Getting a Smart Start

When you decide to run a business, you need to be aware of the reason that a business exists. The primary reason for a business to exist, is to make money (this is especially important to the government, hence charity organizations exist). If you don't have enough start up capital & operating capital, you will not be able to make your investment work.

This calculation assumes nothing changes in your monthly expenses or income. Very rarely will things remain the same for a full year. A baby could be born, your car could break down, you could loose your job, a medical expense could come up, etc... Just be prepared & you will be fine.

There is a fairly simple formula to decide how much you will need to make your business work.

1. Determine how much money you have as take home pay = T
2. Determine your monthly expenses. Rent/Mortgage, Utilities, Insurance, Food, Other expenses. = E
3. Subtract your monthly expenses from your take home pay to get your Monthly Cashflow. From this you will be able to determine the amount you can place into an initial investment & your operating costs. T-E= C
   
• If C (your monthly cashflow) is not at least $150, you really will have a hard time running an online business.
4. If you didn't know, most credit cards have a minimum monthly payment of 4% of the amount spent. So if you invest $5,000 on a credit card, you will need to repay at the rate of $200 until you pay it off. So you will want to take this into account. You will want to subtract $150 from your monthly cashflow, you will be able to determine how much you can initially invest. You will subtract $150 from your monthly cashflow to get your maximum monthly payment for a credit card investment (M) & divide it by 4%, this will give you your Maximum initial investment via your credit card (I). C-150=M. M/0.04=I
• If you don't have enough to pay for your monthly operating costs after crunching these numbers, you should not invest into your own business online at this point. Or you need to plan on paying for hosting fees until you make your dropship site work. There are of course other ways to make money online, but you need to begin a business with eyes wide open

Let's run an example. Let's assume you have $2,000 in monthly expenses & make $2,500 per month.

• T=2500
• E=2000
• C=500
• M=350 or 500-150
• I=8750 or 350/0.04

So with an extra $500 per month & assuming that you have no change in your expense to income payments. You could reasonably invest up to $8750 into an online business. Did you notice how I stated that you could invest up to $8750. If you invest less, you will have more for marketing expenses, but this will prevent more time with mentors if you decide to work with them.

Now lets talk worst case scenario where you give up half way through (or even 90% of the way through). You have kept $150 extra every month that you can now pay down your credit card bill faster.

I now want to approach the subject of savings. If you have $5,000 or $10,000 in savings, you will not have increased monthly expenses if you decide to invest part or all of your savings. You will not need to count this into added monthly expenses. This will simply be an investment due to good planning in your past.

In the end you should determine how much you can really invest before you loose your shirt in any endeavor you decide to begin.