February 28, 2021

How Long Can You Afford Not To Make Money?

Whether it’s a small mom-and-pop operation or a big megacorporation, in order to survive, a business has to make a profit. It can bleed red ink for only so long. This is true for any business, no matter how big or how small (including the big three American automakers)!

One of the advantages of a small business, especially one in Internet marketing, is the low operating costs. This means that, as long as it is not losing a large amount of money, and as long as the operator has an alternative source of income, it can fail to make a profit or it can even lose a certain amount of money over a long period of time without the operator needing to declare bankruptcy.

It can be treated as a sideline or as a hobby. The downside is that the same factors can keep the operator from treating it as a real business.

The upshot of all this is two-fold:

1. Many people conclude that since they didn’t have to invest much in the business in the first place, they needn’t be too concerned with how soon it makes a profit, or even whether it makes a profit at all. As with most things in life, we tend to value those things more that we acquired with a great deal of effort.

2. Low costs of entry can cause people to overlook the incidental costs of running their business including web hosting, mailing list fees, and the purchase of products or services (perhaps ones they don’t really need). These can really add up over time. Low barriers to entry can also cause people to overlook the costs of not making money, or the cost of wages they would otherwise have earned or savings they otherwise would have acquired.

Let’s say you invest $200 in getting your web business started and weeks, months or even years go by without making any money. Perhaps you don’t think much of it because you spent so little to get started.

But what are your true costs? We have heard that “the money is in the list” and indeed, this can be true. Many have eagerly sought out advice on how to explode the size of their lists.

However, what most people don’t mention is that mailing list fees increase along with the number of subscribers. If you have 2,500 people on your list (not a large number by any means) you may end up paying upwards of $50 a month for your mailing list service. Are you making that much money back through sales to your list?

So even if you only invested $200 to begin with, with Web hosting, domain and mailing list fees, you could easily end up losing over $1000 a year, and maybe much more.

And remember that a traditional, brick and mortar business have much higher costs than an online business does. They may have such expenses as store lease or mortgage, payroll, equipment leases and so on.

Different people take different approaches to starting a work at home business. Some expect to make money right away and throw themselves into the process. Others see it as more of a sideline or a hobby that may or may not eventually displace their day job.

Napoleon Hill, in his famous book “Think And Grow Rich” suggested giving up your day job and throwing 100% of your efforts into a new business. That means that, if you failed, you would end up on the street and lose your home, your car and your every possession. This would certainly be a very strong motivating factor to work hard, but I suspect that this advice would be too rich for the blood of most home-based entrepreneurs!

It is advisable, however, to set some goals for yourself. You should expect no more than six months to pass before seeing some kind of income from your efforts. And within this time, you should strive not only to recoup your original investment, but to pay off your monthly expenses—in other words, to be generating a profit. However, keep in mind that it is not uncommon for brick-and-mortar businesses to fail to make a profit during their first three years of operation.

So how should you take stock of your online business?

1. Get into the habit of tracking all of your business-related expenses, including the amount you spend on training materials, products, services, web hosting fees, and mailing list expenses. Also, be sure to track all sales you make, whether of affiliates or of your own products.

2. Subtract your earnings from your expenses (or vice versa, depending on which sum is greater)! The resulting figure will tell you how much money you’re earning or losing.

Financial management software can help a great deal in tracking your income and expenses. The long standing leader in the field for Mac and PC has been Quicken. However, many Mac users are dissatisfied with Quicken 2015 for Mac, the most recent Mac compatible version of the program.

Fortunately, Mac users have plenty of alternatives. IGG Software’s iBank (pictured above), like Quicken, can automatically download banking information. No Thirst Software’s Moneywell focuses on setting a budget and meeting it. Jumsoft’s Money offers 13 financial reports and the ability to download data from your bank. And of course there’s always Mint.com, Intuit’s free online personal finance management service.

The most important thing to remember is that even if you are not making a profit after a certain set amount of time, you should not bounce around from one marketing program to another. This is a mistake that all too many Internet marketers make. Rather than giving any one effort a fair try, they become indecisive and jump from one scheme to another.

This is why it is a good idea before beginning to do a lot of reading and to get a general consensus from the experts (that is, established and successful marketers in your field) as to which is the best way to make money online. Jumping from one money making program to another and not giving any of them a chance to succeed is the surest path to disaster!

The bottom line, is that unless yours is a charity, the whole purpose of being in business is to make a profit. And that means to earn more money than you spend.

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