Creating Your Budget For Success

Home-based businesses are a great way to stay close to home, pursue your passions, or spend more time with the family. A significant advantage of starting a business right from your home is that the start-up cost is significantly less. For example, starting a business that would require office space would cost more upfront, while staying in your home cost less because people are most likely already paying for rent or mortgage, thus resulting in minimal financial burden.

Aside from eliminating the need to purchase office space, warehouse space, etc., the average home business typically demands a smaller opening investment. This theory is especially true of network marketing, where most business opportunities cost under $1,000.00 to begin, though some network marketing opportunities require a higher investment.

Many home business possibilities involve an initial cost under $100.00 and often promote “free” signup.

Unfortunately, the bait of such low entry costs often causes people to neglect the more important, long-term design.

This article will cover three areas concerning budgeting that numerous people regularly neglect:

1) Be sure that you understand the total direct start-up cost. “Direct” is defined here as the amount of money you are obligated to pay to the company during signup.

2) Determine and develop a realistic budget for what your secondary and ongoing monthly costs will be. These encompass setting up a home office, phone costs, travel, packaging, shipping, additional training and seminars, advertising, leads, etc.

3) You MUST reinvest into your business to see growth and success!

Let’s examine the three areas described above.

DIRECT START-UP COSTS

This cost includes your signup fee, any basic sales kit, training materials that you are required to purchase (or strongly advised to), and any activity that you are required or highly recommended to buy at the time of signup. Be sure to include the required initial amount of product or inventory into that price as well.

Attempt to gather as much information in advance about what you’ll need to spend to be successful. Very often, opportunities emphasize a low start-up cost. Still, either the company, its literature, or those representing it fail to fully inform prospective representatives of additional investments needed to advance or sustain your position with the organization.

Again, use great caution, if not avoid altogether, opportunities that require considerable investments greater than a few hundred dollars in samples, inventory, etc., or that commit you to purchase costly leads. As an example, a few hundred dollars for the entrance fee is used; however, if you are dealing with genuine high-end products, just purchasing one may cost more than that, so adjust accordingly. Again, the intent is to ensure that you don’t buy more than YOU need for your consumption.

It’s okay to sign up with a company that sells $1,000.00 therapeutic massage chairs while only buying the one you can afford. Just don’t allow them to talk you into buying more on the basis that you need to keep more on hand to demonstrate, display or sell. Most prominent direct sale companies take orders and ship straight to your customer, so there is little need to obtain inventory.

Furthermore, if you pay even as much as several hundred dollars on nutritional products for you or your family, that’s entirely okay. However, if the business requires you to buy hundreds or thousands of dollars more of the product to qualify for increased compensation or bonus money, this would not be a wise decision. Businesses earn cash by selling legitimate merchandise or services to others at a fair price to earn an honest profit. It does not benefit you or make you money if you are the only individual buying all of the products and services yourself!

It is widespread for some businesses to offer multiple levels to begin and continue to qualify monthly. This approach is particularly true of nutritional companies. But, first, predetermine which group will satisfy you and whether your budget will allow you to continue making purchases required each month to remain qualified.

Another well-known condition with organizations of all times, especially those in the telecom and financial services industries, is that the person onboarding must purchase some training package to qualify for specific promotions in compensation and bonuses. This scenario is usually an option you can add when you sign up or later, though sometimes you may lose specific opportunities by not doing so initially. Again, gather all of the information about what the terms are. In these kinds of plans, 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 increased salary and bonuses.

In every scenario above, another requirement may include an increase to step up in the compensation plan that others you have sponsored or are within your team have made. And, since management is led by example, constantly keep in mind that it will be more advantageous to entice others within your organization if you’ve made an equal investment.

To recap: When you investigate an opportunity and sign up, you comprehend not simply the “basic” or minimal costs to get your foot in the door. Instead, be sure to understand the actual cost of getting off to the right (and best) start to give you the maximum chance of success.

