Financing Your Business

Your ability to do accurate costing for your products and services, and then to set proper prices for what you sell, can make all the difference between profits and losses, success and failure.

The name of the game is "profit." Everything you do in your business, every number that you calculate and consider every point of focus and concentration must be aimed at generating profits of some kind.

Become a Numbers Person

Most entrepreneurs are not "numbers" people. They have little patience for the details of financial statements and accounting. In order for you to be successful, you must master the numbers in your business.

You can hire bookkeepers, accountants, and financial advisers to help you, but you can never abdicate the responsibility of fully understanding every penny and every dollar that comes in and out of your business.

Determining Your Costs

Often the person who makes the fewest mistakes in business is the one who succeeds the most. You don't have to be an entrepreneurial genius to be successful. You just have to master what you are doing.

One of the entrepreneurial successes is to offer a high margin product or service of some kind. It is to produce, acquire, sell, or distribute a product or service from which you earn high profits on the sale of each one. In this way, you have a substantial cushion built in to protect you from losses.

Direct Costs

These are the costs of good sold. If you make a product or buy it from a manufacturer or distributor for $5, including all costs of shipping, transportation, insurance, and delivery, and you sell the product for $10, your cost of goods sold is $5. T his is fairly easy to calculate.

Indirect Costs

These are the costs that are not attributed to all of the products or services that you sell, not any specific ones. Indirect costs can be costs of salaries, rent, telephones, utilities, marketing, advertising, shipping, delivery, and many others.

Fixed Costs

These are the costs that you incur each month whether or not you sell a single item or generate a single dollar of revenue. Your fixed costs include salaries for your permanent staff, rent, utilities, many operational costs, and the costs for outside services, plus your own personal income from the business.

Variable Costs

These are the costs that increase or decrease depending on your level of business activity. These costs are incurred only when a sale takes place. They can include costs of good sold, sales commissions, delivery costs, and other costs that can be attributed, directly or indirectly, to the cost of each product or service you sell.

Semi-Variable Costs

These are costs that are partially fixed and partially variable. They can include part-time labor when you are busier than normal, additional utility, telephone, and mailing costs, and additional costs for outside services.

Sunk Costs

These are expenses that you have incurred that are gone forever. They can never be recovered. They are like an unattached anchor thrown overboard that sinks to the bottom of the ocean and is irretrievable.

Action Exercise

Decide what constitutes a "sunk cost" and resolve today not to spend another dollar or minute trying to recoup it.

Comments

Post a Comment

Popular posts from this blog

5-Step Plan to Reverse Diabetes

Image
Step 1: Remove These Foods to Reverse Diabetes Naturally Certain foods negatively affect your blood sugar levels, cause inflammation and trigger immune responses. To reverse diabetes naturally, the first step is to remove these foods from your diet: Refined sugar: Refined sugar rapidly spikes blood glucose, and soda, fruit juice and other sugary beverages are the worst culprits. These forms of sugar enter the bloodstream rapidly and can cause extreme elevations in blood glucose. (7) Even though natural sweeteners like raw honey and maple syrup are better options, they can still affect blood sugar levels, so only use these foods on occasion. Your best option is to switch to stevia, a natural sweetener that won’t have as much of an impact. Grains: Grains, especially gluten-containing grains like wheat, contain large amounts of carbohydrates that are broken down into sugar within only a few minutes of consumption. Gluten can cause intestinal inflammation, which affects hormones like
Read more

Does apple cider vinegar help people with diabetes?

Image
Apple cider vinegar may have various health benefits, such as supporting weight loss and managing blood sugar. These benefits could help people with or at risk of diabetes. However, scientific research has not yet confirmed them. Scientists have yet to back up the majority of the health claims around apple cider vinegar with significant clinical research. However, some evidence has emerged to suggest that apple cider vinegar may have particular benefits for the management of diabetes. Diabetes is a chronic condition that leads to an inability to manage blood sugar levels properly. According to the World Health Organization (WHO), in 1980, around 108 million people had diabetes. Its prevalence has significantly increased over the past few decades to an estimated 422 million in 2014. This article looks at the research that links apple cider vinegar and diabetes, as well as ways to take apple cider vinegar effectively. According to scientists, apple cider vinegar has the potential to
Read more

The Dangers of Ego-Driven Spending: A Call for Reality Check

Image
In a world where status and outward appearances reign supreme, it's all too easy to fall into the trap of ego-driven spending. We live in a society where success is often measured by the size of our possessions and the prestige of our lifestyle. As a result, many of us find ourselves chasing after the latest trends and splurging on luxury items in a bid to keep up with the Joneses. But what if I told you that some of the wealthiest individuals in the world eschew ostentatious displays of wealth in favor of a more modest lifestyle? Take, for example, Warren Buffett, one of the most successful investors of all time. Despite his immense wealth, Buffett is known for his frugal habits, driving the same modest car and living in the same unassuming house for decades. Similarly, tech titan Mark Zuckerberg, founder of Facebook, is often seen wearing a simple gray t-shirt and jeans, despite being worth billions of dollars. And then there's Ingvar Kamprad, the founder of IKEA, who fam
Read more