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Predicting the Future

7 December 2008 By 1 Comment

Over the next few weeks every pundit on the planet will have a go at predicting the future. But take a look at the following video and you will begin to see why such forecasting folly is a bit of a waste of time!

So what does it all mean?

It means that the future is coming up so fast that by the time we have made our forecasts, they could well have become history already! The present economic situation hit us hard and fast and took most people completely by surprise. The next change could happen just as fast, but what it will be – who knows?

But one thing I can tell you is that, just as the current situation is creating winners as well as losers, so will the next change…. and the next…. and the next!

Looking back I’ve been a winner more often than I’ve been a loser. Even the one occasion that I appeared at first glance to be a loser, turned around the other way and sent me in a direction I would never have expected. So how did I do that?

Opportunity Knocks!

No! Nothing to do with the TV talent show that nobody remembers. During periods of change opportunity is everywhere and during periods of rapid change, the opportunties really come thick and fast – so look out for them. Focus on opportunities not problems. Smart business people of the past learned the easy way to do business:

“Find out what people want and help them to get it!”

Simple? Obvious? Common Sense? Yes! So why are so many businesses still trying so hard and spending so much money to try to convince us we want stuff that we really neither want nor need? Because in a boom when many consumers have more money than sense, it can work. But in an economic downturn, when everyone is watching the cash and being very careful how they spend it, you had better be offering them exactly what they want and need in their current situation.

The business that can understand what their customers want most right now, and that can deliver it in terms of quality, service and value, will always prosper.

Think positive and Roll on 2009! :-)

Filed Under: Marketing

Mail Order Business

22 November 2008 By 6 Comments

In my last article on mail order I left you thinking about what gets you really excited and enthusiastic. I asked you to think also about things you know or are skilled at that would be of interest to other people who are excited about the same things you are. I also suggested that you would need to get some idea of how popular this area of interest is in order to establish the market potential.

If you completed this task you should now have at least one idea, probably more, about what you could sell and who might be interested in buying it. The really great thing about turning your passion into a product, or range of products, is that you will already be familiar with your market. You will know what people like you are looking for and what will really excite them. This knowledge should put you well ahead of those who are less personally involved in this area of business.

The benefits of mail order are that you don’t need retail premises, a small mail order business can easily operate from home – many do! You can target a readily identifiable market based on the ideas you’ve evolved. Your main costs are product production, packaging, delivery and marketing. The key areas focus on are, Product, Price, Positioning, Promotion, Packaging and People!

PRODUCT

If you know your market as well as you should you will know what features to incorporate into your product in order to appeal to and satisfy your customers. Whether you create a product of your own or source one from someone else is a decision you need to take. 

The simple way is to look for an existing product that you know will appeal to your market, and then negotiate a deal with the producer to supply you at wholesale giving you a good profit margin on the resale price. The advantage to this is that you can bring a product to market more quickly than having to design and produce it yourself. A major drawback is that the product may already be being sold in the marketplace. The customer may already be familiar with it and even be aware of the value according to the price being charged by others. This limits your pricing options which in turn may mean that the profit margin available may not be enough to cover marketing and delivery costs and still leave something for your trouble.

Creating you own product, whilst slower and more expensive initially, gives you the opportunity to offer something new to the market on which you can put your own price. Your own product cannot be obtained from any one else so you will not be competing with others selling exactly the same thing. You also have the opportunity to establish your own brand.

This does not have to be an either/or choice. To be successful in mail order you need a range of products. It is almost impossible to succeed in mail order with a single product as the cost of making the first (only) sale to a customer is very high. Most mail order profit is made on what is known as the ‘back end’, the additional products you are able to sell to customers in the future. Therefore you could have a mix of your own and externally sourced products.

