it is included in your pricing model.
• Errors: What is the cost of poor quality in your shop? Not just in terms of replacing blank inventory but labor, shipping and all other production costs. Keep a spreadsheet.

The metrics end of running a decorated apparel business is one of the most important and, sadly, most overlooked. Most shops are “too busy” to worry about these kinds of details. Then one day, they look up from their daily grind and realize they didn’t make the money they should have made.

Don’t be like that. Start learning how to benchmark and keep track of your metrics early on.

Unfair Advantage

Ah! I saved the best for last. The “Unfair Advantage” is the one you have that your competition does not. This shows up in your marketing and the talking points you use to describe your business.

You may not have an “Unfair Advantage” right now. But that’s probably only because you haven’t considered it yet. That’s OK. Start thinking about creating a new one or developing those unfair advantages you may already have. Separate yourself from the competition—and then leave them in the dust!

Examples of an unfair advantage include:

• Patents: You own some form of intellectual property that gives you the edge.
• Licenses: You are licensed. They are not.
• Industry Reputation: This is hard-won and takes time to build. How can you achieve this for your business?
• Creative Art: Better art always sells more than generic, run-of-the-mill stuff. Can you bring the Wow! factor to your business?
• Location: Often, people will know you because you are on a busy street instead of being tucked away in the back of an industrial center.
• Experience/Background: Do you possess knowledge or expertise that can’t be matched?
• Skill or Craftsmanship: Are you known for high-caliber production?
• Exclusivity: This can be achieved with a contract or agreement. Your competition can’t weasel their way in because you have blocked them out legally.

Remember to the victor goes the spoils. All’s fair in love and war. Do whatever it takes to tilt the playing field to your advantage.

Putting It All Together

Now comes the hard part, the actual work of getting all of these thoughts down onto a single short, easy-to-digest document that you can use to focus your efforts on a select target audience of customer types.

Did you go through each section and jot down some notes? Can you start connecting the dots to form an outline of exactly who your best customers should be and what you can do to best serve them? Will it be more profitable than who you are working with currently?

Think of your business plan as a working document. It exists to illuminate the bullseye for your customer-acquisition efforts. Because some “best” customers may behave differently, I know people who have written a “Mini-Business Plan” for each market segment they service. Hospitals, rock bands and restaurants all have different needs and challenges.

The main thing is to put your business plan together and start using it as a guide to go after those same customers who are going to make it possible for you to grow your company as fast as possible.

 

Marshall Atkinson, owner of Atkinson Consulting LLC, is a decorated-apparel industry production and efficiency expert who focuses on operational efficiency; continuous improvement and workflow strategy; business planning; employee motivation; management; and sustainability. He also co-founded a decorated-apparel industry sales and marketing education company called Shirt Lab. For more information or to comment on this article, e-mail Marshall at marshall@marshallatkinson.com.