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Entrepreneurship Finance Uncategorized

Increase Your Profits Immediately With One Practical Method

It may sound like over-promising, but it’s true! You can significantly increase your profits in less time than it takes to watch a movie (especially a long movie like Batman v. Superman, which you shouldn’t be watching anyway when you could be making money to spend on better movies). It’s not a “hack” or a trick. It’s a relatively simple exercise in evaluating and readjusting your ledger.

We personally do it about every 6 months, because why wouldn’t we? Businesses of any size can do it. It’s a simple matter of looking at one part of the standard two-part profit formula: revenue minus expenses. While revenue can be generated in any number of ways, the easiest way to widen the profit gap is to focus on expenses.

Some expenses may seem fixed, but they’re often not. While there are certain non-negotiables, a lot of what you’re spending can be decreased, if not eliminated.

Step 1: Make a List

Write down every single expense your business has, right down to whatever you pay yourself. Order them from biggest expense to smallest. To use our software company WebinarNinja as an example, our list-topper is usually our server provider. Your business will have similar “big” expenses. Suppliers, materials, server space, rental space; whatever they are, tweaking them will be key to saving your business money.

While they may appear un-tweakable, a pleasant surprise may be in store. It’s all about the art of the ask. What if all that stood between you and more profit was just the will to ask? By starting with your biggest expenses and working your way down the list, you can make a massive difference— even if you can only lower some of them.

Step 2: Negotiate

This is the “tough” part, though it’s not so tough. While things like rent or materials may seem non-negotiable, you have to remember that whoever’s on the other side of the table wants to keep your business! If you’ve been using a certain service or supplier consistently and you’ve established a long-term relationship, that’s a major point in your favor. Much of the time, they may be willing to give you a break in order to maintain the relationship.

You have nothing to lose by asking. The only thing that stops most people from asking is inexperience overcoming the awkwardness of negotiations. In that case, it’s never too soon to start practicing! Your odds of catching a break are higher than you might think. I negotiate discounts for our businesses all the time. Sometimes, they’re only in the 10% range. Other times, they’re much more. Month to month and year to year, these discounts add up!

Remember that whoever you’re negotiating with has very good reasons to offer you a price cut. It’s in their best interests to keep long-term customers around, even at a slight short-term loss. A discount may even be offered in exchange for a longer commitment or for bigger volume. Either way, you both win.

Take payment processing fees, which I regularly renegotiate. If you’re bringing in more customers in your second year than in your first, your payment processor can see that. They can see that lowering their cut is worth keeping you (and all your customers) around. If your business involves shipping, there’s lots of opportunity to score a better deal. When I ran a clothing company, I was on the phone with FedEx, UPS, and the USPS every few months increasing my revenue.

While you can accept “no,” there’s always plenty of reasons for them to say “yes.” All it takes is a phone call, perhaps a meeting. It’s always worth asking. Consider all the deals and discounts offered to new customers by various services. If it’s worth it for companies to give breaks for the possibility of a long-term customer, why wouldn’t they do the same to keep an already established one?

Sometimes, the “request” can even be indirect. If you’re consistently in contact with your various service and materials providers, that relationship can lead to offers and discounts you haven’t even asked for. We’ve been using Baremetrics for our analytics for years. In that time, I’ve been in constant communications with them, consistently offering feedback. Eventually, when a new feature was added— one I’d been suggesting to them for a while— I was offered a major discount on it without my having asked at all.

Eliminate Waste

Most of your expense-cutting will come in the form of paying less for various things. However, it’s a good idea to regularly check your list for things you can eliminate altogether. What was necessary 3 years ago might be superfluous now. Services that once came from separate providers might now come bundled (the feature in question from Baremetrics was a way to address missed payments from customers, something I’d had to do separately before).

The only thing I’d suggest not cutting, if it’s at all avoidable, is salaries. Your team needs to feel supported in order to give their best, and adjusting your ledger by adjusting their pay is no way to earn their loyalty. If you have to eliminate a position, or one has become redundant, that’s another matter. But if someone is valuable enough to keep on board, they’re valuable enough to treat right!

