Times have changed. But business is still the same — if you make a dollar and spend a dollar, you’ve made zero profit. If you make a dollar and spend fifty cents, you make fifty cents profit. If you make a dollar and spend a dollar fifty, you lost fifty cents.
Now read this again, changing the dollar figure for one hundred thousand dollars and the fifty cents for fifty thousand dollars.
That’s what business is all about. The secret in business is not knowing how to make or sell the widget, but how to make money at making or selling the widget – or at the very least come out even after covering all expenses – including your salary!
So, what will it take to get into business? In another article, I talk about how you can sell for an employer or for yourself and how selling is the key to staying in business. And that goes for ONline or OFFline businesses.
One of the speeches I delivered at a local Toastmasters’ Meeting was “If you’re not prepared to sell, then don’t get into business”. And you know, business starts right there. No sales, no business.
If there are no sales you might as well close the door, you might as well not start at all — you’ll only lose out over the next twenty-four months. And certainly if there are no sales, don’t mortgage your home — that would be suicide.
First of all, you should have an idea of what type of business you want to start. Is it a service, retail, manufacturing, Internet?
Then analyze your idea and figure out the cost. Even the Bible gives good advice on that, saying, “For which of you, intending to build a tower (a business) does not sit down first and count the cost, whether he has sufficient to finish it?”(Luke 14:28).
What are the direct and indirect costs? How much do you need for yourself? If you’re single, will $24,000 do (for now)? According to Statistics, that’s poverty line for a family of two. Will $28,000 do? More?
If you have a family, you’ll need more. My accountant told me once that if a couple wants to save money, they’ll need to clear $4,000/month. If you’re starting part-time or if your spouse is supporting you financially while you build the business, that’s fine, still write down a normal salary that you would get if you worked for someone else. You’ll see why later.
Put yourself on commission instead of a salary, that’ll encourage you to sell more. Then list all the fixed expenses, the biggest usually being the rent. If you’re working out of the house, that’s fine too, write down what you would pay if you rented a unit. You have to force yourself to get selling.
Don’t be afraid to go through this exercise. The reason why most — not all — but most people fail in business is because they don’t “bother” to put a business plan together. They put their heads in the sand and hope that the Lord, or Fate or Lady Luck will provide when the time comes. Yes they will provide but only after we’ve used wisdom.
Continue listing every expense you can think of, each as a monthly cost. List them under four main headings of Operating, Selling, Administration, Finance, (in this article, we’re not looking at manufacturing, just resale of products or services), rent, telephone, equipment rental, supplies, freight, outside services, gas, sales expenses, sales commissions, deliveries, advertising, promotions, help/staff salaries, car maintenance, etc. — think of everything.
You say, I already have a phone at home. Great, write down the monthly cost anyway. You say I already have a car that I drive and fill up every week. Fine, write that down too. Your advertising and promotion costs should be from 2% to 10% of your gross sales, the higher figure at the onset of a new business.
If you’re going to pay people commission, write that down (if they sell $10,000/mth and get 20%, that’s $2,000/month. Then you’ll have the expenses for them being on the road, etc. Or, in an Internet business you’ll give 50% commission to affiliates, that’s $1,000 for every $2,000 sales you make, and don’t forget to deduct your merchant costs and your cost of the web site and services.
Take a total of these and multiply them by 12 for annual figures. This should give you a good heads-up on what it will take to start a business.
Thanks to Diane M. Hoffmann
