Tuesday's Tip - Money!

Congrats to #9 Collegesahm! Thanks to random.org for the drawing and thanks to Pleated Poppy for the giveaway! She is the winner of the posy pins from the Mamalicious Monday giveaway yesterday! :)

Welcome to my Launching a Business Series! Click here to read what it is all about.

This is week 8 & here is what we have discussed so far:

1. Researching your product to see if there is a market for it.
2. How to price your product.
3. Finding time to work from home with small children.
4. The different venues to sell your products: retail, wholesale, consignment, etc.
5. Making & selling your product.
6. Exposing your business to local media.
7. Selling on the Internet.

This week I want to talk a little about money! The downside to owning your own business, especially if you try to cut costs & run it alone in the beginning, is that you are everything! The CEO, accountant, sales, marketing, receptionist...well, you get the picture! And that can be stressful. Most people are not good at all of those things at the same time. So, when your business takes off, and if you can afford it, you certainly should have at least 1 person to help you out. Otherwise, it can be very stressful!

When starting or running a business in this current economy, you need to learn to run it as frugally as possible. You don't want to dump a bunch of money into something that isn't going to fly. I do have an accountant that helps me with taxes, tax questions, etc. And if you develop a relationship with bank mangers they can be very helpful as well. Here are a few tips for starting and running your business on the "frugal" side! If you are trying to run a business in this current economy, I think it's safe to say we all need to be as conservative as possible with our money right now.

1. Don't invest a lot up front. Start with the basics. Get a feel for the market and see if your product is going to sell before you invest a lot in your business.

2. Evaluate each product, or your business as a whole, after 6 months-1 year. If you don't see it improving, sales increasing, an interest in your product, or if it's not worth the time you are investing, it may be time to quit, or take a break. I know they say it takes several years to show a profit, but that's on paper for tax purposes...you should be making some kind of money in the 1st year!

3. The 60/40 rule. This is a good rule to follow. Set aside 40 percent of your gross income as profit. 60% goes back into the business. In other words, if you have $100 in your business account, $60 should be to re-invest in supplies, and materials needed to make your products, things needed to make your products & run your business. 40% is your paycheck. You can invest a little more of your paycheck if you choose, but be sure when you look at your account balance, realize not all of that is profit. It is really nice to be able to pay cash for your materials, and not go into debt.

4. Take advantage of tax-write-offs! There are a lot of great benefits to working from home and a lot of things you can write off as a result of working from home. Be sure you save all receipts & document everything. It's a lot to keep up with, but worth it. I started a folder and broke it down into these categories below. About once a month I would make sure I had all categories updated, so at tax time, all I had to do was total each category. Check with your accountant if you have any questions.
Here are a few:
-Mileage driven to & from shows, purchasing supplies, business lunches, etc.
-Telephone Bill-a percentage can be written off
-Supplies - envelopes, ink cartiridges, etc.
-Accountant Fees - if you pay someone to do your taxes, you can write off their fee
-Products Given Away - That's right! All those products you give away to drive traffic & attention to your site, you can write it off!
-Stamps, Postage, etc. - Any fees incurred for shipping those products you give away, samples, etc. As long as you pay for the shipping, and not the customer, you can write it off.
-Furniture for office-Bought a new chair for your computer desk? A new desk? A new memo board? Write it off!
-Monthly Internet & Email Expenses
-Advertising Costs - If you network and promote your business wisely, you should not have a lot of out-of-pocket advertising costs. But if you do, write them off! ;)
-Homeowners Association Fees- Here in Georgia ( again check with your local accountant if you are in another state) you can write off your homeowners association fees if you work from home.
-Other Home Fees - Again, check with your local accountant, but this is the way it works in GA. I can't see why it would be different in another state.
Let's say you own a 2500 sq ft home & your office occupies 250 sq ft. That's 10% of your home that is used for an office. So, you can write off 10% of your total utilities for the year. Utilities would include electricity, water, & trash. You can also write off any home repairs, yard maintenance, painting, etc.

I hope these tips help you and please let me know if you have any questions or tips to share. Thanks so much!!

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