Businesses are about making money, and you need money to start one.
You also need to understand how money can work for and against you as a business owner. If you have substantial savings already, or have just inherited money or won the lottery, then you are probably in a good place to start a business. If not, you probably need to spend a few years building a cash reserve and save twice as much as you think you will need since expenses add up quickly and our economy currently resembles a rollercoaster. Because a business represents you and your money history, you also need to know what your credit score is and pay off as many bills as you can to protect it.
Most importantly, you need to evaluate your financial risk by knowing how much money you can afford to lose.
">If you want to invest $50,000 of your savings toward your new business, are you prepared to lose it all if you don’t experience success? If you didn’t have that money, could you still pay your bills and meet your other financial responsibilities? To start your business, you will probably combine savings with bank loans, credit cards, or other financing. Make sure you understand what types of interest rates you will be responsible for if you can’t pay off your debts in time. Keep your business and personal accounts separate so you don’t have any confusion and can easily evaluate your cash flow in light of spending and sales.
If you can manage your cash flow well, you won’t find yourself penniless. Try to anticipate what lies ahead and keep a cash budget, which is a projection of how much money you will have in your checking account at the beginning of each month for the next year. Bill clients promptly so that you don’t lose out on money you’ve earned, and pay your own bills on time to maintain positive business relationships. If your cash flow is constantly up and down, then set aside cash for the dry months – it is a wise idea to have six months’ of expenses saved; two or three months at the minimum. Although it can seem overwhelming, keep marketing your business even when you are busy so that you avoid hitting a lull period, which will quickly lead to a lack of cash flow.
Ironically, despite the huge personal investments required to launch a business, many webpreneurs create online businesses and immediately offer lots of freebies – ebooks, consultations, etc. Web traffic is worth something, but giving everything away and making it up on volume alone can lead to a quick downfall for your company. If you want your business to have options, you need to have income. Design something that you can charge money for, and start taking money within 6 months using PayPal. It may seem counterintuitive, but charging money can actually accelerate business growth because it provides money to fund marketing costs. Money equals power in business, and puts you in an advantageous position for future funding or acquisition deals. When you follow the TypePad approach of taking the high-end position in the market, you have less to worry about in terms of scalability and abuse, and you benefit from higher margins.
Just because someone signs up for your mailing list to get a free ebook doesn’t mean they will ever buy something from you later, and they may immediately unsubscribe or never read your emails after they receive the freebie – they’re simply attracted to the word “free.” People who are interested in your product may sign up even if you don’t offer a freebie. Set a price for your product or service so that you are simultaneously growing your revenue and competing within your own market. Be confident in your offering and don’t let negative feedback convince you to sell products for less than their value or drop your prices.
Use your marketing efforts to attract customers who value what you are selling and are willing to pay your prices.
If your prices are too low in comparison to the competition, people may think your offering is too good to be true or a scam. Plus, when you set your prices too low initially, it can become hard to raise them later without angering clients. On the other hand, if your prices are set too high, you may attract customers that assume high prices equal high quality. After you research what the competition charges, set your prices at 80 to 90 percent of what they charge. You want to make pricing decisions that give customers great value and give you a profit, so consider if your prices will attract clients that will be loyal and continue to willingly pay for your products at your set price. Don’t base your whole business on price alone – otherwise, you will mainly target value seekers who don’t care about what makes your company unique. Focus on promoting the benefits and solutions that your customers can count on.
Don’t be afraid of making money in your business.
Get hungry and you’ll get those sales. Check out our book Hungry Like the Wolf for reinvigorate your sales tenacity. Learn how to enjoy the thrill of the sale and how to seek it out.
Hungry Like the Wolf will give you the edge to increase your sales and Money.