PRICE

The price you charge for your product is critical to your success. It needs to be acceptable to the customer in exchange for the value that you deliver. It also needs to be high enough to cover all your costs, including marketing, and return a profit sufficient to make your business viable. Price too high and the customer may not buy, price too low and you will not make a profit, or even make a loss. One key thing to remember is that price is perceived as a measure of quality. Pricing too low can often devalue the product and lead the customer to believe that it is less valuable than it really is!

POSITIONING

Product positioning aligns very closely with price. Positioning your product as uniquely valuable, luxurious, rare or of a specialist nature will command a higher price. Positioning it as a budget or commodity item available to many will devalue the product and reduce the price it will command. Mail order works best for high margin, high value items that people cannot get anywhere else.

PROMOTION

Advertising and marketing costs can be very high in mail order. It is the only way you bring your product to the attention of your market. Great care needs to be taken to promote the benefits and advantages of the product to the right people at the right time. In most businesses a high proportion of advertising costs are often wasted, getting very little return in the way of custom. The high costs of mail order promotion mean that you cannot afford too much wasted advertising.

There are four main ways of promoting your product to your market place, each with their own range of options.

Conventional Media Advertising

These include Options such as newspapers, magazines, radio, TV, leaflet distribution. They can be national or local in all cases. For specialist mail order products highly targeted magazines are often the best. For products with a wider public appeal the Sunday newspapers are often popular. The only way to determine the right options are by research followed by careful testing.

Direct Mail

Many mail order marketers prefer this method of promotion as it can be easier to send the right marketing message directly to a targeted list of potential buyers. This involves initially acquiring a mailing list of prospects. The simple way is by renting or buying mailing lists from approved mail list brokers. (You can get more information on list brokers from the Direct Mail Association). Another way is by using low cost classified ‘teaser’ ads to generate enquiries and develop your own list. Promoting your product to the customer list of other businesses on a profit share basis is yet another option. The secret to success is to choose the right lists, those which have been proven to produce sales of similar or related products.

As your business grows you will develop your own list of customers to whom you can mail follow up offers whenever you want to bring a new product to market. Look after these customers extremely well, they are the life blood of your business.

Internet Marketing

Increasingly these days, mail order marketers are turning to the internet. Web marketing, online marketing, internet marketing, email marketing are all terms you will see describing their activities. The internet opens up a huge market enabling businesses to reach many more customers than before at generally lower cost than traditional marketing methods. However, as its popularity grows so does the competition which means it is getting harder and more costly to reach this market. Fortunately for you, many businesses are still unfamiliar with the new marketing techniques and are making big mistakes. If you take the trouble to learn how to do it properly, internet marketing can be very successful, even for the smaller or newer business. The internet has leveled the playing field. I will be writing a separate series of articles on internet marketing as we go forward.

Referral Marketing

Word of Mouth marketing has been the way most businesses have grown naturally over the years. Referral marketing is simply taking control of word of mouth marketing rather than letting it happen haphazardly. It can be used by any business whether conventional or mail order and it can be used both offline and online (internet). Referral marketing can be achieved in a number of ways:

  • Incentives for existing customers to recommend you to others e.g. vouchers towards future purchases, free gifts for referring others etc.
  • Network Marketing – growing a network of people who will actively promote your product to friends and contacts, and encourage others to do the same, in return for a share in the profits from resulting sales.
  • Associate or Affiliate Marketing – building a sales team, working on a commission basis, to sell your products. Self Employed Sales associates have been used by many businesses over the years to sell their products and services. In fact I began my sales career as a self employed sales associate back in 1978! Catalogue agents who deliver catalogues to households and take orders for products to be delivered to them are a version of this familiar to the mail order industry. The term ‘Affiliate’ is being used to describe the same type of activity on the internet. In fact Affiliate Marketing online is a huge growth area at present. I have a separate website devoted to affiliate marketing at www.learnaffiliatemarketing.co.uk if you wish to find out more about this opportunity.

