 Welcome back everyone. This week we're talking about business plans. And previously we talked about how technology is used, especially in small businesses. And that small businesses would also use quite a bit of technology that we normally wouldn't think about. Today we're going to talk about how does a business actually work? What is a business plan? And why do companies need business plans? So what do we think about companies? We need to think about, first off, what does a company do? Well, so whenever we're thinking about what a company does, company does, we need to think about normally a company is providing either a product or a service. A product is something that they, like an object that they can sell or service. Okay, so a product would be, for example, a company makes markers, a company makes whiteboards, things like that. So something that you actually produce that you can then sell a service would be, for example, a waiter or waitress or somebody who provides a service to someone. For example, a company is consulting. So maybe you have a computer consulting company and you go in and help people to fix their computers. You're offering them the service of fixing their computers. So products are actual objects that a company might sell. And a service is a service that is provided to a company, usually for money. Now, we have to think about what the company does. What do we want to do, right? We also need to think about who is going to buy these products or services. So we really have to think about the customers. Now customers, there's lots of different types of customers. And for most organizations, they have customers that they don't normally even think about. So a good example of this would be, for example, law enforcement, police officers. If you ask police officers who they work for, I think the best police officers would probably say the people. But police have a lot of different customers. It's not just the citizens of a country. Police, on a day-to-day basis, they work for victims who may or may not be citizens of a country. So foreigners in the country who have their wallet stolen, the police will also help those foreigners. So it's not just citizens of a country. It's also potentially foreigners or somebody else. And whenever they're processing a case, police in Korea also work for the prosecutors because they provide all of the evidence and the examination they've done to the prosecutors and then the prosecutors decide whether to take that to court or not. So the police provide a service to prosecutors. So their prosecutors are also their customers. The government, the police ultimately work to maintain the status quo of the government. So as we saw in the protests not too long ago, police were barricading Guahamun with police trailers. And that wasn't necessarily to protect the people. That was to stop the people from harming the government. So the police are also working for the government. And police have to try to find a balance. And because most police officers don't identify every customer that they actually have, it's really hard to find that balance because some people prefer one customer where other people prefer another customer. Same for business. Police is extra complicated because it's police is just extra complicated. But it's the same for business. Who are your customers? Well, most people think if you produce a dress, for example, and you sell the dress, which is a product, then your customers are probably women. And depending on the design of the dress, you might be targeting a certain group of women, maybe 20 to 30. That's the style for women aged 20 to 30. Now, are they your only customers? Well, no, that might be your target customer. But you know, somebody 31, 32 could buy your dress, somebody 70 year old could buy your dress, men could buy your dress, like everyone is potentially your customer, right? So even if you're targeting a customer, you think, well, only 20 year olds are going to buy this. No, that's not necessarily the case. It might be the case, but it might not be the case. So we really have to think in business, who are our customers? Who is going to buy our product or our service? And not only who is going to buy our product or service, but also how much are they willing to pay, right? So for example, brands, brand companies don't tend to focus on younger people because younger people don't generally have a lot of disposable income or income that they can just spend on, you know, brand items, Gucci bags, things like that. They try to make it look like it's a young and hip thing, but basically it's for young professionals. People who are, can I say late 20s, early 30s, maybe mid 30s, something like that, that's really their target audience. Because in that age, you may or may not have a family, most people are getting married later in life. And if you are in your late 20s working full time and you don't have a family, you have more disposable income than if you were a college student or already started your family and are trying to buy a house, right? So how much are people willing to spend? Well, it depends on their circumstances, right? So it depends on who the customers are. So from this, we can figure out our product or service. Who are we actually selling this product or service to? Who are we working for? And then how much are we actually willing to spend? Okay? Or how much are the