What Risks Equals Rewards? Learning Where to Take Risks in Your Business and Where to Play it Safe January 10, 2011
Take small to medium risks
Be a Prosperity Thinker
Downside - Upside Small downside to your risk and big upside
Where should you take risks? In your personal or business finances?
What is your 2012 revenue goal?
$50,000 today Grow your business by 25% per year 5 years $120,000 10 years $375,000 15 years $1,130,000
3 Ways to Take Risk Time Money Brand
Weighing Whether to Make an Investment in Your Business 1. How much will you spend up front? 2. How much will you get paid? 3. How often will you get paid? Monthly? Yearly? 4. How long will you get paid?
Return on Investment? 1. Go to financial-projections.com 2. Decide if the potential ROI is worth the risk.
Video Equipment Costs Lights Camera Total $1500 $ 500 $2000 Your average fee = $2000/client You will need 2 clients to make this investment worthwhile
Go Where Your Prospects Are
Exhibiting at a Trade Show Costs Booth 500 Travel Expenses 1,500 Food 200 Marketing Materials 500 Assistant 200 Total $2,900 You need to gross $75K to make this worthwhile Client = $1000/year for 3 years
Should You Rent Office Space Monthly Rent = Annual Rent = Yearly Revenue = Annual Rent Revenue = % On average, don't spend more than 7% - 10% of your gross revenue on office space.
Cheeseburgers Create Other Streams of Revenue
Example #1 Webinar Annual Income = $100K Up front costs Your time = $5000 Microphone = $200 Total up front cost: $5200 Monthly membership cost = $100 Monthly revenue with 10 people @ $50/month = $500 Net Gain = $400/month or $4800/year But... 5 years 88% ROI
Example # 2 Education Therapist Adding therapy for children as well as adults Cost of class = $2000 Hourly rate = $200 20 hours of your time/loss of income = $4000 Total Cost = $6000 Break even = 30 sessions @ $200/session
Example #3 : Bad Hair Day Hair Salon Profit = $2000/month Tanning Salon next door is losing $1000/month Cost to Buy = $20,000 Risk or Reward?
Hiring Employees Screening = Hourly Rate = Hours per Month = Monthly Pay = Payroll Taxes = (Monthly pay x 7.65%) Payroll Processing = Total Liability = Monthly Pay +Payroll Taxes +Payroll Processing $ Total liability/hours worked = true cost per hour
Technology Office Equipment Costs Computer Printer Smartphone Software $3000 $300 $500 $3000 Total Cost: $6800 No Risk if your income is $135K/year Or 5% of your revenue
Firing Clients Annual revenue = Revenue from your SOB client = % of your revenue from that SOB = If the SOB is more than 5% of your revenue, SORRY you should probably keep that SOB until you can replace the money.
Raising Prices 20 clients each paying $6,000/year ($120K) Raise your fee to $7,500/year In Maybe 12 Out 2 6 Count your maybe's as no's 12 x $7500 = $90K Too Risky New Clients
Create a Vision for Your Business...I realized that for IBM to become a great company it would have to act like a great company long before it ever became one. Tom Watson, IBM
Krane Financial Solutions 11400 West Olympic Blvd. Suite 200 Los Angeles, CA 90064 310-237-6491 justin@kranefinancialsolutions.com www.kranefinancialsolutions.com Like my Facebook page: www.facebook.com/pages/justin-krane-krane-financialsolutions/146223888732588 Follow me on Twitter: @justinkrane