If you are a regular on my blog then this may see a change of direction for you.
Yes, health and fitness is a HUGE part of my life, my passion and my business and I will still be posting regularly in those subjects.
But I do have some other, sometimes interesting layers going on.
Well, I think that people could maybe find them interesting or useful.
Or maybe not.
But then I can only try, right?
Starting a business. Wow, how much is involved, that I had no clue about, mainly the detailed financials.
profits and loss – cash flow projection – statement of cash flow – balance sheets.
It’s pretty confusing stuff initially.
Today Ed Sheehan put out an article saying you need to spend 10,000 hours working in something before becoming an expert.
I did some quick maths.
I regularly work 80 hour weeks +
80 x 50 (working weeks per year) = 4,000
4,000 x 4.5 (years company has been running) = 18,000 hours.
Thats a lot of hours!
But would I consider myself an expert?
In some areas yes. But in PLENTY of others, no way!
I’m part of business mastermind group at the moment and was lucky enough to go on the recent finance workshop, headed up by the owner and very successful businessman, Dan Bradbury.
He taught me some takeaway points that I have now learned and put in place to watch my business finances.
Basically, everything should be divided into a % of total revenue. Starting with 30% of total revenue being profit. This is known as the profit first method.
Then you have the remainder to split between the following areas.
Cost of good sold – any expenses your business has to spend to acquire customers and deliver your services, usually a variable depending on how many customers you have but not always. E.g. If you run an educational course, the more people you have the more stationary and books you need.
Overheads – fixed expenses that go out regardless of number of customers. E.g. Rent, utilities, etc.
Wages & Salaries – the amount you pay people to carry out the work your business needs to operate.
Now, here is the fun bit.
Each one of these elements should only take up an allocated % of your total revenue. To ensure the company meets profit targets in the set within the right time frame.
Mind = Blown.
It varies from industry to industry, as to what each business will spend in what areas.
But let’s break it down.
[these are not real figures I am just using an example]
revenue = £10,000
proift (30%) = £3,000
wages (40%) = £4,000
overheads (15%) = £1,500
COGS (15%) = £1,500
Now, the goal of a business owner is to get those figures to within the right %’s and keep them there.
Some months the COGS may need to increase, in which case, the plan would be to maybe lower the COGS the month before to have the capital available for use when needed.
Trust me when I say, this part of business is not easy and throws so many curve balls.
However, I am very excited to now have these tools and metrics available to use in my own companies.
Always learning. Always progressing. Never surrender.
Ok the last one was cheesy but I was joking.
Have a great day amigo,