With a little organization, a little luck, and— most importantly— the willingness to ask for a better deal, you can keep profits on the rise. Make it a habit, and your business will thrive in the longer term.

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Entrepreneurship Finance Sales

5 Reasons You’re Not Selling Enough— And How To Sell More

Why do businesses fail to grow? Why do sales go into slumps, or never take off at all? Owning a business with insufficient sales can be a frustrating, frightening experience. Without adequate revenue, it’s only a matter of time before it shrivels up and croaks. The good news is that ugly sales numbers don’t have to be a terminal condition. There’s a reason for them, and there are ways to address them.

It may require facing some uncomfortable truths. It will require making some changes. But you don’t have to go down without a fight. By identifying the problem, you can save your business before it’s too late. The following are 5 of the most common reasons we fail to sell, and what you can do about them.

Reason 1: Selling isn’t a priority.

Impossible, you might say. Of course, sales are a priority. Of course, you’re trying to sell— isn’t every business owner? However, many business owners are either uncomfortable with selling, or simply don’t know how to. They think that with a little marketing and a little advertising, a great product will sell itself. They don’t want to be pushy. They think a passive approach will work.

I’d say that If you think you’re “selling” enough, you’re probably not. Almost every successful business prioritizes sales. This doesn’t mean they’re going to door-to-door every day, asking people to consider their yoga class or SaaS. It means they’re doing something that will increase sales every single week. They’re hosting a webinar. They’re doing an email promotion. Whatever it is, they’re not letting much time go by without actively chasing sales.

Some small business advocates preach that if you just “do what you love,” the sales will come. I’ve gotta call nonsense on that. Sales don’t come, they’re pursued. You have to sell, actively and constantly. It doesn’t mean turning yourself into some slick stereotype. It just means making a conscious effort. It’s about hustle, not hassle. You can’t be afraid to ask for the sale, day in and day out.

When a business owner with weak sales comes to me for advice, the first thing I ask is how many times in the last month they’ve had some kind of sales event. Usually, the answer is 0. It’s not enough to simply put the product out there. Look at Macy’s: they have a 1-day sale every week. It might seem silly, but it gives people a reason to show up. John Lee Dumas of Podcaster’s Paradise hosts a webinar every week for the same reason.

Set a goal to do some kind of sales promotion every week. It can be as simple as a coupon code at the end of a blog post. Whatever it is, give people a special reason to buy.

Reason 2: Opaque Pricing

Few things kill sales like a confusing price structure. While it isn’t always easy to determine exactly what the customer will have to spend, it’s important to make it as simple as possible. This is because people, like businesses, need to plan their budgets. A convoluted system might make sense to you. It might even be your way of trying to help the customer spend only what they need to. But if it’s too complex, it’s guaranteed to scare people off.

Especially when you’re selling a service, you’ve got to have clear, simple package prices. Hourly rates for things like graphic or web design are particular problems, because neither you nor the customer know how long a given project is going to take. Whatever you charge, make it as easy as possible for the customer to predict how much they’ll ultimately spend.

Charge for the result, rather than trying to charge for the exact time and resources you’re using. Set your prices from the customer’s perspective— all they want to know is what the result will cost them.

Reason 3: Burned by the churn

Churn, if you don’t know the term, describes the rate at which customers cancel their service or get refunds. It’s an especially dangerous business-killer, because it’s sneaky. It makes your sales stats unreliable indicators, because the money you’ve “made” gets un-made. That’s why it’s vital to track this metric. We use baremetrics for our analytics, which includes churn rates.

If your churn rate turns out to be significant, do whatever it takes to stop the bleeding. Find out what’s causing customers who were initially sold to change their minds. Give your customers a good reason to stick around. Improve support, improve communication; improve whatever you have to in order to keep the business you’ve earned.  

Reason 4: You’re spending too much

Like the churn problem, in this case the sales numbers can look deceptively good. But in reality, you’re not actually generating revenue. As I always preach, the most important statistic for any business is profitability. If what you’re spending to produce each unit is too close to (or heaven forbid, more than) its price, you’re spinning your wheels.