PACKAGING

Packaging is a very important component of a mail order business. The design of the product pack carries the BRANDING of the product. It needs to promote the quality of the product, highlight the benefits and advantages and satisfy the customer as soon as they receive it that they have bought exactly what they want before they even open it! The packaging also has to protect the product in transit to the customer to ensure that it arrives undamaged and in pristine condition. It also has to meet any specifications of the delivery carrier in terms of size and weight. Getting this right can save you money on delivery costs. It also needs to enable the product to be easily repackaged securely in the event that the customer needs to return it.

PEOPLE

By people I mean customers, the people you need to please the most who will decide the fate of your businesses. Keep them happy and they will keep buying and recommend your services to others. Upset them and they will desert you and tell the whole world about it!

FINALLY!

When you send a purchase to a customer they are already in a pleasant frame of mind towards you, you have delivered on your promise. In addition you have already paid for this delivery, so don’t waste these two key benefits to your business. Make sure you include quality promotional literature on other products in your range in the delivery package. You will be pleasantly surprised at how soon the customer re-orders. This is FREE marketing and it is where you will make most of your profits.

Good Fortune!

Filed Under: Marketing, Opportunities

The 12 Month Millionaire

11 November 2008 By Leave a Comment

Entrepreneurial Case Study this is a case study on how offline mail order marketing methods were converted to online marketing.

12 Month Millionaire

The 12 Month Millionaire is the title of a marketing manual written by a guy called Vince James a couple of years back. It’s out of print now, though there are a few used copies selling on ebay and elsewhere online.

Vince James came from a very disadvantaged background to build a very successful mail order business back in the nineties. So successful that he became a millionaire within a year and built that up to $100 million in a couple of years or so.

But this article is not about that manual, It’s about Vince James and a guy called Russell Brunson. I don’t know Vince and I hadn’t heard of his famous manual until a few days ago. But I do know Russell Brunson, I’ve done business with him a few times over the past few years. Russell is a very talented and successful young man in his own right and a leading light in internet marketing.

Vince’s manual and his methods have been described as quite hard hitting and controversial, Russell’s methods are very straight, skillfull and, in my experience, quite gentlemanly. Yet Russell credits much of his learning and a lot of his success to studying Vince’s manual, the 12 Month Millionaire, while on holiday with his wife! It might even have been his honeymoon, I forget the details – and yes, he is still married! :-)

But, here’s the punchline – Russell and Vince have teamed up to share what Russell learned from Vince with the rest of us. But for me it’s not even about that unlikely pairing. No, how it came about is actually a real case study in entrepreneurial thinking on Russell’s part. It happened like this….

Russell was really impressed with what he learned, but there was a problem. Vince ran an offline businesss but Russell’s businesses are all internet based. What Russell really wanted to know was, could the same methods work online? Now most people would have been stuck at that point or tried to figure it out for themselves – and maybe come badly unstuck in the process. But not Russell – he sent Vince the following email

To his surprise, Vince agreed to show him exactly how to use his methods online. The result was a six hour in depth consultation during which Vince held nothing back. The learning point here for me was, if you really want to learn something – don’t be afraid to go direct to the one person who can teach you and ASK!

You can get the whole story here www.beyourownboss.co.uk/12-month-internet-millionaire.

Filed Under: Online Marketing

Multiple Streams of Income

26 October 2008 By 1 Comment

Last time I introduced the concept of Multiple Streams of Income. The idea being that, by not relying on a single source of income, you build a more secure financial base.

I also pointed out that, in order to give you the financial freedom you need, each income stream has to work on auto pilot. You really cannot be involved in all the traditional tasks of business in more than one venture at a time. So how do you achieve this perfection?

Two possible ways – the simple and the relatively more complex. So let’s take the simple first!

1. Agency or Affiliate Programs

Basically this involves selling other people’s goods and services (usually on-line though not necessarily). Look for products and services that match your own interests and that you can be enthusiastic about.

