Your Next Big Thing.....

There's also another change I've made recently in my activities, which I wanted to share with you....

I started to "keep score" in my business.

It's hard to imagine any kind of competition or sport where nobody is keeping score! Yet, this is how many small businesses operate....

How do you keep score? I started to keep a weekly balance sheet....

I know EXACTLY, week by week, what my "net worth" is, and how it's changed week by week, due to all my activities....

Of course, the goal is to increase your net worth every week by as much as possible!

In my case, I do that through various activities....

I've been keeping my balance sheet for four weeks now. I do it every Friday night (after the markets close, to evaluate my stock market holdings).... I've found it's VERY motivating!

It really is like a score card. And if you only increase your "net worth" by a small amount one week, it makes you try harder the next week. :)

How do you do it? My balance sheets are very simple....

I have four sections. "Current Assets", "Non-Current Assets," "Current Liabilities," and "Non-Current Liabilities."

Current Assets are liquid assets I have now, or which I expect will be liquid soon. That is, CASH and things which will soon become cash. Things like cash in the bank, and chattel items I'm expecting to sell in the near future.

Non-Current Assets are assets I have, which I don't expect to turn into cash soon. I count my stock holdings as non-current assets, since I'm a long-term investor. If you hold property, it would probably go here....

Current Liabilities are things like bills I have to pay soon, or short term loans I need to pay off soon.

Non-Current Liabilities are, in my case, some long-term loans....

To calculate your net worth, you just add up your assets, and subtract your liabilities. This will give you a number -- hopefully a positive one! -- on what your "net worth" is....

I do this every week. It's fascinating to see how this number -- my net worth -- changes every week. Of course, the goal every week is to make it increase by as much as possible.... :)

Once you start doing this, as well as motivating you, it does become more like a game, with a score.

THIS must be what they mean when they say that MONEY IS JUST A WAY OF KEEPING SCORE.

Start your own business score card today, if you're not doing it already!

By the way, this is different from a salary.... A salary is usually calculated BEFORE expenses. However, your increase in NET WORTH comes after expenses. If you're just standing still, just making enough to pay your bills, your increase in net worth will be zero -- you'll have the same net worth from week to week, and month to month. If your net worth goes up, though, it means your WEALTH has gone up. That's the difference....

Another thing you can do is a Cash Flow Analysis.... To find out how to do this, see the book "Low Risk, High Reward" by Bob Reiss. Chapter 2 is all about this topic (and how it's important for small business).... Many consider that this chapter alone is worth the price of the book.... :)

One thing I'm not sure how to do yet is how to evaluate intellectual property rights on my balance sheet. For example, I have some rights to certain intellectual property (reprint rights for example), and I'd like to include that on my balance sheet, but I don't know how to do that yet....

- Dien Rice