You may have all the desires and dreams to “make the world a better place through” your products or services, but if you’re not keeping a close watch on your finance numbers, you’re in for some trouble.
After consulting with many businesses, I’ve come to realize that goal setting, budgeting and having a positive cash flow are the lifelines of a sustainable business future.
1. Get Your Business Model Right
The first step to ensuring that your business does not bleed to death is to create a simple proven business model and to be clear on your numbers.
Business models are like instruction manuals for your business. These archetypes could help you build a successful company.
2. Revisit Your Business Plan
Why I like the internet based digital business models, is because there’s both technology leverage as well as the potential for lesser overheads and higher margins.
Having the right Business Plan, and getting advice from some of the best minds in the industry is a sure shot way to reduce your burn rate and learning curve. Model the best, and you can avoid years of heartburn.
When you create a Business Plan, you’ve got to have the following elements in place.
3. Acknowledge Your Mistakes & Change Them
Before we get into the solution on how to stop businesses from bleeding, let’s understand some common patterns which cause businesses to fail. Here’s 16 reasons.
With all of this going on, you can never expect to run a profitable business. Rather you’ve got to start focusing more on doing the opposite.
“My mentor did $200mn of online sales.” Watch How He Does It
4. Get Your Business Budgeting Right
If you’re looking for a sample budget for business, then this infographic below can help you set your priorities. I got some of these ideas from the Hiscox blog.
If you’re preparing to launch your new business or online business, then this can help.
Whether you’re just about to start an entirely new business or want to expand your existing company, budgeting is one of the most crucial action points for any entrepreneur.
What To Budget In?
1. Research costs
How much will it cost to launch, run and grow your business? The first step in any business budget is researching the costs involved in the business. Be realistic about your business’s costs to avoid any surprises once you start taking action.
2. Project revenues
How much revenue can your business generate? The second step in preparing your budget is to calculate how much revenue your business is capable of generating and the extent to which it can grow.
3. Figure out gross profit margins
How much of your business’s revenue can you keep as profit? Work out your gross profit margin by deducting the costs of running your business from the amount of revenue it generates each month.
4. Create a 12-month cash flow projection
How steady will your business’s cash flow be? The fourth step in creating a budget for your business is working out how steadily cash will flow into your business from its customers, clients and partners.
5. Adjust for unreliable payers
Is your business prepared for unreliable payers? Prepare for missed payments and other financial setbacks ahead of time so that your business is ready if a customer fails to pay their bills as they come due.
6. Adjust for seasonality
Does your business sell a product or service with seasonal demand? Work out how seasonal changes to the level of demand for your business’s product or service may affect its cash flow throughout the year.
7. Adjust for economic and industry trends
Does your business sell a product or service for which demand is growing or one for which demand is decreasing? Look at industry and economic trends to determine if your business has a viable or difficult future
8. Decide how to spend
You’ve worked out the costs of starting and growing your business – now, how will you spend your budget? Work out how much you need to spend on certain items or services so that you’re fully prepared when it’s time to start your business.
9. Discuss costs with suppliers
Can you get a better deal on certain products and services by negotiating with your business’s suppliers? Talk to your business’s suppliers to learn how much you need to spend to get your business off the ground and growing steadily.
10. Discuss expenditure with department heads
How much cash does each part of your business need to operate successfully? If you need to spread your budget between several departments, this is a great time to talk to department heads and learn more about their financial needs.
11. Prioritize investment
How should you spend the money your business generates? Step 11 in the process of preparing a business budget is working out how you’ll spend money to fuel the growth and development of your business over time.
12. Create a contingency plan
Is your business prepared for financial setbacks? Your budget should have a detailed plan of action that you can use to recover from financial issues or deal with a missed monthly or quarterly target.
13. Plan regular budget reviews
The best plans don’t stay the same over time – instead, they keep developing as the situation changes. Plan regular budget reviews – once a quarter is a good idea – so that your business is always 100% in control of its financial direction.
14. Insure your business You’ve put in all the research and hard work, it would be a good idea to insure your investment with a general liability insurance policy to protect that investment so that no unnecessary problem arises.
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It’s all exciting when you want to start a business on the internet, with the vision of living the internet lifestyle, but when you start hitting the ground realities, that’s when you’ve got to look into every aspect of your business.
Here’s the 20 reasons why your internet business may fail:
- No Market Need – Imagine trying to sell something which people do not want. It’s a tough game!
- Run Out Of Cash – This is the big one. Getting your cash flow in order is your #1 goal.
- Not The Right Team – Whether it be freelancers or full-time employees, you’ve got to get A Players on board.
- Get Outcomped – If you competition is tough, you better strategise on outplaying them.
- Pricing/Cost Issues – It’s always good to get advice from the market on your pricing structure.
- Poor Product – This is a biggie! If your product sucks… you lose… period!
- No Business Model – You’re in business for business… not for charity. Get real and have a business model in place.
- Poor Marketing: Learning how to sell stuff online is the coolest skill to acquire in today’s age!
- Ignore Customers: What would you do if someone walks into your door and you walk away? No money and no honey.
- Product Mis-Timed: Timing is everything. Watch this TED Talk by Bill Gross who’s studied hundred of startups, and his conclusion is that “Timing” is everything – the #1 factor.
- Lose Focus: You snooze, you lose. Chasing after too many rabbits will get you none.
- Disharmony In Teams/Investors: The perfect recipe for disaster. Misaligned vision can take you nowhere.
- Pivot Gone Bad – Not having the right strategy can cost you. That’s why I consult people first on strategy.
- Lack of Passion: If you don’t know why the heck you’re in business, then you better not be in it. Passion powers performance.
- Bad Location: This may be true for some business. But for an internet location in terms of where you want to show up matters a lot.
- No Financing: There’s no free lunch in business. You’ve got to tap into some resources to make things happen. Take those risks now. Invest in your education.
- Legal Challenges: Especially if you’re into products there IP is key, be sure you have the best lawyers advising you.
- No Network Of Advisors: Always good to have a board of advisors helping you make the right decisions.
- Burnout: If all of the above are not followed, it will lead to burnout. Working hard for nothing is a terrible feeling.
- Not Willing To Admit Mistakes: Let your ego not take over. Stay hungry and stay foolish.
The Hidden Reason Why Internet Marketers Fail?
Here’s a powerful video interview where Tony Robbins discusses with Frank Kern and John Reese on why internet marketers fail online. Grab your favorite beverage, sit back and watch this whole video.