Seek out suppliers that deliver quality products and excellent customer service and who also sell via agents or have a good affiliate program. They will then pay you a commission on everything you sell on their behalf. They are responsible for all production, delivery, customer service, billing & collection, after sales etc. And often they will pay your commission direct into your bank – you don’t even have to take the cheques to the bank!

By going down this road, you relieve yourself of most of the administrative & operational chores of running a business. All you do is recommend great products and services to people and watch your bank account fill up!

Another great advantage to being an affiliate is that you can always add to or even replace your affiliate programs as market conditions change. Not an easy thing to do with a business of your own. 

You can get more information on affiliate marketing from my latest website: 

www.learnaffiliatemarketing.co.uk.

2. Multiple Businesses

This is much harder but ultimately more rewarding if successful. As an affiliate you can build up a very nice income, but you will not build a saleable asset. By building multiple small businesses you get the benefits of multiple income streams plus multiple business assets.

An ideal way to approach this method is to look for niche markets. Niche markets specialise in a specific area of interest, e.g. hobbies sports etc. or are focused on a particular group of people, e.g. accountants or guest house owners or people who want to lose weight….. etc.

On-line you can find these markets by looking to see what people are searching for in search engines such as Google or Ask.com. Two tools you can use for this are:

www.wordtracker.com which gives you the top 500 search terms each month and

www.google.com which has an excellent search term suggestion tool.

Off-line, go to your local newsagents and scan the magazine shelves – they are literally stuffed with special interest magazines. Look at the classifieds in the back for an indication of what others are selling to readers of the publication. Read the articles and letters pages to find out what this group of people are most interested in. This will give you some ideas of things you may be able to sell to them.

The most important thing to remember is – do one thing at a time and really focus on getting it right! Pick one niche. Research it thoroughly, look for products or services that can be easily obtained and sold to that market. Ensure that your business can be set up in such a way as to automate it. Then focus on building that one business until it is running smoothly on auto- pilot and making a good profit.

Once the first business is up and running, you can repeat the process as many times as you want. Just make sure that each business is monitored to ensure that it doesn’t “fall over” when you are not looking. It’s a bit like the “plate spinning” juggler at the circus – all you have to do is keep the plates spinning! :-)

Filed Under: Opportunities

Mail Order

9 October 2008 By Leave a Comment

This is the point at which the two halves of our article stream begin to merge. From here on this section will focus on different business ideas and ways to maximise their chance of success.

Coming up with a viable business idea – especially one that meets the criteria specified in earlier articles, is not always easy. The best place to start is by examining your own interests. Choosing something you are passionate about means you are more likely to give it the time and focus it needs. Doing something you aren’t enthusiastic about, just for the money, is usually a recipe for failure.

Last week I promised to introduce you to the mail order business. This is one of the few areas where the small entrepreneur can still get in without huge capital outlay. It is also one that can be put on autopilot – if you know how. So how do we tie this in with finding your passion?

Well, if you have a passion for something, chances are other people have the same passion. Instead of spending your money buying things that fuel your interest – find the source of the products & do a deal that enables you to sell them to others, at a profit. Simply put, you find a source of supply – find a group of customers and put the two together. Since you already have the interest you probably also know most of the suppliers and quite a few potential customers. You will also know the kind of magazines those customers subscribe to.

If you are really passionate and knowledgeable about your subject, you may even be able to produce a product of your own. Often the best product for special interest groups is an information product. A “how to” book, or even a video, audio tape or CDROM packed with useful information and insights into the subject could be a great seller to the right audience. The beauty of your own product is that no-one else is selling it!

The other advantage of your own information product is that it can be very inexpensive to develop and produce, but at the same time be sufficiently valuable to your customers to command a good price. This is important in mail order as the cost of marketing can be high. Most mail order marketers look for a selling price of 5 to 10 times actual production cost in order to build in a large enough profit margin to cover all costs and make a good profit.

