Develop a realistic set of expenses. Look at public companies that are doing similar things, your expenses should fall within a reasonable range of theirs. If ten companies in your industry spend 15% of revenue on marketing, you will have to have a good explanation for why your marketing costs are only 5%. Additionally, in the earliest stages, your G&A expenses are likely to be higher.
A. The business Plan clarifies the financial needs of the business and causes you to prepare a projected balance sheet, income statement and most important of all, a cash flow examples, the most important start up financial statement and the only predictor of success that i know.
Journalist Scott Burns, in his article titled, “Take a look at Returns” did an analysis of the amount of money you would need to save in order to not run out of money by the time we die, assuming we retired at age 65. The conclusion was that we would have to save 34 percent of our income if we planned on living another 20 years after we retired. The analysis assumed that we would earn no return on our investments.
This sounds like pretty basic information, but it can be tough to find. Most companies offer more than one product; a big conglomerate might offer hundreds of different products in a range of industries. Digging into the company’s lineup can give you a better sense of the forces that will drive its results.
When I mention Cash Flow, I refer to what some people might refer to as an Income Statement. Cash flow is the summary of how much money you had coming in and how much money you had going out over a certain period of time. For most people, this period of time is a month because that is how often most of your bills come due, yet it is a short enough period of time that you can use the information to make timely adjustments to your income and expenses. The idea, of course, is to have more money coming in than you have going out.
The second column is entitled, “Who Can Help?” List people you already know who have skills to help you start or complete the wealth building activities. These people already know you and are very willing to give advice. If these people are unable to help, they may be referral resources for someone else who could help you achieve your goals and accelerate your wealth. Examples of people you already know can be your family (Mom, Dad, sisters, brother-in-law), friends (college, parents of your children’s friends, health club), neighbors or people from work. Go through your address book for additional people who can help.
Being able to track your inventory can tell you whether business is increasing or slowing down. It also tells you how much money is tied up in this unproductive asset.