I had this problem when I ran a clothing line. My sales were great. Clothes were flying off the shelves. However, no matter how much I sold, I was never really making money. What it cost to produce each item was around 90% of the price. With soft products, it’s even trickier. You’ve got to factor in costs like hosting and third-party apps on which your product depends. You’ve got to track your costs honestly and thoroughly, leaving nothing out of the equation— including whatever you’re paying yourself.

Reason 5: You Ain’t Write Good

Finally, invest time in improving your sales copy. The words you use in ads, emails, blogs, and webinars are at the heart of your salesmanship. For help with that, I recommend reading This Book Will Teach You How To Write Better by Neville Medhora. It’s very short (100 pages), but it’s a fantastic primer on articulating yourself in a way that moves product. With the right messaging, you can reach customers who would otherwise ignore you.

When sales aren’t happening, it’s a horrible feeling. The end of your business isn’t around the corner, but you know it’s down the road. The cure is to stay in sales mode. Ask for the sale in every way possible, as often as possible. Offer value, prove yourself to the customers, and entice them with offers that make sense. Chase the sales, and orient your business practices around them.

Categories
Finance

How To Fight Attempted Charge Backs From Banks— And Win

Charge backs happen. Ideally, they don’t happen often. But it’s important to know how to deal with them when they do. The charge back is the “nuclear option” for the customer who wants a refund. Rather than requesting one from you, they send their bank in like a financial cavalry to demand it on their behalf. Usually, the bank is temporarily covering the customer’s refund with their own money, so it’s in their interest to use their considerable resources against you.

Usually, charge backs come from customers who are looking for a way to skirt your refund policy (assuming you have one; more on that later). They’ve missed the window for a refund, or they haven’t met the (hopefully clearly) stated terms to qualify for one. Sometimes it’s an honest mistake; they don’t recognize the charge, or forgot they signed up for your service, But mostly, they come from customers who feel entitled to a refund that’s outside the normal scope.

The good news is, you can fight the bank, assuming you’re in the right. More importantly, you can prevent charge backs from happening with some pretty basic pre-emptive strategies.

The Black-and-White Defense

The absolute best way to defend against charge backs is to keep them from happening in the first place. This is accomplished by having clear, precise terms and conditions in place that spell out your refund policy. A well articulated, airtight policy that lays out specific terms is the best way to win a refund dispute before it occurs. Somewhere before checkout, the customer should have to acknowledge and accept your terms and conditions. We’ve all checked that box when making an online purchase. It’s there for a reason!

For example, our policy at WebinarNinja is that the service is free for the first 2 weeks. After this trial period ends, the customer is charged. This is spelled out very clearly in our terms and conditions. When a customer is charged on that 15th day, there’s not much of an argument to made for deciding they don’t want the service anymore and demanding a refund. The key is to eliminate the element of surprise. If the customer isn’t surprised by the charge, then you’re not likely to be surprised by a charge back!

Keep Thorough Records

Be organized with your business correspondence, especially concerning purchases and refund requests. Keep a thorough record of emails, support requests and tickets, and every other kind of correspondence. With all of this information saved and time-stamped, it shouldn’t be difficult to resolve disputes in your favor.

This is especially important for your payment processor’s sake. A charge back differs from a refund in that instead of the customer getting a refund from you, the bank is demanding one from whatever payment processor you’re using. This creates a hassle for the processor as well as yourself. To make it easier for them (and maintain good relations between your business and theirs), make it as easy as possible to deny the refund. Have your stated terms and conditions plus your correspondence organized and easily accessible. Be able to present the evidence as soon as the question is raised. Be efficient, and it’ll pay off when you need it to.

Take It In Stride

The worst thing you can do in the event of a charge back is nothing. If you don’t fight it, the customer will more than likely get the refund. This not only costs you money, it can affect your reputation—  as well as your relationship with your payment processor. It’s extremely difficult to reverse a decision in favor of the customer, so stay on top of it. If the customer is in the wrong, you can’t let your business suffer for it.

