In our last video we talked about measuring everything and determining the results of what you’ve done based on those measurements. In this particular video we’re going to talk about measuring something the cost of doing business.
Now in a noir film the cost of doing business might be paying off gangsters. That’s not what we’re talking about. But what I am talking about is measuring everything that goes into keeping your location open – keeping your business open – so that you can do business and find customers and produce a profit.
The first time you do this it’s going to be extremely boring. And you want to measure everything as much as possible. You’re going to want to see how much it costs to lease or rent your building, or your office space. Even if you are running a home office, for your tax purposes there is a cost for this. How much are your lights? How much is your heat? How much is your internet access going to cost you? And these are things that at least one time you need to measure. How much does it cost to insure your business? How much does it cost to buy office supplies? How many office supplies you go through in the course of a year? If you want to really want to break that down – and you you should eventually – how much is the cost for pencils and pens? How much is the cost for paper clips? How much does it cost to buy a laptop computer to do business with and how are you going to replace that? How much is it going to cost to replace that? Are you going to need a second computer? If you need help in doing different tasks, how much is it going to cost to hire somebody to do that?
Once you’ve got a set of numbers, what you want to do is break it down into monthly costs so that you know how much it’s going to cost to just stay in business for a month looking for new clients looking for business. And then you want to aggregate that into a year. How much does it cost for you to be in business for a year? The reason you want to do it this way iss so that you can set business goals, marketing goals, finding new customers. What are your profit goals?
If it cost me a thousand dollars per month to just operate my business I obviously want to make a thousand dollars or more in revenue so that I can cover those expenses and so I can keep doing business. Hopefully I’m going to set goals – financial goals – that allow me to not only cover the cost of doing business but also to make a profit. Because that is the reason for being in business.
So you need to measure everything, and set up a — you can call it a budget, you can call it a spreadsheet, you can just list it on the back of envelope. But somehow you need to know what it costs you per month and per year to stay in business and do business.