112 | HOW TO WRITE A BUSINESS PLAN
exAmple:
Bob Smith signed a shopping center
lease for his optometry office. His lease
called for a base rent of $2,400 or 6%
of monthly sales, whichever was more,
plus a set charge of $400 for taxes,
maintenance, and insurance. If sales
exceeded $40,000 per month ($2,400
÷ 0.06), he would be obligated to
pay the landlord more rent. Bob was
pleased to sign the lease because his
sales projections ($32,000 per month)
indicated he would be making a healthy
profit if his sales volume reached
$40,000 a month, so he would not mind
paying a higher rent. Of course, this
sort of lease is not a good idea if the
amount of sales needed to trigger a
substantially higher rent is too low. In
Bob’s situation, for example, if he was
required to pay more rent if monthly
sales reached $28,000, he probably
would have looked elsewhere.
When you have figured out your total
monthly rent from a lease quotation
from your expected landlord or from
a survey of market rents, fill in that
amount.
4d. Marketing and Advertising. Here’s a story
about advertising. Back in the early
1930s, John Axelrod opened a hot dog
stand on the main road into Pine Valley.
Business was fair. When he put up a
small sign, business got a little better.
Then he added several more signs and
things got a lot better. Finally, he put up
a dozen big signs. Business became so
good, he had to expand his seating area
and hire more cooks. He was feeling
pretty happy about life when his son,
whom he thought was a positive wizard,
came home from college. The son, an
economics major, was appalled at all the
new signs and seating.
“Dad, what are you doing spending
so much on advertising? Don’t you
know there’s a depression going on and
everybody’s going broke? If you don’t
pull in your horns a bit, you will never
make it.”
“No kidding,” John replied, and
took down the signs and stopped the
construction program. Soon business
dwindled away to nothing and John
went broke.
The lesson of this story is simple:
When the signs went up, business
improved. When they came down,
there wasn’t enough income to buy
ketchup. One way or another, success-
ful businesses get the word out.
(Incidentally, the son went on to get his
degree and opened his own business
consulting firm.)
There are small libraries full of
books about how to market a business
or product. I recommend especially
Marketing Without Advertising, by
Michael Phillips and Salli Rasberry
(Nolo). Such books used to focus almost
exclusively on paid advertising. More
recently, broader concepts of marketing
have come into prominence. Network