This case study explores the next three months after Jerry Lame’s messy startup case study. He is starting to get his act together and has made some realisations about starting his own small business. These are some of the changes he makes.

Change business name

Jerry will change his business name from Computer Training Company to Jerry’s Enterprises as he will be diversifying his business. His original business name was very specific and doesn’t reflect the products and services he wants to sell in the future.

Subscription to Project Bidding website

Jerry decides to subscribe to HiPages because they are the market leader in project bidding for trades. He has a direct account and pays for leads from this company.

As part of his business process Jerry calls leads quickly to demonstrate great customer service and then goes to their site and quotes for the work.

He chose to sell asbestos removal services because he made a friend/contact and he understands that it is pretty easy to quote based on the dimensions of existing structures.

He’s quoting anyone for everything related to asbestos removal at the moment but is realising that he needs to be aware of the 2 hours it takes to speak with, visit and then prepare a quote for each prospect. He realises he converts about 20% of prospects because most of them just want to know if the shed/garage/building has asbestos in it.

He realises the importance of being smarter by “qualifying” his leads before jumping in his car and just going to visit them. He also thinks he can make money by offering a testing an analysing service to confirm whether his clients have asbestos.

Upskilling to be a real estate agent

After speaking with lots of his asbestos removal leads he discovers that many of them want to get rid of asbestos to make their home ready for sale. He has being watching the real estate market because he sees people around him making money for nothing by just buying real estate and holding onto it and watching it go up in value.

He looks at the kind of money real estate agents are making and the cars they are driving and decides he’ll get trained up and become a real estate agent. Jerry has also spoken to lots of real estate agents and thinks that selling real estate is just about talking to people about property.

Jerry pays for a Real Estate training course because he knows it is the next step in becoming a “licenced” real estate agent.

Allocating expenses to income

Jerry realises that he is offering lots of different services to different clients and needs to better understand the gross profit for each service.

We focus on showing the expenses that are related to each income transaction more accurately so Jerry knows which service is the most profitable. Where there is an expense relating to an income we create a separate income and expense account to better track the profitability. This means keeping track of all the costs associated with each of his income streams.

We may need to then allocate some of the online advertising costs to the expenses for this income.

Joins low cost Real Estate agency

EzyEstate is a low-cost competitor to the large real estate brands like LJ Hooker, Ray White, Professionals, McGrath etc. He has learnt that with online marketing he can reach prospects quite easily by sitting at home and working on his computer.

He thinks that his experience and knowledge he’ll easily find people who want him to sell their property. He thinks that all he needs to do is open homes up for inspection, make and receive some phone calls and negotiate with interested buyers.

He looks at what his real estate agent friends are doing and see that 2% commission equates to about $16,000 on an average property price of $800,000 in his area. He also learns that the larger and established real estate franchised offices takes about half of that amount.

He realises that he can enter the real estate business at a low cost (low barrier to entry) and that when a commission is earned that he gets 80% of it compared to other agencies that only give away 50%.

He explores whether he needs to have a trust bank account and why but decides to let EzyEstate handle that part of the transaction.

Using LinkedIn to hire people

Jerry thinks that he may need an experienced real estate agent and wants to go through the process of finding one.

Professional website and sales funnel

Jerry just has a Facebook Website (Page) but decides he needs to have his own website so he can channel prospects to his sales pages when they want more information. He realises that by paying for leads at HiPages he is helping them grow their own website and also competes with several other asbestos removal companies.

Jerry does some market research by typing in some popular search terms into Google and sees his competitors websites appearing on the first page of Google. When he clicks on some of their website links he sees a popup enticing him to click to receive something for free and thinks this is a great way to get prospects – he must have his own website.

He realises that he can have a website with different menus for the different services he offers and by having his own website he can stop spending money on Project Bidding sites.

Jerry needs regular work

Jerry has bad cashflow because of his irregular income and needs to find something regular – he is scared that he won’t make enough money each month to cover his costs!

He loves talking to people so looks for work in sales & marketing and wants to provide his services as a contractor. He calculates how much he needs to earn each day and starts looking for two companies for 2 days a week.

He starts to define his ideal client and what he needs to do to get them.

He doesn’t have a PSA which clearly states his terms and working environment so he needs to use good credit management at the end of the quarter to make sure his clients pay him weekly as opposed to 3-4 weeks later. You’ll run some debtors reports for him so he can see his aging debtors.

Asset purchase for innovative advertising

Jerry sees that some real estate agents are pulling advertising trailers behind their cars and leaving them in high traffic areas. He thinks that this is so smart and a great way to get exposure for himself that he buy 3 trailers for advertising for his real estate agency.

Jerry is so excited about buying these he just goes and buys them now, even though he doesn’t have anywhere to put them and not sure about his marketing message.

The message will have to change sometime in the future and his cash flow report at the end of the quarter will show that he may have been better to wait but more importantly to use a loan to buy them at this start up stage.

Jerry gets a loan and buys a commercial property

Jerry decides that he’d rather have an office in a commercial area than meet clients at his own home. He buys a small commercial warehouse because it would suit his business and be a good investment.

He lives in the Newcastle area and thinks that the development of the Cardiff area into a transport hub will drive up values and volume of people.

Jerry pays a 20% deposit and takes out a loan for the remaining amount for a term of 15 year at a variable interest rate and will be paying interest only for the first 5 years.

See the Cashflow, Reporting and Budget Course Topics

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