Asssigning a businessbudget


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If you don't have a business budget, this is why you need one.

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Asssigning a businessbudget

  1. 1. ASSIGNING A BUDGET??? Dont Hate Me… Its not what you think, and Ill make this easy, I promise!This post assumes that you have the basic technical skills for setting up a website and an autoresponder.. if not, clickhere.Wouldnt you love to be able to say to yourself, "I need to make $x.xx amount each month," and thenknow exactly how much you needed to spend in terms of time and money to get there? Of course youwould. We all want to know, how much money will writing an article make me, or how many people doI need on my list to make $xxxx.xx per month… and the common answer is always, you have to test.Thats pretty frustrating. Think about this… when someone goes to a bank, or a venture capital firm, forfunding for a business, the bank wants to see certain things. A business plan detailing the model andoperational system of the business; a finance plan detailing what assets and resources the prospectivelendee has to offer, a plan for the money they will borrow, and what the projected revenue is; and amarketing plan, detailing the marketing strategy and costs of it. No bank is going to lend money on thegrounds that you will just have to test until you make a profit. The bank will want to see, fromresearch and statistics, what a business can expect to generate each month in order to be assured thatthe lendee will make enough to cover expenses and repay the loan.Creating a budget doesnt have to be "I have $10,000 to invest." Creating a budget is about knowingwhat your business is, and what it will cost to operate it and pay its expenses. Creating a budget is howyou determine what you need to invest in terms of time or money, into getting what you need for thebusiness to be a business. You dont have to invest your time into writing articles on the hope thatyoull generate some traffic to a ClickBank product that you might make a commission off of.While it could be suggested that you have to start with a model first, and then go on to assigning abudget, its often more practical for an informal entrepreneur to start with the knowledge of how tocreate a budget. Informal entrepreneurs will determine how much they themselves need to cover theirown expenses, and most likely, quit their jobs. So it makes the most sense to determine that whilechoosing a model. INSTEAD, YOU CAN DETERMINE HOW MANY ARTICLES YOU NEED TO MAKE WHAT YOU WANT TO MAKE!This is done through researching statisics, with a budget that knows what it will cost to acquire a lead,to acquire a customer, and what else to have in the funnel to get a return on your investment in thosecosts, and then creating a business plan, with a sales funnel, a strategic marketing plan, and the cost ofit.Start With Your ModelYou start with your business model. For all intents and purposes, your business model is defined ashow the business produces its main source of revenue. Online businesses have one of the greatestopportunity for multiple streams of income, but the main revenue producer is the model. So whileyou may have a blog that has passive advertising (banner ads, Adsense and other passive Pay PerClick advertising income) ClickBank products, Amazon Products and possibly your own products (orresell rights products), and any other hosts of profit centers, the one you focus on for bringing revenue,is the model.Professor Micheal Rappa, has an excellent article on Business Models on the Web, which breaks down
  2. 2. all of the various online business models to a group of five. • Brokerage • Advertising • Infomediary • Merchant • Manufacturer (Direct) • Affiliate • Community • Subscription • Utility * models are a starting point. For example, Googles model is advertising. Thats where they focustheir revenue producing activities. When Google first decided that it was going to make advertising itsmodel, it had to know what would draw people to its website (which is their branded Most RelevantSearch Results Search Engine) to see the ads. If their website had no eyeballs to it, they werent goingto be able to command any advertising at all. By knowing that they would have to invest $xxxxx.xxinto developing a worthwhile publication that would command advertising dollars, they knew whattheir model was, and what their market was, wanted and needed…Determine The MarketGoogle chose "Internet Users" as its market and created an online publication to serve its market withpublished information. Once it had traffic, everyone wanted to feature their business on its variouspages.Home Depot sells building equipment, from materials to tools, all the way down to home decoratingand gardening products. Their market is builders, homeowners and contractors.Once you determine who your market is, who you serve, you can begin to profile them, and