Know Your Money
May 8th, 2009 Filed under: Uncategorized — Small Home Business AuthorIf you want to build booming business, to create the lifestyle of your desire, and to ultimately leave a proud legacy, you must be aware of one essential facet. You must know your money and how to leverage the opportunities it presents. It is a sad fact that most business failures occur because of the management of the company’s inability to continuously reconcile their plan and their financial resources. Knowing your money means being able to plan, budget, forecast, make adjustments where appropriate while prudently using leverage to maximize your assets.
You wouldn’t buy a house without first shopping around. You base your selection on the home meeting your personal needs and preferences. Also, you would take into account you ability to afford to pay the mortgage, taxes and upkeep on, etc. Being in business is no different . You need to have a handle on the exact costs of being in that business, and how much each business transaction will cost along with the ongoing costs to cover your support staff and resources. Keeping the following five themes in mind will helping you to better know your money:
Forecasting: Forecasting is perhaps the most important, and challenging part of any business operation. Before embarking on a business project, you should always forecast key measures, such as your sales volume, your overall profit, your profit per transaction, your costs per transaction and so forth. It is vital that you forecast these numbers for a variety of scenarios, good and bad, in order to be prepared to take the appropriate actions if the business realities vary from your expectations.
Budgeting: This is a key tool for ensuring that your cash flow stays healthy. Essentially budgeting is the process of allocating certain sums of money for specific tasks. For example, your budget will allocate money for things such as rent payments, payroll, utility bills and so on. A budget is not simply a list of these commitments, but a plan of expenditure balanced against your forecasted sales performance.
Fixed and Variable: If you are having trouble envisioning the costs of doing business, then the tried and tested method of making sense of your basic cost is to split it up into two categories. First, set aside your fixed costs. These costs are things that do not change over time, or only rarely. These include cost such as your rental payments, loan repayments, etc. That leaves you with your variable costs which consists of expenses that will vary, such as commissions and fees, that are charged to specific transactions as they occur.
Leverage: One of the best ways of taking your business and your lifestyle to another level is the concept of leverage; leverage is simply the process of using limited resources to undertake larger transactions than would be possible with your cash pile alone. This is often achieved by using credit to cover the majority of this cost. In short, leverage allows you to do a large amount of business with a small amount of capital.
Asset Management: Many businesses do not allow their assets work for them. This results in significant, sometimes necessary expenditures capital. For example, businesses that have capital-intensive equipment have a range of opportunities open to them, to avoid tying up too much money in their equipment. There are possibilities of leasing and the varieties of financing the purchase. This enhances the ability of the business to enjoy the benefits of the equipment and the flexibility of preserving these funds. This results in the availability to these funds as additional working capital.
In summary, knowing your money is vital for any business. Having a very clear vision of what it costs you to be in business, and having strategies to manage those costs are of paramount importance. Knowing your money will allow you to leverage the opportunities that it presents to you, and to build an enduring business legacy.
WG Communities is a family of companies committed to sharing the resources, tools and techniques that enable independent service professionals to leverage their resources and expertise.
Founder, Walter L. Gordy, Jr. spent over 30 years in the Real Estate Development and Construction industries. He has been responsible for thousands of families realizing the benefits of home ownership and continues to advise Residential and Commercial specialists on modest and large scale development projects.
To learn about how to use integrated solutions which employ virtual technology to produce superior business or personal growth you may visit http://www.wgcommunities.com
