Besides food, water and oxygen, do you really need anything?
Besides food, water and oxygen, do you really need anything?
Make better use of outsourcing. Outsourcing and off-shoring have bad reputations perpetuated by folks who have no factual idea about either concept. Outsourcing is simply delegating necessary tasks to people or companies outside of your business. Off-shoring is buying goods or services from lower cost regions. Yes, both concepts can cost people their jobs but your job/business should always be your priority.
Does it make sense for you to manage your books, build your website, create your own logo, etc? You may need to perform a cost/benefit analysis to answer the question but generally speaking the answer is no. Isn’t your time better spent with your customers or growing your business or innovating.
Here’s an example. There’s a one person business in my building. He is a craftsman who works 10+ hours a day building things with his hands. Then he spends a few more hours at night and on weekends managing his books, filing tax returns and dealing with other paperwork. Maybe he needs a break from actually being productive. I’d like to think that his time would be better served making things that he can sell. He can find a decent bookkeeper for $12/hour. His tax returns would cost him less than $1,000 a year and he could probably get by at about $400 a year. I’m discouraged to think that he couldn’t find the extra business or cost savings to pay for these services.
Look to outsource any activity that does not serve your customers or grow your business. A short list includes:
Some businesses have also begun to off-shore these tasks. I watched a brilliant webinar where one business owner off-shored his personal assistant duties to the Philippines. I don’t have personal experience with these services so I don’t want to endorse them just yet. I get inundated with proposals to have firms in India prepare tax returns for me. They aren’t cost effective yet for me but the idea is tempting.
The whole idea of outsourcing is based on old economic principles of scale and specialization. If you find the right partners, you’ll definitely save time and money.
Occupancy is a fancy term for the cost of housing your business. It can include rent, property taxes, utilities, depreciation, maintenance, janitorial and so on. Rent is a major expense for most businesses. If you don’t rent or own your business building, move on to the next post. If you do rent or own your building, here are some ideas for saving money in 2013.
Yes, rent is always negotiable. Even with a signed contract, you may be able to renegotiate your lease and rent expense. Commercial vacancies are down in my area but there are still plenty of vacant offices and buildings. Landlords don’t want to lose a good tenant. You’ll need to have a valid argument for negotiating. Remember that you never get what you don’t ask for.
Reduce capacity. I keep downsizing my office in the same building. I don’t need three offices and a private lobby any longer. My first downsizing saved me $1,200 plus I negotiated to use the private restroom. I’m aiming to save another $2,400 this year my reducing my space and using a shared lobby. My landlord doesn’t mind because he can charge higher rents for my existing space and has trouble filling smaller spaces. Every business should always look for ways to reduce the amount of space they use. It can always be done.
Move. There are plenty of opportunities out there. Remember to calculate moving costs and additional marketing costs into any cost savings.
Share space. Find complementary businesses to share space with you. This takes patience but could save you some cash.
Fight the tax man. Property taxes are crazy here. If you own your space, think about challenging your assessment. If you rent, have your landlord fight the assessment. You might just get a break.
Shop around for lower prices on heat and electric. If your business is a heavy user, you may find some sizable savings.
Next Post: Hello, this is Raj from customer service.
I used to pay about $4,000 each year for telecommunications including internet. I also purchased a phone system back in 2005 when I hired employees. My telecommunication expenses were almost as much as my rent expense. My first Money Saving Idea for 2013 is cutting telecommunication expenses.
Do you really need landlines for phones or faxes? I cancelled by landlines and switched to Ooma for phone and Efax for faxes. I needed to buy the Ooma hardware for $99 and ported my phone number for $20. I pay $4 each month for the taxes on the service versus $60 per month for a landline. In two months, I recouped by initial investment. Efax costs $17 instead of $40 for an add on fax line. You will also need a scanner to send documents through Efax but my office printer already had one.
I also have a mobile phone. Wireless isn’t reliable enough in my area to only rely on my mobile phone. But I was able to reduce my monthly expense by $20 by negotiating the service.
I cancelled by 1-800 toll-free number as most of my clients don’t have to pay extra to call me.
I negotiated my internet service down to $50 per month from $70 by saying that I was leaving. Most internet providers will make a deal with you if you call them. You can also look into sharing internet with neighbors. It might not be ethical but it might be all you need.