Charge backs don’t have to be a major issue. If your terms are clear, your records are tight, and your customer service is good, they should be a rarity. When they do occur, it’s still possible to resolve in a way that takes the banks and processors out of the equation. If possible, reach out to the customer who’s requested the charge back and see if you can work things out.

There may be a simple mistake on their part that you can clear up. There may be a mistake on your part that actually warrants a refund. If so, it’s better to handle it privately, without the hassles that come with an official charge back. Either way, maintaining communication with customers from start to finish is the best strategy. If you do so, the sailing will be much smoother.

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Entrepreneurship Finance

3 Ways To Start An Online Business (With Very Little Money)

The goal of entrepreneurship can be a broad one. Sometimes, all we know is that we want to be our own boss, live according to our own vision, and make our way independently. We may not have our whole future mapped out. We may not have the ideal product designed in all its detail. Most of all, we may not have much capital to work with.

That’s just fine.

In fact, when you’re in this more broad phase, you’re more “ready” than you think! Entrepreneurship isn’t about creating some magic product or taking the gamble of indebting yourself to investors. It’s about learning how to market, sell, innovate, and repeat the process. It’s a marathon, not a sprint. And sometimes, the most important thing is just getting started.

If you’re looking to start your first business— or even your 5th— but you don’t have much by way of money, there are options. With very little startup cash, you can get in the game by choosing the right kind of business and taking advantage of the new economy. I’ve personally done it more than once. It’s a great way to minimize risk, test out ideas, and generally practice your entrepreneurial skills.

Service-Based Businesses

One thing you can sell that doesn’t cost a dime to produce: a skill you already have. Design, writing, photography, whatever it is you can do, sell that. The overhead is 0 or close to it, aside from whatever equipment you might need (but you probably already have that anyway). Selling a skill is the first and most obvious way to get your independent business rolling— but it’s not the end of the story.

One mantra we like to preach here at The $100 MBA is that time is NOT money. Trading time for money is a means to an end, not a business model. It’s not really possible to scale up a business when you’re the only source of labor! Therefore, the next step is to find others with your same skill, bring them onboard, and take your cut.

The term is arbitrage. For example, one of my early projects was a graphic design business. At first, I did the designing. As the business grew, I did less. Eventually, I did very little of it. I simply found other designers, and brought my clients to them. My business was the hub; my job was simply to arrange the service. The point is, starting a service-based business doesn’t have to mean you’re doing the service, at least not indefinitely. Of course, if the work is your passion (understandable for artists or writers), you’re free to do as much as you wish.

Service businesses, especially arbitrage, are perfect for low-to-no capital entrepreneurs. There’s no significant overhead, no inventory, no membership services. There’s just you, your brand, and a Paypal account. To expand your business, simply offer discounted services; as a graphic designer, I would offer a heavy discount in exchange for referrals. That’s exchanging time for growth!

Product-Based Business

While service-based arbitrage is a great way to go, there is a product-based version. Put simply, it’s the oldest model in sales: buy low, sell high. Cars, clothes, electronics, you name it. Scour the internet for the best deals, and resell at a profit. This is nothing new or revolutionary, but it is effective. Ebay and Amazon are rife with steeply discounted goods just waiting for a middleman to find greater demand for them. I personally bought and sold cars this way, making hundreds or thousands per transaction.

Affiliate Marketing

Another way to start turning a profit without investing much is affiliate sales. I’ve said and written a lot about this model, but in a nutshell it’s this: you become a salesperson for another business, leveraging your reputation to move their product. Commissions can be high— some affiliate marketers get from 50 to 90 percent of the profits, depending on the situation (it’s even not unheard of to get 100%).

Making money this way requires putting a great deal of time and effort into marketing, especially content marketing. If your recommendation is going to be worth anything, you have to be recognized as an authority in your niche. You have to consistently produce engaging, valuable content. You have to be someone that people trust.

