Money ... What's Your Opinion?

Hello,

Running a business is a new adventure for me.

So, I may not be doing this right. Please feel free to tell me what you think of my method. I would greatly appreciate your thoughts, ideas, and sharing your own personal experiences!

O.K. This is what I am doing:

I spend the money from our sales to purchase any products we need for our business. For example, our computers, printer, scanner, supplies, etc.

Every cent we make goes right back into our business. Therefore, the balance is almost always the same because I "pay cash" for all of our purchases.

My reasoning: it seems that at one point, we will have almost everything we need to run our business, without debt.

At that point, our balance should grow. We can then start all over with another product. On and on till we reach our websites goal.

But as I said, I'm fairly new to this other side of the business world. :-)

Thanks so much for your thoughts, ideas, and/or suggestions.

Diane




Easy, Simple and Proven... It WORKS!

Diane ~

If you are a Sole Proprietor, be certain to set aside at least 30% of your gross for Federal taxes.

Social Security as a business owner will account for 15% as well. As an employee, 7.5% is withheld with the Employer matching it's own 7.5% to add up to the total of 15% until you "Pay out" at a certain level.

Take it from one who has wrangled, both successfully and [/b]unsuccessfully[/b] at times with income earned from online ventures.

Is it a hobby??? A second income/occupation??? Are you taking too many of the expenses allowed??? Or none,as I have in the past???

What I found was if you danced to close to the line with deducting percentage of Home Office use. Our IRS guy took an extremely hard stance, and very, very close review of past returns!!!

In '98 I was presented with an additional tax bill of over 5 grand!!! A combination of "Taxes Owed", "Interest and Penalties" and being a tad too aggressive on what I considered claimable income.

Try explaining to an IRS guy your internet ventures are "Educational Expenses" related to my real world selling career!!! LOL

If I go back to school or take a class to further my sales profession, it's expensable. If I go to a Selling Seminar, it's expensable. But to experiment with people's minds, what triggers their purchasing motives, and overall testing of words and phrases which sell... At least on the Internet he didn't consider all of it expensable.

So overall... Allocate your portion for taxes, set a portion aside in an investment vehicle of your choosing and place the rest back into your business.

The exact figures should be left up to you. But remember, Uncle Sam sometimes won't play fair and if he feels you are cheating him he can make your life miserable!!! And if he believes there is fraud involved... You have just opened yourself up to some insidious scrutiny!!! As an aside... Don't piss off your IRS guy either!!! HA!

Success and Regards... Mike

Done any planning?

It sounds like your running a day to day cash flow business.

If you are making sales you should be able to create some sort of rough forecast of future sales.

If you are serious about making an income from your ventures (as opposed to having a hobby that breaks even), then you must plan.

Do a forecast for the next 6 months - write down all your expected income and list your fixed expenses. Then you know how much you've got to spend on equipment.

The drawback on buying everything now with cash up front is that technology is moving so quickly - you may need different tools in 12 months to preform the same functions. What will you do then - start out all over again buying with cash until you have your requirements?

Renting or leasing might be an option - than way you can start earning an income now.

I've seen too many people start small businesses and not make any money for a long time thinking they will eventually recoup their investment.

My suggestion is to start taking an income straight away. That way you are forced to grow.

The fact is your time alone is a major investment and you should be rewarded for it - even if it's only $50 a week to start with.

The other major advantage in taking an income straight away is that you are building value into your business. If you ever want to sell your little venture you can prove that it made you a return. Even a $50 a week income business has a saleable price. This will also make it easier to finance in the future - it shows a trading history.

Just my thoughts...Hope it helps a little.

Good profits and have a great day.
Jason van Hooft

P.S. I really missed catching up on all the great posts here on a daily basis - I've been so busy I haven't had a chance to visit - wow this board has had some great posts in the last 2 weeks!




Don't click here - you will be forced to....

Thanks Jason,

That's great advice! I've been learning about the financial side of business -- about the numbers, profit & loss statements, balance sheets, all that stuff....

It's quite important, I believe. It gives you a sense of where your business is going....

They don't teach this in any of the "popular" business books I've seen. It doesn't seem exciting enough for people to want to buy it.... However, I've just begun to realize how incredibly important it is....

I'm sure there's a more exciting way to teach the "numbers" side of things, because it's valuable information....

Thanks for the advice, Jason, it's good for all of us!

Dien Rice