So in 2012 I cut my telecommunications bill from $4,000 to about $1,700. I think $1,700 is still astronomical but I know that I made better use of the $2,300 in savings.
Next Post: Occupancy
“I want to make the world a better place.” “I only buy Fair Trade products.” “I want to contribute X amount of my profits to XYZ charity.” I am a newbie to these kinds of businesses. As a misanthropic curmudgeon, I try to maintain an open, however skeptical, mind to these business models.
If you’re interested in this business model, check out lifeoutofthebox. This is a young couple in Nicaragua selling handmade goods and suing some of their profits to supports schools in the country. They are very passionate about their mission and I wish them the best. I’m hoping that they start selling belts soon.
Listen, businesses run on capital (which can be synonymous with cash). No capital means out of business. I like to believe that every business, in its own way, is trying to make the world a better place. But you MUST make a profit to stay in business (or you’re just a private foundation giving all your money away). Profit is just an addition to capital measured over time – like a space time continuum. Profits are not bad or evil. They are only a measure of success for your business.
Businesses must be run in perpetuity and you must plan for that perpetuity. Just because you had a profit in March doesn’t mean you’ll have a profit in April or ever again. That’s why profits are important. They guarantee the continuity of your enterprise.
At some point, I’ll do a post on not-for-profits and how they are generally a bad idea. I believe it is far better to generate a profit through hard work and then freely give that profit, or a portion of it, to a charity. I’ll call this the Carnegie method. So, by all means create your social entrepreneurship but run it like a business and plan on making a profit. Add a line for charity in your budget and hold yourself to it. Or, amass as much wealth as possible and give it all away like Andrew Carnegie did.
A few more states legalized possession of marijuana. Check out this map – I can’t verify the information. But it looks like legalization is gaining momentum. Does this mean that you could start a marijuana business?
Farming sucks. You need arable land, water, seed, fertilization, a strong back, hanging barns and security. (I’m basing this on local knowledge of tobacco farms.) You need to know what you’re doing and do it everyday. Once, you grow it, how would you distribute it – straight to consumers, through dispensaries, etc? Farming sucks – 20 hours a day of work and you can’t tell anyone about it.
Manufacture supplies and peripherals? Do you know anything about making paper, blowing glass or making pottery? It might not be enough to make a profitable go. You’ll find too much competition on paper unless you can make organic, bleach free, etc paper. How will you distribute the products? Potentially, you could start a web based store for peripherals but you’ll find lots of competition.
Regulation will eventually kill you. Shortly after legalization will come regulation. (If it makes money, tax it. If it keeps making money, regulate it.) We have a huge, permanent bureaucracy in this country that is always looking to expand. Do you think the FDA and ATFE and related agencies won’t get involved? Do you want to compete against Pfizer or Monsanto (probably not)?
How about downstream? Could there be pot specific munchies that you can make and distribute, especially with Hostess’ demise. How about providing a safe place for people to consume their product? You could teach how-to classes for wannabes and newbies.
I don’t see it as a winner unless you find a niche. As it becomes more mainstream, the Big Boys will enter and crush you. Good luck.
I must be crazy. On April 16th, I posted an offer on Craigslist for a free business plan review. I wouldn’t write it for you but give you creative criticism from the point of view of a potential investor or loan officer while also testing the feasibility of the plan. There were NO takers. I didn’t promote it and Northwest CT doesn’t get much traffic.
So, as part of my goal to help 1000 businesses in 2013, I’m reopening my offer to review your business plan for free. I will sign any confidentiality agreement that you’d like. I will review it for both feasibility – do the numbers make sense – and the likelihood of getting funding for your business.
This isn’t an offer to write a plan. It isn’t an offer for funding. I just want to help you be successful. I won’t try yo sell you anything. Email me at firstname.lastname@example.org for more info.
How much money do you need to start a business?
How do you make a small fortune in the restaurant business? Start with a large fortune. That one kills at most CPA gatherings.
Lots, to answer my first question. When starting a business, you need to figure out what you need including capital equipment, start up costs, working capital, safety margin.
Capital equipment includes all of the tangible assets that you need – machines, furniture, computers, phone systems, copiers, resource material, and so on. Don’t forget Leasehold Improvements if you plan to rent space.
