The important business about Your Own Business (Part 4)

There will be numerous resources available to you to help with your business. So many options available, in different formats, written by different people, with various skills and knowledge - some theoretical, and some practical. So where do you start?

Well, I can tell you what I used, that is still relevant today. I can make some suggestions, but it's up to you to determine what is relevant for your situation, experience and requirements.

Sales and Marketing:

• The 22 Immutable Laws of Marketing - by Al Ries and Jack Trout A great book, that explains how marketing works in the minds of people. How to maximise your market share and more.

• Sell or be Sold - by Grant Cardone A book on the mindset of selling.

• The Closer's Survival Guide - by Grant Cardone A book on sales techniques

Administration:

I have not come across an instruction manual on this topic. However, in today's modern world, there are any software packages available that will handle most business administration tasks. Beware that some may do a better job than others in certain areas - especially inventory handling, so you need to do your homework and ask questions of the company selling the software - don't be afraid to ask for a live demo to show you how the software handles your particular application.

Cashflow:

If you are ok at using spreadsheets, then I suggest you use one to create a breakeven analysis tool for your business. The tool needs to take into account the following items:

• Monthly fixed costs - power, rent, leases, salaries, licences, insurances, etc

• Monthly income - sales income (you MUST know your average profit margin on sales which you can obtain from your company tax returns)

• As your Monthly Sales increase, your profit should increase.

• You need to multiply your monthly sales figure by your profit margin to give you your Gross Profit (GP).

• You need to subtract your Fixed Monthly Costs from your GP to give you your Net Profit (NP).

• You will need to plot monthly sales against your NP (see the example below)

Monthly Sales $50,000 $75,000 $100,000 $125,000

GP (40% margin) $20,000 $30,000 $ 40,000 $ 50,000

Fixed Costs $28,900 $28,900 $ 28,900 $ 28,900

NP -$ 8,900 $ 1,100 $ 11,100 $ 21,100

As you can see, with average monthly sales of $50,000, the business runs at a loss of $8,900. When sales are an average of $75,000 per month, there is a profit of $1,100, and as sales increase, the net profit per month increases.

If we plot monthly sales against NP, we will see that the breakeven point for the business is an average sales volume of $74,000 per month.

If the average sales volume is $125,000 per month, the annual NP of the business is

12 x $21,100 = $253,200 per year over and above all costs (including salaries).

The spreadsheet MUST take into account any changes in your fixed costs and apply them to the breakeven calculations.

You should never stop learning new and better techniques to apply in your business.

Always keep trying to improve yourself - the better you are, the more effective and profitable both you and your business will be.

Keep learning new sales and marketing concepts, look for and consider new ideas.

Manage your cashflow and focus on making profit.

Do you understand what a "business" actually is???

Most people view a "business" as a company or organisation of some formal description. They see it as something that people work in, that has daily transactions. Some think of it as a retail outlet, an online store, a manufacturing business, a service provider (accountant, solicitor, consultant etc). Basically a transactional entity that supplies traditional goods and/or services for payment.

However, that is NOT how I view a business.

For me, a business is a vehicle used to generate a profit.

As such, I had my 'traditional" business vehicle (my company that I "worked" in) to generate a profit, but ALSO, my property investing vehicle is also a "business" used to generate profit from rental returns and capital gains. Taking it one step further, my equity investing vehicle is yet another "business" generating profits from dividends and share growth.

When one views ANY profit generation vehicle as a business, and treats it like an actual business, by constantly learning how to do it better, looking for opportunities, understanding the respective market, watching the cashflow, and making sure that all facets of the "business" are running at optimum levels, then that business vehicle will also serve you well and generate profits to the best of its (and your) ability.

Anything that you create that is designed to generate a consistent profit for you, is a business of yours - be sure to treat it as such.