How to put ideas into practise

[adrianh]

The rule is not to be married to the product - Get in, make your money and move on to the next thing. The point of departure is the money, not the product!

[ians]

It is said that technically minded people make a fundamental mistake in business: We want to solve problems!!!!!!!!!

If you want to make money then learn about money - learn the rules, learn the tricks and learn the money game.

Change your outlook from being "a person that solves problems and happens to make money" to "being a person that makes money through solving CHOSEN FINANCIALLY LUCRATIVE problems"

The change in perspective has a remarkable impact because you gear your products and services to your financial plan - if something doesn't make financial sense then you leave it and move on.

....BUT...

YOU HAVE TO HAVE A FINANCIAL STRATEGY 1ST!!!!!!!

A business plan ... maybe its time to create one ... it would be a start to creating a lot of debt ... so long as you are channeling the money to create wealth for yourself ...it doesnt matter how much debt the company is in ... I saw it with a customer who screwed me for a lot of money ... the company was worthless when we tried to collect on the debt ... but he didnt miss a day at the country club and is still enjoying unemployment .. set his son up in a new business and enjoys mingle with his sons customers ... I would bet that company is operating on 99 % debt as they live the good life.

A friend had an accident at work and lost his hand ... his response was that it has forced him to stand back and let other people do the dirty work ... since then his business has started making money.

Another company I stopped doing work for ... the same thing ... the company got so bad ant paying the bill that I stopped doing work for them ... I know ... it was a silly move ... I had been working with them for more 15 years ... they still phone (4 years later) and ask me to do their work ... I am thinking with the new venture I am going to go do work for them ... the only difference ... this time I plan to make money ...make sure the rates cover the payment delays plus interest plus a little some extra (people are getting desperate to find good workmanship and prepared to pay).

I need to go back to the younger version of myself ... where I would smile and get the job done no matter what it took ... just this time find suckers who work hard like I do (thats gonna be the difficult part ... I know they are out there ...its trying to find them)

[adrianh]

The 1st rule in business is this:

DO THE MATH UP FRONT - If the math doesn't work then the business will fail!

[adrianh]

it would be a start to creating a lot of debt ... so long as you are channeling the money to create wealth for yourself ...it doesnt matter how much debt the company is in ...

This is downright scary - No....business doesn't work like that, a KickStarter scheme maybe....but real business....nooooooooo

[ians]

Something I have learnt since paying off the overdraft and credit cards ... it wasnt a smart move ... I am saving hundreds or should I say more like thousands in interest etc ... however what I am finding is I still havent got to the point that everyone else is funding the business ... I still have a bad habit on not invoicing right till the end of the project ... so what happens ... I dont have an overdraft so about 2 weeks in the following months cash flow gets tight ... it is getting easier but its still going to take a few month to build the account to a point that I have a couple hundred thousand available to carry myself when I get slack with the invoicing.

I have also thought of putting together a business plan and getting a loan ... I know you gonna say silly idea ... but the way my brain works is different to others ... Its like paying off a vehicle ... after 3 years it becomes your property and be used a back stop ... so for example after my accountant incident a few years ago ... I had to come up with almost R100k ... simple I didnt even have to advertise ... the vehicle was sold the same day ... got the money I needed ... paid the new accountant and the total outstanding tax bill.

As I am typing I am thinking maybe just buy another vehicle on HP ... that way its like taking a loan ... the only difference I get a brand new vehicle (maybe even an electric one) . ...so I can work a bit more and make more money and keep my tax bill at an absolute minimum ... after 3 years I have a couple hundred thousand invested a vehicle which can be used at any stage to sell and invest in something else in the business ... I just image what some people must be thinking about my logic ... it cant be that bad ... I am still operating after 30 years ... not many have that noddy badge

[adrianh]

Cashflow management is part of the math. You need to keep a spreadsheet (ALL THE TIME) of expected income/expenses. That way you stay on top of your cashflow needs. I can't see you getting a loan based on a business plan - banks are not in the gambling business - they want 100% assurance that they will get their money back aka collateral

Paying 30% HP on an overpriced car that devalues faster than a cellphone is not an investment!

[Justloadit]

With any large project in which I have to finance, requires very careful thinking.

Part of the plan is to get progress payments, this not only funds the project as you go, but also ensures that the client does not renegate on payment when the project is finished. This happens more often than not, leaving you in a deep hole. If the first payment does not get made, you simply stop continuing, and go some where else. At this time the loss is small. If at all possible get a deposit up front with the order to cover the first stage before a progress payment is made.

Of course all this is easier said than done, you need an iron clad agreement, here you require a lawyer to set it up for you. If the client is not interested in this arrangement, you know what? tell them to take a hike, there are more jobs out there with out a risk. I know it is veryu deifficult to walk away, our human nature is very greedy, and wants to take the job on, but it is a mistake.

[adrianh]

I also think that many people often confuse cashflow and profit with one another. Turning over large amounts of money doesn't necessarily mean that you are making a profit. This is also why planning is important and why it is important to stay on top of things - if you make R1million and spend R1million and R1 then you are better off sitting on your butt watching DVDs all day....

[Justloadit]

How true.
Profit is an interesting number.
If I turned to you and said that I only make 1.5% profit on R4million turn over a month, you probably say that it is a crappy business.
Now If I say, well lets look at the business model that was used to do this business.

I use R100K over draft, and turn it 1 to 2 times a day, making the turn over per day between R130K to R200K a day.
I pay R2,500 in over draft fees for the use of this over draft per month, and the client pays cash up front for every invoice, albeit small values of R200 to R1000.
My running expenses, was about R25K a month.
All business transactions was done via a web page, so it required very little human input, as it was all automated.

