Tuesday, July 22, 2008

Budgets for your Business

Budgets for Your Business
Budgets are the forgotten business practice on the Internet but they are very important to use in running your business. And, remember regardless of whether you are promoting affiliate programs, MLM, selling a product or anything else, you are running a business and you have to look at things differently in order to be successful.Some people start working online and don't consider themselves in business and they cannot be further from the truth because if you are working online to make money, you are now in business and everything we talk about at this site is based on treating you like the business owner that you are.Today we are going to talk about budgets and since your number one expense is going to be or should be advertising that is where we will start.When you start a business, you always need to keep your eye on the bottom line. How much money do you have coming in vs. how much is going out? Since you are probably self funding your business which means you are not getting investors, establishing your budget is fairly easy.

One way to establish a budget is to pay your mortgage or rent, car payment, utility bills, food, clothing, etc. and then whatever you have left over that's your budget. While this might work, it is not the best approach to take because it is too easy to slip on investing in your company for a week with the intent on catching up the following week.

The problem with this is most people will never catch up so having a budget for your business is a matter of self discipline.

There is no right or wrong amount to set for your budget as long as the budget is not zero¦Before you establish your budget, you need to take a few things into consideration such as the cost of your product, the amount of commission you'll generate and whether or not there is any residual income from your product.

Residual income can come from recurring commissions or from commissions you receive from those you sell to. In other words a multi-tier payment process has the ability for you to make an income from everyone you sell to.
Based on this information, you can decide how much money you want to spend to make each sale.If you're selling a product that costs $50 and you get $20, you will treat that product differently than a product you sell for $50 and you not only get $20 on each sale, but you will get an additional $5 from everyone you sell to who also makes sales.

The reason for this is because if you make a one-time commission your cost to advertise has to be less than $20 if you want to make money.Whereas if you have a product that pays you $20 for the initial sale and $5 from everyone you sell to who also makes sales, you can actually spend more than $20 for that first sale because you can make it up on the back end sales.This is called the รข lost Leader approach and is based on long term gains for short term losses. Now be forewarned that this is a little risky if you are selling a product for someone else and relying on your downline to make sales because unless you are helping your downline, many of them will never make a sale which means you will never see that second tier payment.Your best approach is to find a happy medium so you can generate an income off the initial sale and future sales by your downline.How much should you dedicate to advertising your product, program or service is entirely up to you. There are people who work on bulk sales where they make a small percentage on each sale, but they make lots of sales. Other people want to make fewer sales but get a larger percentage of the commission. Again, there is no right or wrong way to do this, you just need to decide going in which is best for you and base your budget on that policy.
Once you have established your budget, make sure you spend your budget each and every month and you don't do this just because you have the money, you do it because you will want to test different advertising, always have traffic flowing to your site, setup co-ops for your downline, etc.Also remember your budget needs to cover more than just advertising. You also need to include the following in your budget: Internet Connection
Phone Costs
Printer Ink
Paper and Office Supplies
Salary for yourself
Accounting Costs
Design and Layout
Website Hosting
Miscellaneous ExpensesSome of these will not pertain to you at first because something like salary is not something you can expect for many months or years and yes this is a fact. Again, contrary to what others are telling you, you will not come online and immediately generate an income. You will at some point, but not initially and if that is your plan, quit your business now because you will be disappointed when you find out the truth which is what we are telling you now.Now you need to understand that if making money online was as easy as all those scam sites are telling you, then everyone would be working online and there would be no traffic jams or rush hours and gas would cost about a dollar a gallon because nobody would be driving anymore.Yes, you can make money online if you treat your business like a business, advertise it as much and as often as you can and spend some quality time with your business each day.Okay, getting back to budgets. Take an hour and setup your budget for your business. If your are promoting multiple things, you will need to establish a budget for each product, but you start with your business first.Feel free to re-work your budget about every 6 to 12 months and if you are not spending all you set aside for paper and office supplies, then take that and invest in advertising because the only thing and I mean the only thing that will make your company grow is advertising and the more you spend, the more you'll make assuming you have a solid product of course.Take an hour and setup your budget and monitor it carefully. If you have Excel, you can track your budget in Excel and make sure you know where you are spending your budget and why and keep solid records so in the near future as you build your downline, you can show them how much they will have to spend to get to your level.
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For Your Online Success,
Eric Burgoyne