We’ll use our example of $140,000 we arrived at for gross sales in our previous article. There is also net sales which we are not going to get into at this time. We’re just keeping things basic and simple right now in order to get a general overview of how it all works together. Later, we can come back and look at further details.

So we need $140,000. The marketing plan is dependent on what we’re selling. The cost/price formula is worked out when the retail price of the widget is not known — like when we are manufacturing it for example. In the Internet business, if you are going to sell e-books that you will be writing, you need to know how much to sell them for.

Here you would calculate the unit cost of making the product, then you would multiply by 3 or 4 depending on the anticipated distribution plan — if you’ll sell through wholesalers, dealers or end users.

For our purpose now, let’s say we buy it from a wholesaler at $5 and they already have a suggested retail price of $10. Obviously that would not be enough margin in the real world. You would normally use 3X or 4X your cost. It all depends on the product. More on that in a bit.

We’re using this to make it simple to calculate. You would also get extra discount when you increase quantity, but we’ll leave that for now too. For example, if I write a book for publishing, I will have to build in a retail price that will include a dealer discount, a wholesale discount and a distributor discount.

Typically, these will expect, or demand, 40% discount, 45 to 50% and 50 to 60% respectively. That’s because the distributor sells to the wholesaler, the wholesaler sells to the dealer and the dealer sells to the consumer, and everybody has to get paid.

So, if your cost for producing the book is $5, you will have to set a retail price of $25 in order to cover the highest discount of the the distributor. You might say, well I won’t be selling it through distributors, I will sell it myself to retail stores.

How do you know you won’t be selling through distributors? If the book takes off and become a best seller through no effort on your part (how lucky can you be!), distributors will come to you and you will have to then change the retail price. So you need to prepare ahead. You can always sell your books at “show specials” or “book signing special” while you sell it yourself.

At $25 selling to distributors, you would make $5 per book after your cost of $5. And remember our financial analysis in our first article, you can apply a quick calculation of 50% for direct cost of gross sales. So that means you’re left with $2.50 gross margin per book before operating expenses.

By the way, another thing to keep in mind is that once you do have dealers and wholesalers and distributors selling your book, you no longer can sell yourself at discounted prices because it would not be fair to your sellers. You need to protect them at this point.

But for now, based on that $10 retail price, let’s get the number of widgets we need to sell by dividing our monthly figure of $11,667 by $10 retail price.

That’s 1,167 widgets per month in order to achieve our projected sales figures. Now let’s find out how many we must sell per week. We need to multiply the monthly amount by 12 to get a yearly total, then divide by 52. That comes to 269 per week and 28 per day. Now you can tie this in to the “action calls per day” that must be made to sell 28 widgets a day.

Of course, we’re only looking at the simple life here. There will be a variety of situations from type of product, type of industry, type of customer, type of market. If you sell by boxes of 12, that means you only need to sell 2.2 boxes a day — if you sell 3 boxes, you’re ahead. So adapt your particular situation on your spreadsheet, following the process.

Now, who’s going to buy these widgets? Make a list of your prospects. Get directories from various sources (the local library is a good place) and start entering the information on your “call cards”. Get as much information as you can: company name, contact name, address, phone numbers, size of company, etc.

Obviously you’ll approach a ma & pa business differently from a multi-million dollar corporation. Find out what your widget would do to make their business easier or faster or more profitable.

In the Internet business, look for your target market. Then ask yourself “Who are they?”, “Where do I find them?” In other words keywords they use that I can integrate in my “call page” so they will find what I have to offer them.

All that information is what you will use to make your script (or your web page and email follow-ups on the Internet) for your first telephone contact, your second personal contact, your third follow-up contact and subsequent calls. Make sure that your widget is usable by them, remember you sell “benefits” and “solutions” — not widgets that you think are great. If they are great, why are they great from your customer’s standpoint, what is it that makes them great. This now picks up in the “selling” part of business which I cover in another article.

As you find out more about the market, you will also find out about their objections, and your competition. This should not discourage you, but it should stretch and challenge you. Remember, always find out what your competition is doing and do better.

There’s always more than what we can discuss in one article, but, armed with what we have so far, in my next article I”ll talk about financing our venture. /dmh

Diane M. Hoffmann is president of Hoffmann-Rondeau Communications Inc., which offers ONline and OFFline business services and resources. She is the founder and creator of http://www.business-resources-hrc.com and author of several books, e-books and articles, including “Contextual Communication, Organization and Training”. Diane has recently shifted her primary focus to he