Last week, I let you all in on the secret of how I became a millionaire. Didn’t I? I thought I did. Well, for starters, I can tell you that I’m not a millionaire, nor will I be one any time soon unless the odds of the PowerBall are in my favor. However, I have learned a few business fundamentals throughout my young life that have helped keep me financially out of trouble – for the most part.
Remember those $3 car washes I used to sell? Well, come to find out, I would’ve gone completely bankrupt in a matter of days, had I continued on with those. Because after the cost of the sponges, soap, bucket and my labor, I would really be spending more than I’d made. By a long shot, too. Calculating the expenditure of your business, believe it or not, is more often overlooked than not. Or, it’s just not looked at thoroughly, as a whole.
What it honestly comes down to, is, are you making more than you’ve spent? An obvious answer, and hopefully the answer you’d give, is, “yes.” You would then be considered financially sound and profitable as a company. But there are some entrepreneurs who are breaking even.
Breaking even can be a dangerous game. You are investing the same time, effort, labor and, at the end of the day, money, than you are receiving in return. While doing this type of business for a longer term may result in happier customers and a stronger relationship between partners and employees, there is no profit to be cut in this scenario. And what often happens to businesses that are unprofitable, is, they sink. Faster than you can imagine.
Remember Blockbuster? Before Netflix and Hulu and Vudu all came into play, Blockbuster was the place to go on a Friday night to rent a movie. They even had snacks! But, the price of staying in business would’ve cost them hundreds of millions of dollars. They went bankrupt in 2010 with a total debt of $1.46 billion. Don’t let that happen to you.
Be aware of your competitors, be conscious of your budget as well as your expenditure and project weekly, monthly and yearly financial goals. But more importantly than goals, project relevancy. Any young entrepreneur can sit down with a pad and paper and crunch numbers, but it means nothing unless it’s relevant to your real-life capital.
One of the biggest mistakes I’d ever made in business, was seeking investors. Investors are great, don’t get me wrong, but my business hadn’t made a dime before I’d started asking around. I thought that my company would blast off significantly – I had projected an unprecedented margin for my first year, but, without the available funds, had I taken on the responsibility of an investor, I would’ve been a fish out of water.
Now, I’m not saying, ‘don’t seek investors,’ I’m simply warning against going about it the wrong way and making sure you’re in the right position financially to obtain and maintain a possible account with interest. Don’t let your ambitions drive your business rampant. Be excited about your endeavor, but remember that business isn’t always a game.
I learned a while back that every potential client you interact with, solicited or not, has money for you in their wallet. Whether they want to invest in you or not, buy your product or not, is up to you. Ultimately, it’s up to the client to decide whether or not they want to do business with you – but you are the only one that has the opportunity to change their decision.
Now, as I went over , you must make absolute certain that you’re making more than you’ve put in. But in the same sense, you’ve got to spend money to make money. If you’re spending, spending, spending, and not making, making, making your investment back plus a profit – there’s a problem. Take into account the cost of advertising, business cards, a professional website, a neat bumper sticker that has your business name and logo on it. That’s all coming straight out of your pocket. And if you were to open your wallet after spending money on all of those essential tools to help kickstart your business, and it’s just an empty wallet, you’re going to have to adjust your budget to close the gap on the spending-to-receiving ratio.
In an area with as many business prospects as North Dakota, I’ve learned that the demographics play a crucial role in business development. At least, in an electronic and even internet-based business. Things are slow around here, and the knowledge that folks in Western North Dakota possess isn’t tech-based; it’s farm-based, agriculture-based, simplicity. Which isn’t a bad thing at all. In fact, it opens up plenty of doors for the industry I’m currently investing in, because people who don’t understand how certain things work, or want to broadcast their business online but don’t know how to, can come to me and utilize my services. And it’s a win-win because I get to build relationships with folks while earning a living. These scenarios can be played in all parts of the nation, as well as globally, just so long as your demographics allow. You probably don’t want to start up a cheese factory in Tillamook, Oregon, but I bet Missoula, Montana doesn’t have one. And just as I came out to North Dakota to access companies untapped by graphic designers, folks from North Dakota might travel to Seattle to start up a tractor-leasing company.
It’s all about location, and where you can stretch your dollar the most.