Wendi Kelly from Life’s Little Inspirations left a great comment on my last post The World Is Still Turning. It was actually her comment that inspired this post, so thank you Wendi. I’ve been meaning to talk about business costs and how they can affect you a while back but somehow lost the idea amongst many (didn’t have my Moleskin back then yet).
Business costs can take a huge slice off your bottom line. Many home entrepreneurs seem to forget this fact conveniently. You might see a great income statement on a particular website and be drawn to that method of monetization, but unless there is an equal listing of associated business costs, the figure is actually very distorted. Mind you, I’ve been guilty to do that myself when I started out.
Convenient lack of information and how the brain can simply forget
I’ve had to learn this back when I was in network marketing. As required, I traveled to a company meeting pretty much every month’. Successful leaders were pouncing around the stage, proclaiming their awesome income for us to get sucked into the whole “hype”. I believed it was possible to earn $5,000/month after being two years in that business.
After all, they have done it. So why couldn’t I? Plus the figure wasn’t so unrealistic anyway. Little did I know that they conveniently “forgot” to tell us that they were spending $2,000/month in advertising. This of course brought their “real” income to $3,000/month instead.
As you can see, it is easy to overlook that part, because we so want to believe that we can do the same. The mind works in mysterious ways and blinds us to the obvious.
I might add that I don’t just take things at face value either. I usually question things and always double check, but in that case I simply overlooked the obvious and allowed myself to be brainwashed.
I suspect many of you do the same.
To run a successful business upfront, you need to follow one tip. This tip is what turned my freelance writing business to success, from previously failing in network marketing.
Spend less than you make! Generate Cash Flow.
I’m all for spending money to make money. But in my previous business I went to the extreme and spent big because it was required for “serious business builders”. Today, I can say this was a simple means to feed the pockets of my upline. No hard feelings. It was my own fault to have been so dumb.
Plus, I guess once again I learned a very valuable lesson.
Back then I spent at least $1500/month for websites, an autoresponder system, travel, advertising, flyers, marketing and more. As you can imagine, I was draining our savings account rather fast, because my income was along the lines of maybe $300-500/month if I was lucky.
Now multiply that for 30 months. Yep, serious money issues and an even more serious depression. In all that time (or at least for two years) I believed that next month is going to be the one I was going to crack the code and see some good income.
I suppose there was one good thing that came out of all that. At least I won’t have to pay huge tax bills for a while, since my profit and loss statement is very much in favor of the losses. At least until I’m even.
Once I realized that nothing would ever change, I knew I needed to get out – fast. Plus by then I had lost the belief and my passion in the network marketing business model.
I realized that the key to success in any business is to spend less than we earn to generate immediate cash flow. If I had done that back then rather than playing business builder, I might still be around, who knows.
So when I remodeled my business and became a freelance writer and pro-blogger, I knew that there was no way I would ever spend more than I was making again.
I can honestly say that my income has grown from that knowledge and practically alone. These days I hardly spend more than $100/month but make a generous full time income. I’ve had cash flow ever since I started this business, even in my first month when I only had a couple of clients.
This is the key you need to hold close to your heart.
Analyze your business costs and only spend after you earn. Especially the big dollars. I realize you might need to pay for hosting and a domain name before you can find clients, but then you need to work it to rope your first client in your first month to cover that cost.
I managed to do that and it was fairly easy. I’m confident, you can too.
If you remember just the one thing from this post, then remember this:
Always spend less than you earn!
Hope this helped some of you.