INDIRECT AND ONGOING MONTHLY COSTS

A substantial percentage of people becoming involved in a home business or network marketing for the first time make the blunder of overlooking their after-signup and ongoing costs. If done accurately, there is no reason why these costs need to be significant. However, you may find it remarkably challenging to get your venture up and running successfully without the added investment.

You can begin to learn by reading articles and free reports online but, it is usually NOT the best approach to start by discussing the matter with your family, friends. So you may have to purchase or create some leads. Here again, through articles and training available online, you’ll discover why you should never pay more than five to fifty cents a lead unless it’s a lead that is generated by yourself. With that said, even if you assume an average cost of 20 cents per lead, which is 500 leads for $100.00, you’ll most likely sift through anywhere from 500 to 1,500 other sales leads as you work your way through the learning curve on your path to profitability. So, if, hypothetically, it only costs you $39.95 to sign up, you would still need to budget at least $300.00 more dollars to purchase enough leads to have a reasonable chance at becoming profitable. Likewise, these guidelines apply to whether you deal in more small amounts like the abovementioned or much more significant amounts.

To consider the additional cost, you must determine your method of communication and contact. If you choose the mailing method, then consider postage and shipping. For telephone leads, factor in our phone bill. Suppose a business operates via local meetings, perhaps even the cost of renting a conference room. And while email leads may feel like a no additional cost avenue for communication, the cost of internet service must be accounted for in your budget. If you plan to hand out written material, be prepared by researching printing and publication costs.

If you are dealing with smaller amounts of hundreds of dollars or with more significant amounts running into the thousands, keep in mind that lack of capital is one of the principal critical causes of failure in all businesses of any type. Therefore, if you cannot afford to invest the money that you will genuinely require to get your business off to the appropriate start, you may want to sincerely assess whether or not you may be better off waiting until you know that you can do so.

REINVESTING BACK INTO YOUR BUSINESS

What frequently happens when a business suddenly has an influx of finances, especially if it’s a significant amount, it will often spend most or all of the money instead of earnestly acknowledging how much of the profit should be reinvested back into the business. This way of thinking is a common but sometimes fatal mistake.

It is nearly impossible to sustain sufficient growth and revenue to build a viable business without reinvesting back into your business. There is so much truth to be found in the old saying, “it takes money to make money.”

The minimal start-up cost for home businesses is the main reason there is more profit in a home-based business. They require limited overhead, which in turn allows you to keep more of what you make. This type of profit is a huge win compared to a traditional business, like your local grocery store, which sees as little as 5 cents of every dollar as profit. In contrast, home businesses and network marketing regularly allow you to earn as much as 30% to 50% profit or more.

If your profit is usually less and you are accustomed to earning this, this may apply to you. While on the other hand, if you are already making more income or 6-figures, you’ll need to adjust these examples accordingly.

However, for example, let’s say a person who usually earns $2,000.00 monthly suddenly received an additional payment due to their home business efforts for $1,000.00. Perhaps before that, they had some bills they were behind on or a dream vacation they wanted to plan. It is unquestionably tempting to spend most or all of those new earnings.

However, evaluate your budget. Most likely, some expenses incurred in earning that initial check, including the initial signup costs? If this is true, you may want to start by “repaying” yourself or reinvesting that amount into your budget.

Let’s say, for example, that your expenses looked something like this:

Signup costs: $500 .00
Products you purchased: $200.00 Leads and advertising: $200.00 Total = $900.00

You may likely have incurred even more expense initially getting started. However, suppose your first check was for $1,000.00. In that case, you need to consider the fact that you’ve only made an initial profit of $100.00, primarily if the temptation to spend that initial check on something else arises. Having earned a small net profit of $100.00 does not sound as exciting as the entire check, but it’s the truth.

However, you can happily consider that you’ve successfully added $100.00 to your budget that wasn’t there before. And that’s a great start, mainly because a traditional business may have an average profit of as scarce as five cents on the dollar ( five percent); as mentioned above, most traditional companies involve substantially more start-up costs. As a result, they may not show a profit at all for months or even years. So, to earn $100.00 ( or a ten percent ) profit during the first weeks or months in the business is a win.

