Advertising, marketing, labour, storage and the catch-all category of overhead — it’s useful to know how much it costs you to get a product sold as well as what it costs you to create it.
Limit the fundamentals – the Paper Poker Game. The psyche of investors behind Supply and Demand is expressed in price, beyond fundamentals alone. Investors sold off fundamentally sound stocks, after the unfortunate 9-11 incident and it was repeated with the financial pandemic of 2008, going into 2009. Benjamin F. King: Market and Industry Factors; Journal of Business, January 1966: ” Of a stock’s move . 20% is peculiar to the one stock.” A fundamental Analyst fusses with paper (Balance Sheet, Income Statement & Cash flow Statement), only to explain 20% of price behavior. As valid as all the FA work is, would you gamble against the house armed with only 20% of the odds with paperwork done by Analysts?
Your expenses could not support any business, much less a high growth business. Have a good understanding of what your expenses will be. Recognize that if you hire people, you don’t just have to pay salaries, but taxes, health insurance and other benefits, workman’s comp, and each of these people will need some square footage, a desk, a chair, a computer, a telephone, an internet hook up, etc. You will need to hire lawyers, accountants, and possibly other professionals. You will need to market your product in some way.
First of all, you need three basic account reports for your business. They are the cash flow examples, profit and loss report and balance sheet. The use of the balance sheet is to show you the worth of your business, your liabilities and your assets in the company for the whole year. You need profit and loss account to keep updated with how much you earn and how much you have spent. Basically, a report that has high profit and low loss is a sign of a growing business. However, if vice versa, you might be having troubles with your business.
A cash flow analysis can also show you cycles in your business. This can be a valuable forecast of business expenditures like marketing costs to support a big sale. If the sale is a success then you will see cash come into the business and you can form a plan to use it for continued growth. By tracking and trending the business cash flow by month, it will make it easier for you to plan your business next year.
Apply for and get a credit report and credit score. This will help you get a clear picture of your financial health. Be sure to get a report annually and learn how to analyze a credit report.
Establish a relationship with a bank that offers small business loans. Open a company checking account, after a few months see if the bank will offer overdraft protection.