customers willing to spend? Once we have a general idea of what the company might want to do, even if we don't have a company yet, we're just starting to plan the company. We want to think about what the company does and who our customers are. Then we can start to work on what's called the business plan. Okay? So our business plan, the first thing we should have in our business plan is the goal of the business. What is the goal of this business? What will this business do? Okay? We already have an idea of what the company should do, but really what's our goal? Not just to produce a dress or maybe just make a lot of money, something like that. Those goals are either too specific or way too general. So the goal of the company, you could say, I want to make as much money with this company as possible. Okay. That doesn't say anything about what the company does. Right? The whole point of your company is to maximize profits. Well, is that always true? Would you let your company harm your customers if it could maximize profits? If so, then maybe don't start a company because that's not good. But think about what the goal actually is in relatively specific terms. Some companies, we said some companies, most companies want to make a lot of money, but they also have a goal while they're making the money. Okay? Some companies don't want to make any money. Those are non-profit organizations. So they have a goal, for example, to make the world better in some way. They want to help animal rights or they want to help human rights or they want to make sure that innocent people don't go to prison or get a fine even if they can't afford it. So non-profits have a goal and their goal is not to make a profit. Right? They still make some money to pay for their operation costs, but they don't necessarily make a profit. So think about what the goal of the company is. What do you want to do? If it is to make money, well, how are you going to make money? Is it by creating the coolest dress ever made? Right? Maybe your goal is to make the best possible dress ever. Okay? So if that's the case, then now you have some sort of specific goal that you can achieve over a long period of time. So now you can think about how do I achieve this goal once you have it? So think about what's the goal of the business overall? Not something general like just make a bunch of money. A little bit more specific than that. Next, we need to identify the customers. Now, we've already thought about the customers. We thought about who our customers could be. Right? So if we know the customers that we want to target, it kind of goes hand in hand. You can do it either way. We also need to think of a product. Actually, I want to switch these around. We need to think about our product first, based on our goal. So let's do goal, product, and then customers. If we identify customers, then if we don't have a product yet, we identify customers, then we can figure out what they need, and then we can develop our product. But if we already have a goal, we can think of our product first, okay, I want to make the best dress possible. Okay? So the product that I'm creating is mostly dresses, probably, or dresses that I think are the best, or maybe just one dress that's the best and also really expensive. Then we can identify the customers based on the product that we have. So these, I'm kind of switching them around because they are a bit interchangeable. You really should, once you have an idea of what you want to do, you really need to interact with your customers to figure out what do they need? How can I help them? How can I make their lives better? How are they willing to buy my win? Are they willing to buy my product? And how much are they willing to spend on my product? Okay? So we can either go customers first and then develop a product out of what the customers want, what the customers need, or we can start with a product idea and then identify a customer base that's willing to buy that product. Okay? Both ways are possible to start with. I mean, actually, I would recommend at the research or the beginning stage to kind of iteratively do both. Basically start with your product idea, find some customers, figure out what they need related to that product, and then revise your product. So something kind of like this, basically. Okay? So product customers, product customers, and then at the end of this cycle, you have a much better product. And that brings us to innovation later, or maintaining your business over time. Okay? So once we have a goal, we have our product and our customers and kind of iterative iterative cycle. Next, we need to think about the cost. So if we know our product or service, we need to think about how much is it going to cost to produce this product or service, right? So our cost is directly pulling money from the business's pocket, basically, right? So the business has a certain amount of money. If you have, for example, investors, then they give you quite a bit of, maybe quite a bit of money to start with. And then they expect money in return, they expect to make money in the long run, basically. So if you don't have investors, then you are probably the investor. And the cost is directly from you. Okay? So how much does it cost to produce this product? Okay? So let's say our dress, if it's, imagine it's just a plain cotton dress, and you decide that that's the best possible dress. The