What you do with that remaining $100.00 is entirely up to you. But before you decide, keep reading, and we’ll offer a few suggestions below to help set the base for your business mindset for the upcoming weeks and months as you continue to grow your company.

If in the first month you earned $1,000.00 and made a profit of $100.00, it is safe to say that as long as you continue to do the same things in your second month, it’s realistically possible that you may earn at least as much if not more. Of course, you are keeping in mind that these are only hypothetical examples. Some people make much more in their first weeks in their new businesses, while most probably earn much less. It is prevalent for the first check-in of a network marketing business to be less than $300.00.

Let’s pause for a moment and use the same kinds of numbers we are already working with and assume that your second month looks something like this:

Earning: $1,100.00 Signup costs: N/A
Products you purchased: $200.00 Leads and advertising: $200.00 Total Earnings = $1,100.00 Total Expenses = $400.00 Total Profit = $700.00

Your profit margin is already improving because you don’t have to factor in your initial signup costs. But, of course, you’ve also gained slightly more income this month as your business begins to gain momentum.

In the early stages, it may seem like you have more money in the budget. At first, you only made an actual profit of $100.00, but now you seem to have an extra $700.00 this month? What does this mean?

Well, if you are tracking your expenses, you can easily see that, at least currently, your costs are running about $400.00 a month, which translates into a monthly net profit of $700.00.

So, what do you do next? There may be times when extenuating circumstances may prevent you from reinvesting back into your business as much as you would like to; after all, you started a business because you needed money and had a vision on how to earn it. You may have to allot your newfound finances to pressing bills that require payment or unexpected barriers. However, barring extenuating circumstances, it’s time to buckle down and evaluate how serious you are about your business. Ask yourself how much you want to reinvest and how quickly you want to make your business grow.

First, an old rule that financial planners, money managers, and home business experts practice is the rule of 10/10/10.

The initial ten percent of your gross earnings goes to giving back. Apply at least ten percent toward helping others, whether family members, your church, your favorite charity, etc. The objective is to give back.

The next ten percent should directly transfer savings and “safe” investments for retirement and your future.

And finally, but just as equally important, is the final ten percent that you should reinvest directly into your business.

As you earn more money, additional opportunities to adjust the numbers by reinvesting more into your business and yourself will become available.

The more money a person makes, assuming they manage their finances wisely, the higher their percentages will grow.

For example, while the average person might save as little as ten percent of what they make and spend the rest, most financial advisors urge you to save and invest as much as 90 percent of what you make and live off the remaining ten percent. But, of course, this is much easier to do when earning a higher income.

As you continue to achieve tremendous success in your business, you will continue to adjust your numbers. In general, however, the more money you wisely reinvest into your business will be focused on what makes it grow to produce more income, the better off you are likely to be. Ultimately, you will reach a position where you have enough money to reinvest notable totals into your business and your future while leaving plenty of additional income to do the things you enjoy.

If you are comfortable with technology, picking up a sound financial management or accounting program can significantly assist you with budgeting and managing your personal and business finances.

There are several helpful products available on the market. However, I have heard great things about the Intuit product line.

The Quicken line of software can handle your business and personal accounting needs while keeping them separate if your earnings are less than $100,000.00 annually. However, if you make over $100,000.00 a year, you may consider using Quicken for your finances. Their QuickBooks software would be ideal for managing your business finances. If you are new to your business and in the beginning stages, you can start with the Quicken line now and switch later when your business gains momentum.

You can find Intuit’s products at most major retailers with software, such as Office Depot, Office Max, and Best Buy. You can also research your needs by visiting their website.

Other accounting products and software include Freshbooks, Oracle Netsuite, and many more. If you need some tips on choosing your small business accounting software, check out this article.

Creating a budget for success means you have researched, approached all angles, and are prepared to invest in your business, yourself, and your dreams.