A great example of this (and one that shows you how to avoid the pitfalls of affiliate marketing) is Pat Flynn of smartpassiveincome.com. His ethical, honest approach to affiliate marketing utilized and boosted his own credibility to great effect. He only ever recommended products that he used, and that worked. Nowadays, he still does some affiliate marketing, but mostly he’s focused on his own products— for important reasons.

What’s crucial to remember is that affiliate marketing is a stepping stone, not a goal. If you overplay it, if you don’t have your own product to sell eventually, you won’t be able to sustain your business. Your audience will grow tired of getting nothing but sales pitches for other people’s products, and wonder why you don’t offer something of your own. Affiliate marketing can be a great boost, but only within its limits.

All of these three options can be used to build a foundation for your independent enterprise. They’re low-investment, low-risk, and practical. Most importantly, they help you develop the abilities you’ll need, no matter what industry you ultimately thrive in. These early projects are the first steps.

Don’t wait until you have the perfect product, the perfect plan, or a massive stockpile of capital. Start doing business now, and see where things go!

Categories
Entrepreneurship Finance Leadership Uncategorized

Time Is Not Money

“Time is money.” It’s an age-old business adage, popularized by Ben Franklin’s Advice To A Young Tradesman. Franklin argued “He that loses five shillings worth of time loses five shillings, and might as prudently throw five shillings into the sea.”  Since then, the phrase has been used to exhort business people of all kinds to work more hours.

No disrespect to Ben, but enough already.

The phrase was meant to encourage focus, to remind you that any time you spend not working is draining revenue. That may be technically true. But equating time with money doesn’t encourage productivity so much as it encourages misery. It turns work into a chore rather than a calling. It surrenders us to the idea that money is more valuable than time. It isn’t.

I propose we flip this equation. Time shouldn’t be something we spend in order to acquire money. Money is something we should spend to acquire time. That’s the point of business. That’s the point of entrepreneurship. By starting an independent business, you free yourself from someone else’s demands on your time.

Time Is The Most Valuable Commodity

Money can be spent, earned, loaned and recuperated. Time is different. There’s no getting it back once it’s gone. It can’t be regenerated or negotiated for or made to pour out of a slot machine. But like money, time can be invested in order to produce more of itself. We all know our business represents an investment of time. Rather than seeing the return on that investment as money, a healthier outlook is to see more time as the ultimate reward.

In Tony Robbins’ latest book Money: Master the Game the self-help legend details his philosophy of prosperity. The ideal earner, he argues, is ultimately a smart investor. He claims that the absolute worst investment one can make is an investment of time—if money is the expected return. The worst! This may fly in the face of conventional wisdom (and certainly in the face of conventional employment), but I couldn’t agree more.

Most people exchange time for money on a daily basis. We get paid by the hour, the month or the year. Every day, across the globe, people trade this precious, finite resource for money. We trade life itself for greenish paper. We trade happiness for numbers in an account. It’s like trading gold for pigeon droppings.

Instead, let’s think of time as the most valuable currency. Life gives you an account. This account accepts no deposits, only withdrawals. Every day you withdraw 24 hours. You spend 8 or so sleeping, leaving about 16 hours of irreplaceable denominations of existence. It’s definitely unhealthy to spend that time on a job you hate—but you shouldn’t spend too much even on a job you like!

I’m not suggesting we give up our livelihoods and live under a bridge, enjoying all the free time. What I am suggesting is that sometimes entrepreneurs get into business to free themselves, and instead end up enslaved. Devoting excessive amounts of time to your business in order to reach that next milestone, and the next, and the next, defeats the purpose. You can succeed on your own terms without sacrificing what matters most.

How To Take Back Time

Why did you get into business? How can you avoid trading one cage (conventional work) for another (independent work)? Once you’ve decided to prioritize time over money, how can you go about earning more of the former?

Planning. While it’s reasonable to devote a great deal of time and energy to getting your business off the ground, you need an exit strategy. Your exit is the moment you can hand over the reins of your business to people you trust. It’s the moment you finally extricate yourself from the day-to-day work. It’s the moment you’re free to live off of your creation, instead of it living off of you.

