Just one of the advantages of starting a home based business is that it usually cost
less than starting a business that requires office space or other facilities. Most
people are already paying for a home or apartment anyway, so starting a business
from that location entails very little extra overhead.
Aside from eliminating the need to pay for office space, warehouse space, a
restaurant, storefront, etc., the average home business also typically requires a
much smaller starting investment. This is especially true of network marketing,
where most business opportunities cost under $1,000 to get started in, though
some network marketing opportunities do cost more.
Some home business opportunities involve an initial cost well under $100, and may
even advertise ?free? signup.
Unfortunately, the lure of such low entry costs often causes people to overlook the
bigger, long term picture.
This short article will cover three areas regarding budgeting that many people
commonly overlook:
1) Make sure that you understand the total direct startup cost. ?Direct? is defined
here as what you?ll pay to the company you are signing up with.
2) Learn and develop a realistic budget for what your indirect and ongoing monthly
costs will be. These include such things as setting up a home office if you don?t
already have one, phone costs, additional training and seminars, travel, leads,
advertising, etc.
3) You MUST reinvest back into your business in order for it to grow!
Let?s take a closer look at the three areas outlined above.
DIRECT STARTUP COSTS
This includes your signup fee, any basic kit of sales and/or training materials that
you are required to purchase (or strongly advised to), any training that you are
required or advised to purchase at the time of signup, and, a big one to avoid in
most cases, a required initial amount of product or inventory.
Try to get as much information ahead of time about what you?ll really need to spend
in order to be successful. Very often opportunities emphasize a low startup cost,
but either the company, its literature, or those representing it fail to fully inform
prospective representatives of additional expenditures that you need to make in
order to advance and/or maintain your position with the company.
Again, be extremely careful, if not shy away from altogether, opportunities that try
to get you to invest large amounts ( more than a few hundred dollars ) in inventory,
samples, etc., or that commit you to purchasing expensive leads. I use a few
hundred dollars as the threshold here. Obviously, however, if you are dealing with
certain high-end products, just purchasing one may cost more than that, so adjust
accordingly. The point is to make sure that you don?t buy more than YOU really
need for your own personal consumption.
If you sign up with a company that sells $1,000 therapeutic massage chairs and you
can afford to buy one, fine. Just don?t get talked into buying more of them on the
premise that you need to keep them on hand to demonstrate and/or sell to others.
Almost all modern, reputable direct selling companies take orders and ship directly
to your customer, so, with rare exception, there is very little need to purchase or
stock inventory.
Likewise, if you spend even as much as several hundred dollars on nutritional
products for you or your family, that?s fine too. But if you then purchase hundreds
or thousands of dollars more of the product just to qualify for an increased level of
compensation or bonus money, again, not a wise thing to do at all. Businesses make
money by selling legitimate products and services to others at a fair and honest
profit. You DO NOT make money if you are the only one buying all of the products
and services yourself!
It is very common for some companies to offer various levels at which you can start
and/or continue to qualify monthly. This is especially true of nutritional companies.
Determine ahead of time which level you can be satisfied with and whether or not
your budget will allow you to continue to make whatever purchases are required
each month to stay qualified.
Another common requirement with companies of all times and especially those in
the telecom and financial services industries is that some kind of training package
must be purchased in order for you to qualify for certain promotions in
compensation and bonuses. This is usually an option that you can elect to add
either at the time you sign up, or later, though sometimes you may lose certain
opportunities by not doing so in the beginning. Again, be sure to get all of the
information about what the requirements are. In these kinds of programs even
though the purchase of the additional training is, ?optional,? if you do not you will
not be promoted and thus you may miss out on substantial extra income and bonus
money.
In each of the above scenarios it may also be a requirement that in order for you to
step up in the compensation plan that others whom you have either personally
sponsored or are within your organization have made this same additional
investment. And, since leadership is by example, always keep in mind that it will be
easier to interest others within your organization if you?ve made the same
investment.
To recap: Make sure when you research an opportunity and signup that you
understand not just what the ?basic? or minimal costs are to get your foot in the
door, but that you understand the true cost of getting off to the right (and best)
start that will give you the maximum chance of being successful.