Start up costs include things like professional fees to get your business going, building a website, branding, first round marketing and anything else to get the business off the ground. It can also include deposits for rent, utilities, etc.
Working capital in this sense means having enough cash to pay 3 months worth of expenses without any revenue. You’ll need to plan out monthly expenses in your business plan financials. You should have at least three months worth of expenses in cash. It may take a while to get customers to buy from you and pay you. Working capital also includes opening inventory and supplies. You can’t fix a transmission if you can’t afford the parts.
Safety margin. Things go wrong all the time. Survival may rely of having a few more bucks put away to handle the problems or pay for things that you didn’t originally plan.
Make a list and get prices for each. Add it all up. Can you find the money to pay for this?
Check out a free webinar happening now. Click here now. I should have shared this earlier. It is full of great ideas. It’s free. No one is trying to sell anything, except a download of the video. If you have time, check it out.
I’m stuck on hold with IRS and taking notes from webinar so you can definitely multitask while watching it.
Just don’t. “When I save some money (or inherit it or win the lottery), I want to start a little Uzbek restaurant where all my friends can come and hang out. It will be like a party every night.” How about: “I can cook so I can open a restaurant.”
A successful restaurant might be the toughest business. King crab fishing seems easier. I’ve had many restaurant clients. None of them made made any money and most of them failed within a year. It is hard 24/7/365 work. Here’s why:
It takes a special, learned skill to plan a menu. Food spoils, quickly. People’s tastes are fickle. There is plenty of competition out there. Math skills are necessary to determine the proper inventory of food – constantly. You need business planning skills to guesstimate how much food is needed each and every day. This is daunting and amateurs are guaranteed to fail at it.
Margins suck. You will be lucky to break even on food – very lucky. Do you think McDonald’s makes any money on its Dollar Menu? The price of your plate barely covers the food and prep costs let alone the service cost and overhead. I used to recommend that aspiring restauranteers calculate how many plates they need to serve each hour to reach break even. I don’t think anyone heeded that advice. Liquor sales are used to offset poor margin on food, plus it doesn’t spoil as quickly. That’s why a $15 bottle of wine costs you $45 at your favorite restaurant. Even McDonald’s can make up for its Dollar Menu losses by marking up soda and McCafe drinks by 300-500% of cost.
People suck. Restaurants need to reinvent themselves constantly to stay on top. Restaurants are a form of entertainment. People’s tastes in food and entertainment are constantly changing. It takes money to constantly change the look, feel and taste of a restaurant. If you can’t break even on food, you’ll never generate enough capital to keep up with your customers changing tastes.
Friends suck. Don’t count on them to carry your business. They expect discounts, especially on booze. They know you’re marking up the Chardonnay so they expect a special price from you. They may not realize that you’re losing money on their calamari or casually forget the last time you told them.
Competition will crush you. There is usually room for only a few successful restaurants in any area. Smaller towns may only be able to have one. That local restaurant that everyone goes to all the time shouldn’t be held up as an example for success. They have years of gut wrenching experience under their belts and low overhead that you can’t compete with. Large chains have economies of scale, distribution systems, and planning systems to beat you on the cost of everything. (Even with the advantages, are any of your local Quizno’s still open?)
You suck. Maybe, I don’t know you. But are you willing to put in the work to make a successful restaurant. There are no off hours let alone off days. You need to work every day and watch everything. I couldn’t do it. I like the occasional hike or Sunday morning soccer matches. You won’t get to enjoy anything until your restaurant starts making money. By then, you’ll need to worry about how to keep it making money.
Franchises suck. Look up Quizno’s. I used to love their bourbon chicken (for no other reason than I really like bourbon). I’d eat at my local Quizno’s a few times a week. It always seemed packed at lunchtime. Then it was less packed. Then it closed down. Franchises don’t guarantee success. They take a whole lot of money upfront to purchase and start. They also get a cut of every single sale so you have a higher break even point. You’ll have high capital requirements, a vig, and many of the same headaches as a private restaurant.
So, still want to open a restaurant? Sign here ____________________ acknowledging the fact that you’ve been warned. Better yet, here’s a link to a sample business plan P&L for a restaurant.