At some point, your business will reach what I call a “personal profitability marker.” That’s the point at which the business is sustainable. Revenue pays for all operations and for your own personal needs and living expenses, with money to spare. From here, you’ll be able to start moving towards that exit. As soon as you can afford to, pay someone else to take one task off your hands. Then, one by one, subtract more and more tasks from your own schedule.

As more revenue allows you to pay more people to produce more product which produces more revenue, you earn more time. This is the ultimate exchange. This is the transaction that makes independent business worth the effort. This is how you can—in the only real sense—buy time. It’s the greatest profit possible.

Start with something small, like emails. Train someone else to handle the crafting and sending of emails to your audience. Once they’ve mastered it, the time you normally spend doing it is returned to you. Then, move on to your blogs. Scheduling. Payroll. Customer service. The list goes on. Groom managers to make important decisions. Mold them into people you can trust to run operations. Keep files on your own decision-making process for your protégés to study. They get experience, skill, and pay. You get time.

In Robert Kiyosaki’s book Cashflow Quadrant, he describes a left-to-right continuum from employee to investor. The employee is at the beginning of his working life. He or she has the least favorable exchange: time for money. To the far right is the investor, who only exchanges money for time. That’s the goal of entrepreneurship: to be the person whose work creates something self-perpetuating. While Kiyosaki is under scrutiny as the kind of financial “guru” whose advice should be taken with a few grains of salt, the concept is valid.

I’m working on that process now. The $100 MBA Show podcast takes time. Refining our webinar platform, Webinar Ninja, takes time. On top of that, there’s speaking engagements, interviews, conferences, etc. But even all that is less than I used to do. Little by little, Nicole and I have unburdened ourselves of various duties by finding good people to do them for us.

It costs money. But in return, we get something so much more valuable.

Sponsored by the bester Forex Broker

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Business School Entrepreneurship Finance Sales Uncategorized

Spending Your Profits Wisely

So you’re making money. Revenue is outpacing expenses, and there are a few more zeroes in your bank account. Your labors are starting to bear fruit, and you’re at the point where all your “needs” are covered, and the door to “wants” is finally open.

This could be a problem.

The challenges of success require no less careful thought than the challenges of adversity. As an independent business person, you want to be prepared to make the right moves when the momentum is carrying you forward. You’ve got to be prepared for success, so that you can not only parlay it into even more success, but so that your business can maintain the identity and character that you envisioned. Most importantly, it’s necessary to define your priorities regarding wealth, work, and overall happiness.

That’s why this post is about “spending” rather than “investing” your profits. Investment is one way to spend your profits, and it’s definitely worth considering. At some point, however, you’ve got to pay yourself. Deciding how to do so in a way that’s consistent with your broader goals is part of the entrepreneur’s challenge, and an important component of maintaining long-term success.

What Are Profits For?

Let’s say, for the simplest example, that you’re a solopreneur with an online product. You’ve sold enough eBooks and courses to more than cover your overhead, and you’re left with a sheer net profit of $8k. What’s the best way to spend it? Do you have to plow it back into your business? Is there a certain ratio of business use to personal use that allows you to enjoy your life while still being a responsible business owner?

That all depends on you, and your own priorities. Naturally, what you pay yourself has to cover basic necessities like rent, food, and Netflix. Beyond that, what you choose to do with your money should be informed by what kind of business you want to run, and what kind of lifestyle you consider enjoyable.

What kind of growth are you ultimately looking for? Did you get into business hoping to build the next Google, or do you simply want the freedom that comes with supporting yourself on your own labor? Do you want to manage a business with multiple employees, or do you enjoy the peace and solitude of solopreneurship? Are you trying to maintain your current lifestyle, or are you preparing for the next plateau?

It’s important to ask yourself these questions as early as possible, rather than waiting to cross that bridge when you come to it. Having some guidelines as to the business and life you want to create will allow you to make decisions about your profits that will help you realize your own unique goals, not just some vague notion of “success.” The more specific your vision for yourself is, the better prepared you’ll be to turn profits into positive results.