So with R100K I made a gross profit of R60K per month, less expenses made it a nett profit somewhere around R25K a month.
Looking at a yearly value, with an investment of almost R0.00 and standing surety for R100K, I made R300K a year.

Now where do you make a return like that?
Even If I did not use the overdraft, and invested R100K of my own money, that means a return of 300%

Any business can make money, you need to sit down, and run the numbers, and understand your business model.

Unfortunately I closed this business down some 4 years ago, as it was in the technology arena, and since that market is morphing all the time, my specific model was no longer a viable conduit to make money. The Service providers and banks with deeper pockets starting implementing similar models to what I had, and since they had deeper pockets, I was no match. Got out while the going was good.

There are times that taking a loan, or standing surety makes sense. You must understand the risk before signing surety.
There is no way that I would sign surety for a even a few R100K to buy material for a job, only because I received an official order. The order is not worth the paper that it is written on if you do not get paid!!!!

Remember the saying, that it is better to have one bird in the hand, than two flying away.
Always, always think in the manner that the client is not going to pay for this job, so how will I ensure or secure payment?
Once you master this, then you will start being successful at your business.

A lesson I learnt from a very old man when I was in my younger 20s

"Son, the only people who have taken me, were the people I trusted!"

Now think back, all the times that you were done in, were when you allowed yourself to be taken. Do not get yourself in this position in the first place.
Rather not do the job, and have money in the bank, then get the order and do not get paid and you owe everyone you bought from.
The same amount of work could have been put into going to a dam and do some fly fishing, it would be more relaxing with out the stress

[ians]

I think most of us have the same stories to tell ... payments for months no problem then the last one which is normally the biggest amount ... suddenly becomes a problem.

the biggest financial loss in my life was trusting an insurance broker ... You know that F%^&*$%^&* butt F%^& that comes and puts your family as a reason you should take out dreaded disease cover and now that 22 you could have a heart attack and your family would be left with nothing ... that piece of crap who adds life cover to every policy ... you know what I am talking about or your gonna learn one day when you reach that day when you are suppose to collect on all those policies ... anyway lets change the subject.

I have a mentor whos turnover is 4 million a month ... like he said his "profit margin is only 2 percent ... like he mentioned thats after everything has been paid ... he is left with 2 % profit in his pocket ... 2 % of 4 million would keep me smiling.

[adrianh]

I have a mentor whos turnover is 4 million a month ... like he said his "profit margin is only 2 percent ... like he mentioned thats after everything has been paid ... he is left with 2 % profit in his pocket ... 2 % of 4 million would keep me smiling.

I prefer to select my customers / services very carefully to make very high profits for the least amount of work. The lasers run simultaneously with the CNC machines while I bill cash for CAD drawing. (Hell, I made R6k last week for a couple of hours of drawing in the evenings) My other work is also practically pure profit because I have my customers pay for all the materials up front and the repeat work is pure profit with hardly any labor.

My daughter is busy with her 4th year a varsity and she tutors online earning BIG dollars in her PayPal account.

You can make huge profits if you select appropriate markets.

[Derlyn]

Not gonna be too long now and you ain't gonna be able to buy a loaf of bread with 2% of 4 million.

[Blurock]

How can making a 2% profit be a viable business? Considering the risk of doing business, one could be bankrupt in a blink of an eye. Consider the risks of pilfering, theft, hijacking, stock deterioration or obsolescence, environmental disasters and to top it all, changes in the regulatory environment, as governments cannot be trusted.

If you work on an overdraft, you may have to sell your house to repay your creditors!

In my previous life I had a client with a R1 billion turnover, making about 3 % net. He had invested in property and plant, vehicles and employed a huge workforce. He worked night and day and liked the excitement and adrenaline, but he was getting older. After analysing his business, he realised that the small to medium guys that he was supplying, was making 10 times as much profit with half the effort!

[adrianh]

In my previous life I had a client with a R1 billion turnover, making about 3 % net. He had invested in property and plant, vehicles and employed a huge workforce. He worked night and day and liked the excitement and adrenaline, but he was getting older. After analysing his business, he realised that the small to medium guys that he was supplying, was making 10 times as much profit with half the effort!

I know such a person as well. They guy is worth over R1 Billion on paper but he can't sell the business. People often mistake "on paper value" for cash in the bank - they are different beasts.

I just got an order (10 minutes ago) for R10k of laser cutting (This customer places such orders once to twice a month for the past 7 years and they are expanding). The customer has the materials delivered to my doorstep months in advance and I cut the stuff in my spare time so as to ensure that I always have stock at hand for them. The laser cutting machine was paid off over 4 years ago. I work from home.... my overheads are negligible. They collect right away and pay in 4-5 days. This is what I call money for jam - hell, I just slap the material on the laser now and then between other work.

[Justloadit]

How can making a 2% profit be a viable business? Considering the risk of doing business, one could be bankrupt in a blink of an eye. Consider the risks of pilfering, theft, hijacking, stock deterioration or obsolescence, environmental disasters and to top it all, changes in the regulatory environment, as governments cannot be trusted.

If you work on an overdraft, you may have to sell your house to repay your creditors!

One has to understand the type of business model you get into with this type of profit margin.
This type of business is not suited for a manufacturing business or even a business in which you hold physical stock and have a brick and mortar business.

If you look at Takealot, they work on the same principle. They have no stock, they receive the order, get the bucks and collet the goods from the supplier and deliver.
A very low risk business.