One of the advantages of starting a home-based (online) business is that it usually cost less than starting a business that requires office space or other facilities.
The average home business typically requires a much smaller starting investment, and since most people are already paying for a home or apartment anyway, starting a business from that location typically requires very little extra overhead.
Unfortunately, the lure of such low entry costs often causes people to overlook the bigger, long term picture. When evaluating whether or not to move forward with a business opportunity, be it network marketing, affiliate marketing, or freelancing, you’ll want to assess your direct costs, budget, and reinvestment strategy.
Let’s review three areas that many people commonly overlook when it comes to budgeting for a new business.
1. Direct Costs
Know the total direct startup cost for your new venture. For the purpose of this article, direct is defined here as what you’ll pay to either the network marketing company and/or the costs associated with marketing the affiliate offer or yourself as a freelancer.
If you choose the network marketing route, also known as multi-level marketing (which is very popular due to the low barrier to entry), you’ll want to get as much information ahead of time about what you’ll really need to spend in order to be successful.
Very often, these opportunities emphasize a low startup cost, but either the company, its literature, or those representing it, neglect to fully inform prospective representatives of additional expenditures needed in order to advance and/or maintain your position with the company.
Costs such as your signup fee, any required basic materials, required training, and product or inventory requirements, should all be examined and assessed before moving forward.
Should you choose the affiliate marketing or freelance route, you’ll want to assess the costs associated with getting and maintaining a website (domain, webhost, graphic designer, etc.), plus any marketing fees for promoting the product or service (i.e. Facebook or Google Ads, promotional banners on other sites, direct mail, etc.).
2. Indirect Costs
Please note, there are also indirect costs of starting a business that you’ll need to consider and budget for as well.
When starting an online or network marketing business, many make the mistake of overlooking what their ongoing costs will be. If set up correctly, these costs should remain relatively low.
However, without the additional investment, you might find it extremely difficult to get your business off the ground successfully.
Related: 3 Ways To Help You Better Leverage Your Time
To avoid this, you’ll want to create a realistic budget for what your indirect and ongoing monthly costs will be.
Your ongoing costs may include equipment for your home office, i.e. computer, printer, storage cabinet, etc., in addition to monthly telephone and internet costs, additional training and seminars, travel, leads, advertising, and so on.
Regardless of which business model you choose to start with, remember that lack of capital is one of the leading causes of business failure.
If you cannot afford to invest the money that will truly be needed to get your business off to the right start, then you may want to seriously evaluate whether you might be better off waiting until you can.
3. Reinvestments
You absolutely must reinvest back into your business if you want it to grow! One of the biggest mistakes new entrepreneurs make is spending most or all of what they generate in their business.
This behavior will cause your business to either never gets off the ground or remain stagnant.
Now, it’s understandable that things happen unexpectedly, especially in the beginning that may prevent you from being able to reinvest right away. But as soon as you can, you should implement a reinvestment plan, so that you can sustainably grow your revenue and keep your business thriving.
So how do you start reinvesting?
First, there are a strategy financial planners, and some business experts suggest called the 10-10-10 rule and it looks like this:
- 10% of your earnings, preferably gross, go into long-term savings, such as a 401K, 403b, etc.
- 10% back into your business, be it marketing, improving systems, products, etc.
- 10% toward helping others, your church, your favorite charity, etc.
At the end of the day, you’re starting a business to generate revenue. So, you’ll want to do your due diligence and conduct full research on all opportunities before taking the plunge.
Be sure you have a complete understanding of ALL costs involved, and not just the “basic” or minimal costs required to get your foot in the door.
As you achieve greater success in your business, you will need to adjust your numbers.
In general, the more money that you invest back into your business on those things that make it grow and produce more income, the better off you are likely to be.
Eventually, you will reach a point where you have both enough money to reinvest back into your business, while still having plenty left over to do the things that you enjoy in life!
If you’re looking for additional support, and need a trusted Coach to come alongside you and guide as you navigate this new level in your business, I’d love to help!
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