Spending vs. Reinvesting

When you’ve got some extra capital on hand, the temptation to spend it is strong. Some people will want to spend it on luxury items like cars, clothes, travel, and fine dining. There is surely nothing wrong with that, if that’s what you want. But knowing you want those things is different from assuming you want them, and balancing those desires with your business goals is something that requires careful forethought.

The key is to decide on a ratio of personal spending to business reinvestment. What that ratio is will depend on how large you want your life to be, and how large you want your business to be. If you have that $8k in the bank, and all of your necessary expenses are met, try splitting the profits between your business and yourself. If $4k worth of equipment or training could elevate your business to the next level (and you want your business to be on that next level), then there’s nothing wrong with spending the other $4k on a much-needed vacation. If, however, you’re doing roughly the amount of business you want to be doing, and you’re financially secure, then spending all $8k on something personal may be a perfectly legitimate reward for yourself.

Types of Reinvestment

If you choose to devote some or all of your profits to reinvestment, make it skillfully targeted reinvestment. This breaks down into two categories: growing sales, and growing the business itself. These are related, but distinct categories.

For example, new equipment, a website overhaul, training, or hiring is an investment in the business. Investing this way doesn’t directly promote sales, it simply enhances the size, capacity, or capability of your company. This can be a precursor to more sales, but not necessarily. It could simply result in improved product quality or a diversification of your product line.

Directly boosting sales calls for a different kind of investment, generally a marketing one. Advertisements, email offers, promotional discounts (the decreased revenue from the lowered price being the cost of the promotion), and other forms of direct outreach are sales boosters. They may bring in loads of new customers, which you’ll then need the capacity to serve in the long term. This means more success, more profit, and more work- it that’s what you want.

Which form of reinvestment you choose depends on your own business plan. Do you want a big, sprawling business that serves as many people as possible? Would you rather have a niche business with a small, loyal following that prioritizes a more personalized approach? Neither answer is “correct;” it’s your business. But knowing which you prefer is crucial in deciding where to funnel your profits.

The Lifestyle Question

I’m fortunate enough to have had a few great mentors and guides in the world of online entrepreneurship. Michael Port taught me how to communicate. Noah Kagan taught me how to develop software. Another major influence in my approach to business has been Thrive’s Gary Vaynerchuk.

Vaynerchuk has made millions as a creative business thinker and entrepreneur, but his approach to personal spending is what had the most impact on me. He specifically avoids conspicuous consumption, eschewing flashy cars and other obvious signs of wealth. That’s not to say that conspicuous consumption is somehow wrong- it’s to say that a pre-determined notion of what lifestyle makes you happiest is a better goal than simply wanting “more.”

“More” is a vague and limitless goal, which is to say it’s not a goal at all. If the cost of a Porsche could buy your business the capacity it needs to sustain a modest, but stable revenue stream for the foreseeable future, a person with modest, but stable goals would do better driving a perfectly good Honda. If the cost of a Honda could allow you to see the French countryside, then someone with a travel bug would do better booking a plane ticket.

A lot has been written about how to grow your business and make as much money as possible. What you do when those efforts start to produce results, however, is something entrepreneurs might need to spend some more time considering. Start by defining what matters most to you, and as your business grows, balance the need to profit with the need to reward yourself for doing so. Rather than an open-ended quest for revenue in general, remember why you went into business for yourself in the first place- to build the life of your choosing.

Categories
Entrepreneurship Finance Uncategorized

The Importance of Financial Goals

Business is all about goals. Whatever the industry, all entrepreneurs share a common one: to be their own boss, make their own way, and carve out their own place in the market- in short, to make a living on their own terms. This goal is broad, however. If you’re serious about reaching it, a series of smaller goals or milestones have to be reached first. That’s why it’s important to establish specific financial goals. Without doing so, it’s almost impossible to track your progress towards true financial freedom.

The question is how to set them. Should they be set in terms of raw profit? In terms of growth achieved from previous years or months? In comparison with the competition in your industry? The answer, in a nutshell, is all of the above. Mapping out your path requires paying close attention to how much your business is making, how much it’s growing, and how well it’s competing in the marketplace.