So, armed with this initial information why don’t you spend the next week thinking about what gets you really excited and enthusiastic. Think also about things you know or are skilled at that would be of interest to other people who are excited about the same things you are. You will also need to get some idea of how popular this area of interest is in order to establish the market potential.

Next time I shall tell you what to do with the results of your thinking.

Until then, have a fantastic week!

Filed Under: Opportunities

Financial Freedom

9 October 2008 By Leave a Comment

You cannot achieve true freedom if your focus is constantly on making a living. But, initially, you have to do the work to put the right income generating systems into place.

Now you are on your way to making your budget work & getting rid of any debt burden you are carrying, we can look at ways of generating additional income.

In the session on debt elimination, I asked you to find some spare money in your budget to begin to accelerate your debt repayments. Now, I’m going to ask you to find a little spare time in your busy schedule to put to work making some extra money.

And, what are you going to do with this extra cash? Well, I suggest you allocate one third to speeding up debt repayments, one third to savings and the rest to a little luxury or two for you & your family. After all, by now you probably need a little encouragement & self reward!

So, how are you going to turn a little extra time into future financial freedom? Well, not by stacking shelves at the local supermarket for a start! Nor any other low paid menial task.

It’s time to learn the art of leverage. In other words, use a little time and a little skill to make a bigger income. The true entrepreneur does very little actual work (as we know it), he uses knowledge & skill to apply the techniques we have already begun to cover in the “Going Solo” section of past articles.

If you are already in business, use the extra time to step outside of the business & take a good hard look at how you are presently running it. Are you working hard or are you working smart? The smart business owner works ON the business not IN the business. If you are simply an employee of your own business, you are wasting most of its profit potential.

On the other hand, if you are an employee of someone else, you are probably not yet financially ready to “give up the day job!” But that does not stop you spending a little time on preparing for & building a part-time business.

You may have heard of the principle of “Multiple Streams of Income”. This works on the concept that reliance on one single source of income can be insecure, whereas multiple sources of income give greater security. If something goes wrong with one source, you still have the others.

However, a key requirement for success is focus. It’s no good being a “butterfly” & flitting from one opportunity to the next at random. The way to achieve the security mentioned above is to take your little bit of spare time and build one additonal income stream that can be put onto “autopilot” once it is running smoothly. Only then do you turn your attention to the second stream and do the same again – always keeping an eye on the first to make sure there are no “bugs” in your system.

By working in this way you can multiply the results of your efforts and make the most of your spare time. One day, you could well find that your multiple streams of spare time income exceed the income from the “day job”. If you have set it all up right, you will be well on your way to independence and financial freedom.

So, how do you find these illusive income streams? I shall be going into this in more detail as our journey together progresses.

Filed Under: Opportunities

GOING SOLO – Basic Principles

28 September 2008 By 7 Comments

Up to this point we have looked at various ways into business or self employment. Before going into more detail about the best kinds of income/wealth generating activity, I want to cover some basic principles of business success.

Business is simple, you only need three things…..

1. First & foremost, you need a whole bunch of people who have a common want that needs filling. The more of them there are and the more “hungry” they are, the better.

2. You need a product or service that fills that want in the best & simplest way possible at a price they are willing to pay. This  means providing the most complete solution that you can, NOT as little as you can get away with for the money!!

3. You need a way to let these people know what you’ve got and how it so perfectly fits their needs. You also need to be able to convince them that they can trust you and that you are not going to disappoint them. Unfortunately they, like you, have been disappointed in the past so they may appear a little sceptical!

You would be surprised how many people break one or more, sometimes all, of the above requirements!

From a business management point of view ther are a few basic fundamentals that you need to be aware of – they are, however, pretty obvious.

1. You have to operate your business legally, i.e. in accordance with the laws of the country you will be
operating in.

2. You have to operate within certain financial constraints – namely, there has to be enough money coming in to pay for supplies and operating bills, pay the taxes and have enough left over for you to live on! Otherwise your business will be in debt (possibly as well as yourself) which will result in you becoming a SLAVE to your own business in order to try to get out of debt! Not conducive to FREEDOM!

