I’ve seen the same mistake repeated over and over again by CEOs and business owners. The mistake blows me away each time I see it.
What is that mistake?
The CEO doesn’t have a plan for the business.
And, if you’re going to succeed in business, you’ve gotta have a plan. The crazy thing is the plan doesn’t need to be complex. But there has to be a plan. And the primary goal of the plan is to:
Determine how much money you need to start your business.
You’re going to need to gather up everything to do with your company. Let’s break this into two parts:
- Your revenue by month
- Your expected revenue by month
- Your current cost of goods (if you are selling a physical product)
- Your future cost of goods
- Your Expenses:
- Your salaries for each employee, including yourself
- The expected salaries you’re going to pay future employees
- Your rent
- Your insurance
- Office supplies
- Advertising expenses
- Travel expenses
And anything where you are spending money to run your business
You’ll be ahead of most people if you just do this simple exercise. Then, put everything into a spreadsheet so you can determine how much money you are spending by month.
A word of caution: Make sure you are accounting for all of your expenses.
I don’t know why people do this, maybe it’s human nature, but there is a tendency for CEOs not to account for all the expenses of the company. Maybe it makes them feel better if expenses are lower. I don’t know.
But don’t fall into this trap! Account for everything. And one more thing:
Make sure you account for your salary.
Yes, you need to make money too. Even if you start your salary at $500/month, you need to take a salary.
Taking a salary starts you on the discipline of running your business as a business. And taking a salary shows you how much money the company needs to make for the company truly to be profitable.