Often businesses need a bit of a “runway” to take off and the length of that runway varies from business to business and your skills or resources. But using this transition time to prepare for entrepreneurship is so important to ensure that you don’t land back in your cubicle after 12 months of launching your business. A big piece of this planning is a “Financial Flush Out”.
1) Page #1 of Workbook – The first step is to determine and research what are the financial requirements to set up your business. These would be the up front, one time costs, to setting up your business. It might include items like rent deposits, vehicle purchases, website costs, and equipment purchasing.
2) Page #2 of Workbook – It’s also important to know what are the monthly overhead costs of your business to keep the lights on and door open. So items like monthly insurance payments, utility bills, web hosting, monthly marketing subscriptions, staff costs, etc. Even if you’re already launched your business you may never have gone through this exercise and it’s SO important to know this information to ensure financial success.
3) Page #3 – Now it’s time to drill down to the specific unit costs that are associate to your product or service. This is getting specific into what is relevant for your personal business. It includes material costs, labour costs per unit, possibly service fees (taxes, shipping, licencing), etc. that are required to complete a unit or service or the production of your product.
4) Page #4 – Last but not least, you need to know your own personal bills! Yup! What are your overhead costs of living as an individual. Often we don’t pay attention to this until the cash flow gets tight and we’re thinking, “what the heck and I spending my money on?”. Again – it’s better to know up front about how much you need each month rather than going into debt after the fact.
Upon completion, you will have a really good idea of your up front investment and your monthly carrying costs, both personally and as a business. Now I hope this hasn’t scared the pants off you and you’re dream to become an entrepreneur because keep in mind, you will find shortcuts, deals, and savings to what is on this plan. You can bootstrap and shoestring almost any business these days which is empowering. But this financial plan will help you set your sales goals and assist with a marketing plan which we will talk about in the near.
Be sure to watch part 2 of Transitioning from cubicle dweller to entrepreneur.