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Starting a small business? Part 1

November 20, 2012

Why?  Don’t you like sleep, sanity and savings?  All three things are gone once you start a business.  Don’t take my word for it.  Ask any business owner.  Go to your local restaurant, car lot or mechanic.  Ask them how much fun they’re having.  Be warned – they might unload on you.

So if you still want to start a business, here’s some advice.  Figure out what your biggest expenses will be on a monthly basis.  Come up with a number.  Rent and/or employee costs will probably be the biggest amount.  Now figure out how much you’ll make on each transaction after any direct cost of the transaction.  This is your gross profit.  If this is too much work for you, either STOP or find someone to help you do it.  If you’ve stopped, you’re smarter than you look.  If not, divide your largest expense by the gross profit per transaction.  The result is how many transactions you need to have each month just to pay one expense.

If you can’t find enough customers each month to cover this one number, forget it.  Keep your day job or government benefits.  If that sounds harsh, wait and see what happens when banks, creditors and the IRS come after your failed business.

 

 

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