3. You have to ensure your customers are happy otherwise they will tell each other, they will tell the media, they will tell the consumer watchdog groups and they will tell the business controlling authorities! They may even SUE!The result will be that you rapidly go OUT of business.

You will also have to deal with things called competitors! These are other people trying to sell the same kind of things to the same people as you are. If they are not there to begin with, they will turn up as soon as you show signs of being successful! Don’t worry about them – unless they’ve read these articles :-) – they will probably make all the classic mistakes so will not be a threat. The worst thing you can do is take your eye away from giving your customers the best service you can and focus on your competitors instead. Keep the customer happy, and let the competitors look after themselves. The person who pleases the customer most, wins!

Now I know this sounds pretty demanding, especially the “keep the customer happy” bit. So how do you ensure you can follow the best principles of business whilst still following the best principles of freedom? Easy, combine business with pleasure! In other words, before you look for the “hungry crowd”, seek out your own hunger. If you go into a business which involves doing what you really want to spend your time doing, then you have found your “passion”. That passion will become contagious and will attract others with the same interests or needs – that is the hungry crowd you are looking for. They will become your best customers, possibly even friends and no competitor who lacks the passion will get a look in.

Business should never be a chore, business should never be tying, you should never feel the same way about your business that you may have felt about a job you hated or even just disliked a little! Business should be F-U-N! For both you and you customers!

Have a fantastic week!

Filed Under: Starting Out

FREEDOM – Review

28 September 2008 By Leave a Comment

We’ve covered quite a lot of ground in the last five weeks, so I thought it would be a good idea to review the plan so far! It is very easy to get carried away with the latest information or ideas and forget to carry on with previous learning.

By now you should have a clear idea of how you and other members of your family want to live your lives. You will have set your goals both material and lifestyle and be practising the exercises I gave you for achieving those goals. If you have not written down your goals as taught in part 4, please do so now. I cannot stress strongly enough the importance of clearly defined goals. Similarly, if you are not carrying out the goal “visioning” exercise every day, do so from now on – it works!

Onto your debt elimination. Have you carried out the debt listing exercise in part 1 and the debt prioritising exercise in part 2? If so, you should by now have made a start on clearing your highest interest debt. If not, start now – the later you leave it, the longer it will take and the harder it will get! A few of you will have….
ADDED to your debts in the last few weeks (I know this because I have years of experience of human nature). Please, STOP adding to your debts, debt will keep you and your family in SLAVERY for years, and that is precisely the opposite of FREEDOM!

If you really and truly want to take control of your own life you will have taken note of and acted on the earlier lessons. So take stock now of your progress, it will be slow at first – like turning around a huge oil tanker, but once you start to gain momentum, your progress will get faster and faster.

Last week I gave you some freedom principles which have been life changing for me and many other people. I hope you were able to take them to heart without too much difficulty. They may well have gone against years of “programming” but give them “house-room” and they will repay your acceptance many times over.

Here is one more – you may or may not have heard it before, but it is fundamental to the philospher’s often repeated question….
WHY AM I HERE? You are in this life to become your own highest vision of yourself, or at least get as close to it as you can in the time you have on this planet. You are NOT here to be what someone else wants you to be! You are NOT here to conform with the requirements of the State, without question! You are NOT here to be the slave of another or to make someone else rich! You are simply here to achieve your own highest ambition!

But be careful, this does not give you free reign to walk over other people or manipulate others in any way. Remember, they are all here for the same reason you are, even if they don’t know it yet! Be kind to others on the path – they may even reciprocate! We can help others without becoming slaves to them.