Goal-Driven Priorities

Financial goals are especially important in the beginning, when they represent the steps between the idea of a business and a sustainable financial reality. Without careful, ambitious (but realistic) goals in place, it’s unlikely you’ll get off the ground-even if you’re selling. In education, there’s a concept known as backwards design: you start with a desired endgame, and tailor all planning, execution, and even improvisation towards achieving it. Business works the same way. Before you make any move, you’ll want to ask yourself how it will affect your ability to hit that next milestone, that nearest financial sub-goal.

For example, if your product is something educational or informative, like a course of study, determine how many courses you’d have to sell to reach a desired monthly revenue. If the goal is $5,000 for the month, you’ll need to sell 100 courses at $50 each in order to stay on track. If you’ve only sold 30 by the middle of the month, maybe more time has to be devoted to marketing. Maybe you’ve surpassed the goal by the middle of the month, and can devote time to analytics concerning why it sold so well. Either way, a specific goal is needed to help you establish priorities.

With those priorities established, you can continue to move through the plateaus of your business’s growth, always using your financial goals as the yardstick of your progress.

Layered Goals

Determining where exactly to set your goals is the most challenging part, and will vary from business to business and product to product. In my experience, it’s best to establish a firm range of numbers, with the low end representing what you need to achieve, and the high end representing a new plateau or ideal accomplishment. This allows you to be realistic about what your business needs to do for survival, while being optimistic about its full potential.

To establish the low end, or minimum goal, you simply have to reckon all expenses and surpass that number. Professional expenses like materials, paid hours of labor, hosting fees, etc. are obviously parts of this calculation, but so are personal expenses, right down to the cost of lunch. This has to be a ruthlessly honest calculation, so that it represents a legitimate minimum. If you don’t make this number, it’s time for drastic measures. Even if you’re in the type of business that typically loses money at first (like a restaurant or bar), it’s important to establish how low is too low.

To establish the high end, choose a number that will allow your business to move on to another, loftier goal. How much money would you need to reinvest in order to produce that new product? How much would you need to build that addition to your location or bring in that new equipment? At what point could you afford to bring in a new team member? Whatever the high-end goal is, make it something that will allow you to plow your success right back into the business in order to move forward towards the ultimate vision you started with.

As you establish these goals on a monthly, quarterly, and annual basis, bear in mind the need to maintain the gains you’ve made. If you’ve sold just enough to meet a certain goal, remember that “customer churn” is always working against you, and stay relentless in your pursuit of new business. Parlay the brand loyalty you’ve built into an always-refreshing stream of new customers, so that your foundations stay strong as you reach for the next milestone.

Sticking to your goals

Whatever financial goals you set, make sure that they’re firm. Having the gray area between the low and high ends will give you room to accommodate reality, but it’s important to commit fully to the numbers you’ve mapped out. Avoid “moving the goalposts” within the term established. If you fall short, figure out why and adjust accordingly. If you exceed the goal, reinvest the excess towards meeting the next one. If you simply meet the goal, celebrate it. Take the time to be proud of your accomplishment, and “reinvest” the gains in morale.

If you’re working with a partner or group of partners, be sure to have an open, precise and clear conversation about financial goals. Every partner has to agree to each goal, and every partner should have input when it’s time to establish them. Have an honest conversation about what goals are realistic, and what goals will move your company to the next level.

Starting Out

I’ve found that the most common mistake new entrepreneurs make in establishing their goals is setting them too low, rather than too high. Don’t be afraid to be ambitious, even as you’re being realistic. If your goal is easy to hit, it’s too low. If there’s zero doubt as to whether you’ll hit it, you risk plateauing in the long term. Growth, while exciting, should be a little uncomfortable. It should involve a certain level of risk. Tough but achievable goals force you to stay on your toes, and reinforce your commitment to innovation.

If you’re new to the world of independent business (especially if you’re pursuing your business on the side at first), get into the habit of setting financial goals early. Even if it’s as low as a few sales a month, or $100 in revenue, or even if it’s not a goal that represents profit, get into the habit. It will train your mind to see things in terms that make for big success down the road.