#26 - How do I start a business?
What do you need to do to start a business?
Write a business plan – not that stuffy kind, but the one that will give you real results. “How will you make money?” that is the question you need to answer. WRITE IT DOWN!!
Other questions to ask yourself:
What kind of money do I want to make?
What kind of money do I NEED to make?
How can I make that number? ie: How many widgets do I need to sell, how many clients do I need to take on? Make sure to calculate a pre-tax number
What is my offer to the world? Meaning, what value will you provide to your clients or customers in exchange for their money
What should really be in place financially before you start:
Cash flow needs - how much $$ you need to have in the bank before going out on your own
Asset liability matching with your investments - meaning, your stock investments shouldn’t be used to fund your future personal expense needs
Entrepreneurial mindset - get your head in the game, you’re starting a business!!
Business name, Tax ID number, legal structure and what kind of insurance (if any) you potentially need to run your business.
Don’t spend 100 years thinking of a business name, getting a logo and creating a website. Get a minimum viable product out the door and refine as you go
Business spend vs personal spend
Tally up all the business expenses you expect in the first year or two
Tally up all your personal expenses that you expect per year – give yourself a buffer in case emergencies come up
Deduct business expenses - stop trying to deduct your personal expenses
Knowing how to evaluate a business spending decision – before you go into business!! So that you can re-apply this after you’ve gone into business
Example we used : Paying a marketing person $10k per year. You sell your services for $3,500, but let’s say it costs you an additional $1k per client to run your business, so you really sell your services for a net $2,500 per client. You need that marketing person to bring you 4 clients to break even. 5 clients is a 25% return on investment (2,500/10k), pretax. Can this marketing person help you bring on 5 clients?
Mindset: Who do you need to be right now to keep going when the going gets tough. How can you make yourself more resilient?