Filed Under: Starting Out

FREEDOM 4 – Principles

19 September 2008 By Leave a Comment

So far I have introduced you to some of the freedom principles that I live by. Together we have looked at examining your lifestyle requirements and those of your family. I have given you a method to get out of debt that I know works, because I have personally used it! I have also shown you how I and most successful people set and achieve goals.

Now I want to introduce you to some very controversial freedom principles! Are you ready? Do you have an open mind? You may have heard some of these before, the message is beginning to get out there – so here goes……

  • You have the RIGHT to be free and to choose your own destiny! But your choices should not deny the same rights to others
  • You may CHOOSE to serve others, and this can be very satisfying, but no one should force, or coerce or manipulate you into doing so!
  • You were NOT born into modern slavery, even though it might sometimes feel like it!
  • You have the RIGHT to be happy, it is our natural state (left to our own devices!) If what you are doing does not make you happy, or worse still makes you unhappy – CHANGE what you are doing!
  • Kill the BIG LIE …. Money DOES Grow On Trees!! In both the literal and metaphorical sense. Literally, apples, oranges, olives, almonds, walnuts….. i.e. CASH CROPS grow on trees. But, more important is the metaphor. When, as a child, you were told that money does not grow on trees, you were in effect being told that there is a limited supply of money. In fact the supply is NOT limited! For those that can change their belief and learn how to make money, there is no limit. There may, however, be limits to what you are prepared to do to make money – but that is your choice and comes from your freedom to decide.
  • But also understand that money isn’t everything, it is simply a means of exchange. Do not sell your soul for it. Having the right attitude to money is what is important. Money is NOT the master, YOU are!
  • Freedom brings responsibilty. You must live with the outcomes of your choices. Make them wisely.

I shall leave you to ponder these concepts and make room for them in your life. But we are not finished yet, I shall introduce many more before we are finished here!

Filed Under: Starting Out

Sales – Costs = PROFIT!

19 September 2008 By Leave a Comment

Time for a little simple finance. One of the biggest stumbling blocks for new business owners is understanding business finance. This is probably responsible for more business failures than any other single factor. Here are some fundamentals that you need to understand:

  • Sales are not income unless you sell for immediate cash. If you sell on credit, you have to collect the money according to your credit terms. Even payment by cheque or credit card can take time to become available in your bank account.
  • Income or Revenue is not profit. The costs of producing, marketing and delivering the product or service, the costs of running the business, paying staff and other ancilliary costs have to be taken out first.
  • Profit is not yours to take out and spend! Some may be needed to repay loans, some will almost certainly be needed to pay taxes and some should be invested back into the business to help it grow.
  • Money in the bank may not be yours to spend either! Goods and services you pay for on credit have to be paid for eventually, as does accrued taxes etc.
  • Debtors are people who owe money to you, creditors are people who you owe money to. The two should roughly balance out. The difference will have an impact on how you use the money in the bank.
  • Cashflow is the flow of real money into and out of your business bank account. It is not always the same as sales, revenue or costs which can often be purely paper transactions involving some form of credit or delayed/deferred payment.
  • Assets are those things that have a tangible value to the business such as property, equipment or cash – as well as money owed to you from customers.
  • Liabilities are those things that will ultimately drain money from the business, such as loans, money owed to suppliers, compensation to disatisfied customers, accumulated charges for utilities etc. or potential legal costs of not complying with business and trading laws.
  • CASH is KING – especially in difficult times such as recession or other poor trading conditions. Other assets take time to turn into cash and may not materialise in time to deal with any unexpected crisis. Keep some spare cash on deposit for emergencies.
  • Growth is good as long as you can finance it. Growing too fast can mean you run out of money at some point and come to a grinding halt, possibly even ending up with business debts that cannot be paid on time. This is known as OVERTRADING and will often be fatal to what appeasr to be a successful business.

An understanding of the above will ensure you run your business in a sensible manner and reduce the risk of failure. Make sure you keep full financial and trading records so that you can keep track of the important financial areas of the business.

Filed Under: Finance
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