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Showing posts with label lower expenses. Show all posts
Showing posts with label lower expenses. Show all posts

Sunday, November 5, 2017

FIVE THINGS YOU MUST DO WHEN STARTING BUSINESS

ONE
Own your name. Make sure the company name you choose is one with an available trademark and Internet domain name. To see if a trademark is available, you can do a trademark search online through the United States Patent and Trademark Office's website. Failure to properly obtain a trademark could put your fledgling business at risk -- not to mention that the time and money you have invested in establishing your business name could go to waste if someone else owns the trademark. Don't assume your new business name is not trademarked because you were unsuccessful finding such name on the Internet, either. Someone could have used the name for a business that closed, or filed a trademark and never used it.

TWO
Get in with the law. Understand what regulations, licenses and taxes you will need to follow, obtain and pay for your new business. After doing some initial research on your own, consult with a lawyer and accountant to confirm your understanding and to help structure your business to be in compliance with the law. Generally speaking, you will need to need to (i) ensure you are charging the correct amount of tax your service or product that your business is promoting, if applicable and (ii) obtain all of the proper licenses needed to run your new business, at a minimum. Establishing a successful business is hard enough. The last thing you need is some technical legality or administrative detail to stand in the way of your success.

THREE
How much do you need to live? When working on your business plan, do not forget about the most important factor: YOU. You need to take into account your living costs. Rent, mortgages, and health insurance -- these are all things that don’t pay for themselves. You will most likely need to cut out all the unnecessary extras you can live without. Make sure you account for unforeseen or unexpected expenses by factoring a little flexibility into your budget for those “just-in-case” moments. You might even consider taking a part-time job until things pick up with your new venture and speak to a financial planner to help you budget yourself properly.

FOUR
Where are you in your life? Starting a new business takes brains, bravery, and what will seem to be endless hours of hard work. When you own your own company, there is always something that has to get done. You will most likely find yourself working at least 60-80 hours a week for the first two years. With that said, I’ll ask you one very important question: Are you ready to give up your personal life for the next three years?

FIVE
Don’t over -- or under -- spend. Starting a business can be incredibly financially taxing on you and your family. You will need to learn where and when to spend. It’s important not to waste those precious seed dollars but it’s equally important to spend where necessary. In any business, you often have to spend money to make money.  Don’t skimp out on things your company needs. For example, it may be worth it to put $1500 in an online vendor listing, but it may not be necessary to give every new customer a $15 mug. Be sure to keep up with technology too -- there are many time-saving programs and apps (including free or inexpensive ones) that can help you keep track of it all, and as we all know, “time is money."



Monday, November 10, 2014

IMPROVING YOUR COMPANY'S BOTTOM LINE

There are two basic methods for improving the bottom line of any business. 
  1. Lowering overheads / costs.
  2. Increasing cash flow. 
The former is a great deal easier to accomplish than the latter. Increasing cash flow means developing new business, finding new customers / clients or providing more products or services. The latter is a relatively simple exercise if you do not know how much revenue you have to generate each month to make a profit.

If you plan on reducing costs as a first stage, you need to know what your monthly "nut" is. The monthly nut is the amount of money required to operate the business month to month including every business cost down to the cost of toilet paper and excluding the business owners or partners salary or draw. That can be included in the monthly total if you wish.

In the businesses I have owned, I have always wanted to know what my monthly cost is before my draw. How much money do I need to bring in over the next 30 days to cover my company expenses.

If you don't know what your business overheads are, how will you know if your business is profitable? First step; create an Excel spreadsheet and list all your expense categories. Next step is to ensure you get receipts for every purchase whether it is paid by cash, check or credit card. With items like parking, if you just use coins, keep a small notebook in the car and write down the amount you paid the meter. If you do a lot of driving and a lot of roadside parking, you will be surprised to see how much you spend on meters. Keep in mind, this amount comes off your business taxable income. Same with meetings over a coffee. Or buying a train ticket, as examples.Get a receipt and keep a file folder for the receipts. Total them up at the end of the month. Carry out this exercise every month for the next 3 months and then do an average. 

Costs that have to be paid annually, divide over 12 months in your spread sheet. At the end of 6 months, divide by 6 and at the end of the year, divide by 12. 

Now figure out what you (and your partner or partners) need to draw each month. Add this to your monthly total and now you know exactly how much revenue you need to generate each month. From this, you can deduce if the mark-up on the products you sell  or the hourly rate you charge for your services is is sufficient. 

You do not need an MBA to carry out this business analysis.