Starting Your Own Business: Part 6
The measure of your ability as an entrepreneur is your ability to create a business plan and a budget and then to hit your numbers on schedule. Anyone can pull numbers out of a hat. But the best business people are the people who meet or exceed their numbers on a regular basis. This is the true measure of how good you really are.
Once you have an idea of how much you are going to sell and how you are going to sell it and who you are going to sell it to, and how you are going to deliver the product or service and get payment for it, you then go onto the second part of the business plan which is estimating all of the expenses involved in achieving the sales on the top line.
Take every single conceivable expense, in order, from the largest expenses down to the smallest, from cost of goods sold, the rent for your premises and your transportation all the way down to the cost of postage stamps. It’s useless to play games with yourself, or to pretend or hope that you will not have to pick up certain expenses. There is nothing that makes a business plan worse than the failure of the entrepreneur to include expenses that are unavoidable.
Once you have added up all your expenses, you then create a “fudge factor” of 20% of that total number. For example, if your top line sales for the month are going to be $10,000 and your total expenses to achieve those sales will be $5,000, you create a fudge factor of 20% or $1,000 and you include that as a real expense. Believe me, it will become a real expense, no matter what you do.
Now you have an accurate projection of your net income for that month. You do this for every month, taking into consideration seasonal fluctuations, vacations, cycles and trends in demand over the year, and estimate what your business will be for the next 12-18 months.
Every month, you review your actual figures against your projected figures to see how close you were. By using a spreadsheet program like “Excel,” by changing any one of the figures on a go-forward basis, you can then push a button and change all the subsequent figures so they are more in conformance with your real experience rather than your projections.
Over time, you can become extremely accurate at projecting exactly how much you will sell, how much it will cost to make those sales and how much you will have left over. The better you become at this, the better entrepreneur you become in every other respect as well.
There are two more points with regard to starting a new business. The first has to do with buying an existing business. Here is the rule. No one sells a profitable business. If someone has a business for sale, it usually has a hidden flaw of some kind. Perhaps you can compensate for the flaw and make the business prosper. Perhaps you cannot. But in any case, you must find out what it is.
I have spoken with countless entrepreneurs who have been offered businesses for sale. When they heard this rule from me they went back and investigated, and in every case, they found that there was something in the business that the seller had not told them. In one case, the major customer for the business was closing down and fully 50% of the revenues would disappear by the end of the year. In another case, a competitor was bringing out a better product at 25% lower cost than the best product of this company and their sales would be non-existent within 12 months. Find the hidden flaw and if you can’t compensate for it, don’t buy the business at all.
If someone wants to sell you a business and it has problems, offer to pay them for the business out of the profits of the business. If there are no profits, there is no payment. Anybody who is selling a profitable business will be open to receiving a substantial part of their return in the form of ongoing profits. If a person is reluctant to be paid out of profits, you can judge for yourself whether you want to pursue it.
The second area of starting a business has to do with multi-level marketing. There are many outstanding multi-level marketing companies in America today. Unfortunately, there are quite a few fly by night multi-level marketing companies as well. But here is the rule. Everything that applies to starting your own business, in terms of business planning, selling, budgeting, projecting, and investing many months and even years, applies to building a successful multi-level marketing business. If you are not prepared to invest 3-5 years building your business, don’t get in in the first place.
The greatest trap for would-be entrepreneurs in America is the lure of get-rich-quick schemes, easy money, something for nothing ideas that are advertised and promoted everywhere. There is within the psyche of most young people a passionate desire to short cut the process of success by finding a quick, easy way to jump the line and get to the head of the class without paying the full price in terms of hard, hard work.
Make the decision that this is not for you. Refuse to look for or listen to any get-rich-quick schemes. Walk away. The very act of looking for something for nothing can be fatal to your future.
Once you decide on a new business remember that the primary sources of value in America today are time and knowledge. Time refers to the speed at which you can deliver your product or service to your customers. Knowledge refers to the expertise content that you put into your product or service or business that makes what you do more important and valuable to your customers than what your competitors are doing.
By starting your new business at home, you can enjoy specific financial and tax benefits. Do your homework. Find out what they are. Be perfectly correct in all of your financial dealings, with everyone in your financial life, your bankers, your suppliers, your customers and with the tax people. Remember, life is very long and everything you do financially trails behind you for years and years.
There has never been a better time for you to achieve financial independence by starting your own business than there is today. Anything that anyone else has done, and especially something that hundreds and thousands and millions of other people have done, you can do as well, and probably even better. You can piggyback on the knowledge and experience of hundreds of thousands of entrepreneurs who have put their best ideas and insights into books, tapes and courses. You can become one of the most successful business people in America by simply doing what others have done before you. There are no limits except the limits you place on your own imagination.
About Brian Tracy — Brian is recognized as the top sales training and personal success authority in the world today. He has authored more than 60 books and has produced more than 500 audio and video learning programs on sales, management, business success and personal development, including worldwide bestseller The Psychology of Achievement. Brian's goal is to help you achieve your personal and business goals faster and easier than you ever imagined. You can follow him on Google+, Twitter, Facebook, Pinterest, Linkedin and Youtube.