The refrain is constant. Bermuda needs new business. Bermuda needs jobs.

It takes a unique individual to start a business anywhere, but it can be particularly challenging in Bermuda. The business start-up checklist is long, as you will have noted from last week’s article with references to StartupNation’s “10 Point Business Plan.”

There are several predominant personal traits that are absolutely crucial to the success of a start-up business:

— Basic math skills, at least;

— Basic business plan projections and timeline on covering your overhead costs;

— Detailed understanding of your proposed customer base;

— Ability to provide consistent customer value satisfaction.

Of these, the first and last are critical. You cannot bring your dream business to fruition without them. Thus, if you excel at customer relationship building but are weak in math, you need a finance-focused partner to balance out the proposition. Analytical math type, but poor on interactive people skills? Then, have the common sense to sublimate your ego to your personable likeable business partner. Your combined strengths used wisely will knock over the competition.

Math ability is needed to:

— Calculate and monitor your fixed overhead costs. You want to know what your break even point (what you must sell to cover your cost of doing business) on a monthly and annual basis, at all times.

— Calculate what you need to be paid from your business in order to survive.

Sales and marketing skills to:

— Launch knowing that the first selling opportunity (whether sales or service) is the only opportunity — far more than most business owners realise. Sale and customer satisfaction skills are needed that provide personal warmth, intuitive-driven consistent long-term customer relationship building.

You must be committed on a daily basis to find and sell to your most receptive audience, soon to be cultivated as loyal clients for life. Cultivated is a loaded word: to grow and care for. You can never stop reaching out to your clients, EVER.

Settle their problems, resolve their issues, understand their behaviour by anticipating what they want before they want it, serve them and sell to them by providing real personal service to them that is what they want and what they need. Become complacent, take them for granted, treat them as just another sale, a sure dollar in the cash register, it is virtually guaranteed, they will drift away. Many will never give you another chance.

Pretty simple really, when viewed on paper.

Anyone can do it, don’t you think? Yet, statistically across the global spectrum more than 50 percent of new businesses fail in the first five years, a large percentage of those within the first 18 months.

Business failures can be attributed to many causes; a few common themes recur consistently. One example of inadequate preparation is the inability to fully understand the first basic rule of a small business.

Cover your overhead.

Closely related to overhead is your break even proposition. What must you sell to cover both your overhead, plus compensate you for your time?

How do you compute the real cost to cover your overhead?

All businesses generate costs, sorted by fixed (overhead) — those that must be paid every month (on time) in order to stay in business, and variable — those costs that are linked to, for instance, amount of products, service-generation activity.

Case example: Let’s take a very basic general example of a small retail start-up showroom with just you handling all facets of operations. We won’t discuss viability or kind of product, location, size of, and presentation of your retail footprint. We also assume that you are not ready to incur the cost of hiring employees. These all have an impact, too.

What we will focus on is the total monthly amount for your business operation fixed costs: lease, utilities, communication media (phone, website, social media), taxes, licenses and registrations, office supplies, insurance, financing (yes, you may need the bank to turn your inventory), legal, maintenance, and marketing, etc

— $10,000 per month is your total fixed overhead inclusive of items above.

— $100 is the average retail price that you plan to charge for your new and exciting product. You can bring the product in at a landed cost of $60.

— $5,000 is the salary amount per month that you would like to get if your careful business planning is correct. You are keeping your personal wage low until the business is truly and consistently profitably.

Jackpot question. How may items should you purchase on a wholesale basis? How may will you need to sell each and every month to make your overhead? To reach break even?

Assume every single item sells — for full price. No sales and discounts. Remember this is a theoretical world.

Play the what if game. What if I only sell half of what I need in a month? What if I am overwhelmed and need to hire an employee. What if the business is slow off the ground — how long can I go with taking a salary? What if I only sell enough to cover the overhead?

Answers and evaluation of the overhead planning in Part 3, next week — along with keeping your business top of mind while handling the challenges of saturation, cannibalisation, copycat operations, innovation, and outside economic pressures.

Now, a true story — names, places changed. These situations can evolve from anywhere. You interpret which country as you wish.

They always wanted a small restaurant. She was a good cook, they liked to eat. How difficult could it be? The opportunity arose. Quietly, they took out bank loan, and purchased the small local hangout type eatery, that had been established for over 40 years. Many, many loyal customers, multiple generations even, stopped in — as much for the friendly conviviality as the decent, reasonable food.

Within weeks, they starting raising prices. Within a month — he became bored, too much chatter with customers, too many hours, much, much harder than they planned on. He started leaving early, taking the day’s receipts home. Customers began to feel abandoned. Where was the old camaraderie?

Result. You guessed it. Nine months later — still in debt, to the bank plus now their suppliers and out of business.

Cash in the till is not yours until you cover your overhead, and make a profit.

Martha Harris Myron CPA PFS CFP JSM, Masters of Law: International Tax and Financial Services, Summa Cum Laude. Appointed to the Professional Tax Advisory Council, American Citizens Abroad, Geneva, Switzerland.

President: The Pondstraddler Life Consultancy. Providing planning for international tax, immigration, investment, retirement, legacy, and related financial challenges to the lifestyles of internationally mobile individuals and their businesses residing, working, crossing borders, and straddling ponds in the North Atlantic Quadrangle. Specific focus for residents of Bermuda, the premier international finance centre.

Contact: martha@pondstraddler.com