cost, maybe is, let's say, OTAN-1, to produce the dress, to produce the dress. Okay? So if the cost is OTAN-1 to produce the dress, and this is the best possible dress you can get, then how much are people willing to pay? So your customers that you have identified, if you say, this is the best cotton dress ever created, how much are you willing to spend? Well, it depends what it looks like, it depends on your customers. Usually older customers tend to have a restricted budget, especially if they're retirement age. Maybe they get a pension, but that pension is very small, right? So they're willing to spend less on new dresses, usually, not always, but usually. And then younger people, especially if they're trying to establish like that they're fashionable or something like that, they might be willing to spend more. But college students, they spend, college students statistically spend quite a bit on clothes, but individual pieces of clothes are relatively inexpensive. You know what I mean? So a lot of clothes, but the pieces that they buy are actually not so expensive. Whereas usually, I don't know the statistics exactly, but I think it was like mid 30s, tend to buy higher priced clothes, but less of them, right? So it depends on who your customers are on what they're willing to spend. Okay? But what we're actually interested here is how much are they willing to spend and how much revenue can we generate, right? Right? So revenue is the total amount of money that comes in. Okay? So once we sell all of our dresses to all of our customers, how much money did we make? Now, out of revenue, we subtract all of our costs. So for example, the cost to produce the dress, the cost to rent a dress shop, the cost to have water, the cost to have light electricity, the cost for internet, all of those different things. Once we add up all of our costs, even if the dress was O-Tan-Wang, maybe it actually costs us about Man-Wang to produce the dress, right? So if our total cost is Man-Wang to produce the dress, whereas actually creating the dress was only O-Tan, then we need to basically make over that amount. We need to charge more than Man-Wang for the dress. So if we charge, let's say 11,001 for the dress, then we make O-Tan-Wang in profit per dress. Okay? And what we actually need or what we want is at a minimum to break even, but breaking even for most companies isn't enough. They want to make a profit, profit, right? So here we have Chan-Wang as profit for whatever we're creating. Now, can you actually get a dress for Man-Wang? Probably not. I think they're mostly like Man-O-Mang, 50,000, 60,000, or 200,001, but it actually probably costs them maybe 10,000, 20,000 to produce, right? So dresses have a really, really high markup because people are just kind of accept paying a lot for dresses basically. So the profit that they tend to make is maybe 200,001 per dress if we can produce it for 10,000 and sell it for 210,000, right? So then per dress, 210. Now, how many dresses are you going to buy if it's 200,000? For a $200,000 or 200,001 dress, how many dresses are you going to sell in the month? Maybe, you know, four, five, six, if you're doing very well, 10, 20, 30. If you're doing very well, then that's a really good profit margin. If you just sell a few, then you might not actually pay for, for example, your electricity costs. So you have to think about what is the cost, the overall cost, to produce not only one dress, but also everything else that goes along with production, and then figure out what your revenue is likely to be. How many dresses am I going to sell, and how much money will I bring in? And then what is the profit that you think you're going to make? Now, whatever profit is that you think you're going to make, estimate less. So whatever you think, it's probably going to be a little bit less than that until you actually get your business going. Usually businesses start quite slow, and then as you get known, your profit kind of goes up. Okay, so don't expect to just make a bunch of money immediately, people have to learn about your business and learn about your product. Okay, so in our business plan, we have a goal, we have our product, we have our customers, and then we try to estimate the cost to produce our product or service, our revenue, how much we think we can sell based on a similar product that's also sold, and then how much profit do you think we're actually going to make in here? So can we actually make money in this business? Can we actually maintain the business? That's what our goal is. Maintain an expansion. With profit, we have expansion. With the same revenue as cost, we call that breaking even. If you break even, you're not losing money, but you're also not able to expand. Usually companies want expansion. Okay, so the business plan is kind of this overall estimation of what are you going to produce, who is going to buy it, how much is it going to cost, right? And if you can figure out a business plan, and we'll talk later about business models, if you can figure out a business plan and business model, that either breaks even, if that's acceptable to you, or makes profit, then you have potentially a successful business, as long as you've been honest about the customers that you have and what their needs are. So we'll talk more about this in the next video, specifically focusing on, again, the customers. Okay, so thank you very much.