How do you plan for the money that you have coming into your business?
I read a 1990s guide to setting up business. It talked about looking at the money that you have coming into your business and thinking of it as percentages. This made a lot of sense. It talked about costs in running a business (the running costs) being about 70% of what you are bringing in. So, if you are bringing in $10,000 per month, then $7,000 of this is running costs including your take out. The other 30% is interesting and something that I am sure you have a view on.
Where the 30% goes…
- 10% you give away. The thing here is that as you start small and bring this type of mentality into your business, you are creating an initiative of social intercourse that will grow as your business grows. Obviously this is a personal decision as to what and who you give to. If you decide to give ‘time’ – make sure that you are being true to yourself as to what the value is that you are delivering. Think about the fact that 10% of time in a 5 day working week is ½ day – think about whether this is congruent with your day rate and whether this sits well with you.
- The remaining 20% is about reinvestment. It is about investing in new stock, new projects, or new initiatives that help in your growth. The risk profile of what you do is upto you. Be genuine to yourself is important here. It is not about investing in a lunch or a snazzy bit of hardware or software unless the return is absolutely explicit.
For me, the %ages are a guide and will be dependant on your business models and profit return. However, the ability to think about a ‘profit’ being split into different elements is encouraging. It allows us to plan and deliver improvements into the new year.
If you are a business owner, how does this approach feel to you?
Is this a reminder of the need to invest not just in your business future but also your society consciousness?
What percentages work for you?