INDIRECT AND ONGOING MONTHLY COSTS
A very large percentage of people getting involved in a home business or network
marketing for the first time make the mistake of overlooking what their after-signup
and ongoing costs will be. If done correctly there is no reason why these costs need
to be high. However, without the additional investment you quite literally may find it
extremely difficult to get your business off the ground successfully.
As you can learn by reading some of the articles and free reports on
ABCIncome.com, it is usually NOT the best idea to start by trying to talk to your
friends, family, or co-workers. Therefore, you?re going to need to purchase (or
generate) some kind of leads. Here again, through articles and training available
from ABCIncome.com you?ll learn why you should never pay more than 5 to 50 cents
a lead unless it?s a lead you generate yourself. However, even if you assume an
average cost of 20 cents per lead, which is 500 leads for $100, you?ll probably go
through at least 500 to 1,500 as you work your way through the learning curve on
your way to profitability. So, if, hypothetically, it only cost you $39.95 to sign up,
you would still need to budget at least $300 more dollars to purchase enough leads
to have a reasonable chance at becoming profitable. These same guidelines apply
whether you are dealing in small amounts like those above, or much larger
amounts.
In addition you have to, at the very least, figure in the cost of telephone calls, and, if
you conduct your business via local meetings, perhaps even the cost of renting
conference room facilities, etc.
Regardless of whether you are dealing with smaller amounts of hundreds of dollars,
or with larger amounts running into the thousands, remember that lack of capital is
one of the leading causes of failure in all businesses of any type. If you cannot
afford to invest the money that will truly be needed to get your business off to the
right start, then you may want to seriously evaluate whether or not you might be
better off waiting until you can.
REINVESTING BACK INTO YOUR BUSINESS
More often than not when someone ends up having more money come in that was
the case previously, especially if it?s a significant amount, they often spend all or
most of the money instead of seriously giving thought to how much they should
invest back into their business. Big mistake!
If you don?t reinvest back into your business, you may not be able to sustain
sufficient growth and revenue to make your business viable. That?s why the old
saying, ?it takes money to make money,? still has a great deal of truth to it.
Because most home businesses require relatively little overhead you can indeed
keep more of what you make. Whereas in a traditional business (such as your local
grocery store) as little as 5 cents out of every dollar may end up as profit, home
businesses and network marketing often enable you to earn as much as 30% to 50%
profit, or more.
The more money you are already accustomed to making then, in theory, the less
this may apply to you. If you are already earning a high income and/or 6-figures,
then you?ll need to adjust these examples accordingly.
However, for example?s sake, let?s say that someone who earns $2,000 a month all
of a sudden gets a check due to their home business efforts for $1,000. Perhaps
prior to that he or she had some bills they were behind on, or maybe there is a
dream vacation they?ve been wanting to take, etc. It certainly may be tempting to
spend most or all of those new earnings.
However, it?s very likely that you incurred some expense in earning that initial
check, including your initial signup costs? If so, then for starters it might be a good
idea to ?repay? or at least put back into your budget at least that amount.
Let?s say for examples sake that your expenses looked something like this:
Signup costs: $500
Products you purchased: $200
Leads and/or advertising: $200
======================
Total = $900
It?s very likely that you may have incurred even more expense initially getting
started. However, if your first check was for $1,000 then you realistically need to
consider the fact that you?ve really only made an initial profit of $100. Especially if
you are tempted to spend that initial check on something else you might not be
happy about the prospect of having only earned a net profit of $100.
However, when you consider that you?ve now successfully added $100 to your
budget that wasn?t there before, that?s not bad at all. Especially when you consider
that, as mentioned above, the average profit for a traditional business may be as
little as 5 cents on the dollar ( 5 percent). AND, most traditional businesses involve
substantially more startup costs and may not show a profit at all for months or even
years. So, to earn $100 ( or a 10 percent ) profit in just your first weeks or months
in the business, again, really isn?t all bad at all.
What you do with that remaining $100 is up to you, but below I?ll offer a few
suggestions as to how you might want to be thinking as the weeks and months go
by and you continue to grow you business.
If your first month you earned $1,000 and made a profit of $100, then in your next
month, as long as you continue to do the same things, it?s very realistically possible
that you may earn at least as much if not more. Keeping in mind that these are only
hypothetical examples. Some people earn much, much more in their first weeks in their new businesses, while most probably earn much less. It?s not at all uncommon
for a first check in a network marketing business to be less than $300.
