Home Business Opportunity – Managing Expenses
Home business opportunity expenses are generally given little attention when starting a new business. Whenever you are introduced to a new business, the promoter generally only talks about the income opportunity and seldom if ever discusses the expenses that will be incurred with running a home business opportunity.
Whenever there is talk of management skills in a home business, most of the discussion is about how to manage your time, your employees and/or your customers. Managing your business expenses is generally an after thought process. This is in reverse of how it should be. Mismanagement of your business expenses is a sure fire way to cause your business to fail and to put you further in debt. You should keep in mind that managing your business expenses is the very essence of conducting your business and therefore, should receive your serious consideration and planning prior to establishing your business.
Here are a few general tips regarding business expenses that you should consider:
Will you need the services of an Accountant, Attorney or Business Consultant and what are their fees? What about business permits and/or licenses? How much money are you going to spend on production? What is your advertising budget? How much will it cost you to run an office at home? These are just a few of the potential recurring expenses that you can expect to incur with any business. It is important that you plan for these and other expense contingencies.
After your business is up an operating, you will most likely find that your initial budget will need to be revised to accommodate expenses that you did not plan for and your budget will need to be adjusted accordingly. Budgets are living breathing business tools that need to be continually massaged in order to manage your business successfully. Failure to do so will only lead to moderate success, if any at all.
When reviewing your budget, you should keep a watchful eye on the following problem areas:
Many businesses overlook this critical factor when they handle their finances and it is often the main cause of failure. Whenever you think of spending money in your business, you must always consider the return that you investment will give you. You should always look to get a positive cash flow from the expenditure and if not, then the expense should be terminated or at least revised so as to return to a positive income status.
Multiple Sources of Income:
During startup of your business, you may find it best to start with a single source of income. However, as soon as it practical to do so, you should always try to supplement the income of your primary business with additional sources of income by adding new products and/or services. For example, if you run a website for your home business, you could earn some additional money by joining an affiliate marketing program. In this way you may be able to cover the expenses of running your own website and possibly also generate additional income to expand your products and services in other areas.
You should always plan for business cycles. Most products and services generally have cycles when sales are at their peak and when they are at the bottom of the sales cycle. As a business owner, you will need to determine when these cycles affect your business and plan for them to help flatten out your annual income.
The down cycle is the phase in your home business opportunity where you will need to have some cash reserves to off set the lack of income in order to pay for your recurring monthly expenses. This is a critical time in your business and one that will require your utmost attention. It is the time to rethink your spending strategy and look at where you need to cut your spending.
However it doesn’t mean that you should cut your spending for every item in your budget. In fact, when your business is in a slump, it might be an indication that you need to spend more money on advertising your product or service. It could also mean that you need to channel your finances more towards improving the quality of your product and/or services. You should always balance your spending with the goal of positioning your business to be successful during all business cycles.