Learning how to budget time and money and then sticking to that budget is important, whether you’re an entrepreneur or not. If you are an entrepreneur, they’re both as vital to your business as earning money. You could earn millions, but what would it matter if whatever comes in goes right back out? Not much.
Spending some of what you earn to run the business can’t be helped. But you want to hang onto some of the cash you generate, don’t you? If you don’t already do it, you’ll need to learn how to budget. Stashing a few dollars away is impossible unless you acquire this skill. There’s a trick to budgeting and once you learn it, you’ll benefit personally and professionally for the rest of your life.
Google Budgeting and you’ll find lots of information. Here are a few idea on setting the foundation within your business, being successful and making the most of your hard-earned money.
More than What You Want
As an entrepreneur you probably started your business because of what you want. Budgeting is more about what you need. Before you can set a budget for your business, assess your expenses. How much income will you need to earn in order to operate your business? What might be right for you might not work for someone else. Every business is different.
If you own asuch as a bait shop your expenses will differ from those of a coffee shop. Both businesses will need money to purchase inventory, albeit different kinds. Knowing what you need to generate every month will also clue you in on how you need to price your products—even those squiggly little worms.
As the owner of a coffee shop, you’ll need to cover the cost of staff—barista’s, cappuccino machines, dishwashers, etc. You’ll also have to buy a variety of coffees and pay to keep the lights on. If you own a bait shop, you’ll need to invest in a large enough inventory of fishing supplies and bait to capture the interest of potential customers.
Entrepreneurs who venture to succeed in online enterprises have it a little easier in that there is probably no rent, no property taxes, no janitorial service. Depending on the type of online business, there may not even be inventory. Businesses that ship directly from a factory or sell digital products fall into this category. But you still have operating expenses and need to determine earnings as they relate to pricing.
Determine How Much to Charge
Add up your monthly expenses and you’ll have a good idea of what you need to clear to cover them in a 30 day period. This will help you determine your profit margin: the difference between what you pay for something and what you earn from selling it. For instance, restaurants triple their wholesale costs to cover operations. In some cases, profit margins are higher, such as is the case with sodas, coffee and popcorn.
Determining the amount of money you need to generate will also help you choose the products and services you want to sell. Items with higher profit-potential will more easily help you meet your goals than will products and services that are likely to pick your pocket instead of fill it.
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Daven Michaels is a New York Times Best Selling Author and CEO of premiere global outsourcing company, 123Employee, http://www.123Employee.com. The company employs hundreds of young bright individuals on three continents. His International event, Beyond Business Live! http://www.BeyondBusinessLive.com inspires entrepreneurs to meet challenges head-on in with revolutionary new theories and systems allowing them to design the business and personal lifestyles of their dreams.