However, using the same kinds of numbers we are already working with, let?s
assume that your second month looks something like this:
Earnings: $1,100.00
-------------------------------------
Signup costs: N/A
Products you purchased: $200
Leads and/or advertising: $200
-------------------------------------
Total Earnings = $1,100
Total Expenses = $400
======================
Total Profit = $700
Just by virtue of the fact that you don?t have to factor in your initial signup costs
your profit margin is already improving. You?ve also earned a little more money this
month as your business starts to grow.
So, you now seemingly have more money in budget. At first you only made a true
profit of $100, but now you seem to have an extra $700 this month?
Well, if you are tracking your expenses then you can easily see that, at least
currently, your expenses are running about $400 a month each and every month,
and that, at least so far, you are making a net profit of $700 a month.
So, what do you do next? Extenuating circumstances may prevent you from
reinvesting back into your business as much as you would like to. You may have
pressing bills that need to be paid, for instance. However, barring extenuating
circumstances, it?s definitely time to start thinking about how serious you are about
your business, how much you want to reinvest, and how quickly you want to try to
make your business grown.
First, there is an age-old rule that money financial planners, money managers, and
home business experts would likely tend to agree on. It?s called the 10-10-10 rule.
Always put at least 10 percent of your earnings (preferably your gross earnings, as
opposed to taking it out of your net profit) into savings and ?safe? investments for
the future, and for retirement.
Reinvest AT LEAST 10 percent back into your business.
And, depending upon your own personal faith and beliefs, apply at least 10 percent
toward helping others, whether family members, your church, your favorite charity,
etc.
The more money you make the more opportunity you have to change the numbers
by reinvesting more back into your business and yourself.
As business and success philosopher and speaker extraordinaire Jim Rohn points
out, the more money a person make, assuming they are managing their money
wisely, the higher their percentages will be.
http://www.abcincome.com/success-resources/index.html#jim-rohn
For instance, while the average person might save as little as 10 percent of what
they make and spend the rest, Jim Rohn saves and invests as much as 90 percent of
what he makes, and lives off the remaining 10 percent. Easier to do when earning a
higher income.
As you continue to work to achieve greater success in your business you will
continue to adjust your own personal numbers. In general, however, the more
money that you invest ( wisely ) back into your business on those things that make
it grow and produce more income, the better off you are likely to be. Eventually, you
will reach a point where you have both enough money coming in to reinvest
significant sums back into your business and your future, AND have plenty of extra
money left over to do the things that you enjoy in life!
If you are comfortable using a computer then picking up a good financial
management and/or accounting program can assist you greatly with issues
regarding budgeting and managing your personal and business finances.
There are a number of good products on the market. However, after having used
them all since the very first such software appeared over a decade ago, my personal
preference is for the Intuit line of products.
If you make less than $100,000 a year then their Quicken line of software can
handle both your personal and business accounting needs, while keeping them both
separate if necessary. If you make more than $100,000 a year, or plan to, then you
may want to consider using Quicken for your personal finances and their
QuickBooks like of software for managing your business finances.
You can visit Intuit?s Website to learn more, and their products are also carried by
most major retailers that carry software, such as Best Buy, Circuit City, Office Max,
Office Depot, etc.
Up to 25% Off Quicken Products + Free Shipping
Another product/service worth considering is a very unique and powerful
subscription service offered by EverydayWealth. It offers many features similar to the
software above, but doesn?t require you to install any software on your computer
and goes beyond what most financial software does by actually playing an active
role in showing you how to leverage your current financial position and even your
current debt, into greater wealth. Most people aren?t wealthy, but most people do
have debt, and EverydayWealth allows you to literally turn your debt into increased
wealth.
GRPMAX, L.L.C. was founded by CEO Phil Covington in 1979 and is the parent
company of http://www.abcincome.com.
GRPMAX specializes in developing Uniquely Innovative Technologies & Solutions?
and has worked with clients ranging from small business, to government, to the
Fortune 500. Specifically, GRPMAX creates solutions that automate processes that
previously required human staffing and interaction. Mr. Covington's interest in the
home business field started in the 1980s and developed out of relationships with
some of the industry's most talented and highest earning individuals, during which
time he has actively pursued the creation of the ultimate home business passive
income solution.
