Are You Set Up To Do Business?
To become a profitable and sustainable business, one of the skills you will ultimately need to develop is the ability to maintain and control your finances. When we talk about finances, many people associate the conversation with bills, especially if you are venturing into the home-based business arena for the first time. As a matter of fact, many newbies look at their business as an additional bill. I can’t tell you how big of a mistake and how costly this could be.
I am sure by now you have heard of the concept of Assets and Liabilities? An asset is an income producing item and a liability is an income reducing item. Sounds simple right? Not so fast, let me help you fix that false assumption, because if you think it is simple you are sorely mistaken. I won’t be going completely into a finance course here, nor am I trying to become your virtual CPA. The goal from this article is bring awareness to the some of the differences between how an employee and business owner look at structure, income and expenses and if your plan is to make the jump into the entrepreneur world how to get off to a good start with good habits and appropriate expectations.
After getting my MBA in Finance, I realized there was much more than meets the eye when it came to business. Whether it was starting a traditional business or home-based business, there were some basic principles and structures that needed to be established. It is amazing to see the number of people enter in the MLM world without first considering the shift in mindset needed to convert from an employee way of thinking to a business owner way of thinking. For example, the employee asks questions like “where is my desk, where is my computer, who is going to pay for, “ etc. A business owner asks the same questions, but from a different perspective. For example, the business owner asks “how much is this desk, how much is this computer, how am I going to pay for,” ect. It is important to understand the difference between the two approaches, because it is going to make the difference in how you manage your finances in the world of the home-based business owner.
The simple key to any successful business is to make sure the revenue coming in the front door is more than the expenses going out the back door. In addition to that, making sure your Uncle is always taken care of. Who is your uncle? Uncle Sam. Employees and business owners have a very different relationship with him. If you are and employee you have a W2 business structure with your employer, but have you ever heard of 1099 income? It is how most independent distributors or home-based business owners are paid. It allows a comply to have a contracting relationship you. It also means the company is not responsible for your benefits or paying taxes for you. Keeping this in mind, it is my opinion one of the very first questions should be asking yourself is how am I going to structure this business relationship? This is huge and many people either overlook it or flat out disregard it. Are you set up to do business because you will be contracting out your services?
Here is a list of things one should potentially consider or think about when starting their home-based business.
- How will I separate my personal expenses from my business expenses?
- What type of bank account should I get to receive my business income?
- How will I keep track of my business expenses?
- Should I incorporate a business entity?
- If so what type of structure will be best for this business?
- How will I initially fund the business?
- How much will it monthly operations require?
- What is my initial marketing, advertisement and travel budget?
These are just a few financial items I would strongly suggest taking time to think through, because most business ownership is vastly different from being an employee. Imagine if more people took this initial or similar startup approach before taking the plunge, especially since the estimated attrition time-period is 30 to 60 days in the home-based, network marketing, MLM business world. Again, if you are considering going into business, the question you have to ask yourself are you setup to do business?
Sure, I know the person looking to recruit you won’t like the delay this may cause, but if they truly have your best interest at heart they should appreciate the consideration. I don’t claim to have every answer for every person, because everyone’s situation is going to be different, but if it is your goal to become a successful business owner and not already in business, you have to make the shift. You are not in business just because you paid for a membership, which is the easy part. I look forward to sharing more lessons learned over the years to help reduce the attrition rate and create more sound business owners. Check back often for updates and don’t hesitate to leave comments and suggestions!