figure outwhat they buy. Not just one product, but what they need on an ongoing continuous basis.Advertisers need to place their ads every month. They need more places, to place their ads, and theyneed more relevant places to place their ads.Builders need new materials every time they start a new project, homeowners will buy materials onlyabout once on average, and tools always about only once every so many years, on average, but theyalso buy new sod every year or two, (depending on their location), seeds and plants for theirlandscaping, fertilizer and other perishables that need to be replaced on a continuous basis.The entrepreneur builds the store and stocks it with what the market buys, and stocks according tostatistical data of what the market buys, when they buy it, how often they buy it, what they buy with it,and how much they will spend on it… and all, during statistical data even on the time they buy it, suchas season.With this data, you create a funnel of products you sell, with a projection of how many sales you canmake in a given time period based on how many people actually know about and visit your business.The BudgetThis is when the budget finally starts to make sense.Well assume that your goal is to net $5,000 per month Gross. • Operating Expenses of $500.00 per month • Salaries: $2,500. • *$2,000 divided into various percentages for various growth strategies.
  3. 3. From here, we look at our model, and our market, to find the various products and services that theysell….We start with the loss leader" the product we sell at break even, or at a loss to acquire a customerThen we look at what else they will buy, and what they will pay for it, and create a funnel.Its very hard to start with too cheap of a product and ladder customers up to spending more… and itsvery hard to start them at a high price point before they know you or the quality of your products andservices.However, in certain marketplaces, you have to use either of those strategies for success, and sometimes,even in those marketplaces, if everyone else is doing the same thing, you have to stand out… thats partof Step 2, which well talk about tomorrow "The Heartbeat Of The Market."By having a well defined marketing system, knowing where your target market is, whatthey want, what they are feeling in any given place where they congregate and what itcosts to advertise there, you can determine the best strategy for your pricing funnel.For the purpose of this article, were just going to look at pay per click advertising…Looking at The DMA 2010 Response Rate Trend Report, we can see that if we plan to use pay per clickadvertising to reach our audience, that the industry wide average cost per click is $3.79.Of course, as you narrow down the industry and the niche, you can lower, (or sometimes raise) that costper click, through micro niche keyword strategies and by purchasing certain types of advertising, suchas text on the search networks, or text on the content networks, or display on the content networks.First lets assume that we have a "Click Through Rate" of .05%. This number represents the percentageof people who are exposed to the ad vs. how many actually click on it.Lets look at the DMA Report stats: • Paid search had an average cost per click of $3.79, with a 3.81 percent conversion rate. • The conversion rate (after click) of internet display advertisements was slightly higher at 4.43 percent. • The cost per click for paid search in B-to-B was also higher than in B-to-C. Conversion rates were better in B-to-B—5.27% versus 3.63% in consumer—but the average CPC was $4.59, versus $3.79 in consumerJust to use round numbers, well say that we have a cpc of $3.80 and a conversion rate of 4%.This means you have to spend $380.00 to acquire 4 customers. You need to charge $95 for a productto break even on this campaign.Assuming your product has a cost of $75.00, you have a $20.00 per sale profit margin.You need to make 250 sales, per month, of this product to meet the gross revenue goal.And if 4 out every 100 turn into sales, you need to get 6,250 clicks. At $3.79 per click…Effectively, you need to spend $23,687.50 in clicks to generate 250 sales for a gross of $23,750.00leaving you at a negative ROI of $62.50. *Over time however, with the Lifetime Value of aCustomer", as your customer purchases more from you, you begin to profit… and thats a part ofthe funnel… but as you can see, you cant start here.
  4. 4. So what do you do?First, you find cheaper advertising… and you scale it up, but you start from the same kind ofstatistical analysis….Next, you create a funnel (its cheaper to serve an existing customer more products and services than itis to acquire a new customer)Finally, you find products with a lower cost to you, and a higher profit margin for you…And from here is where you start to refine you business plan. Because those numbers dont work,do they? (Hint, they might if you had your product cost is $1.00 and your margin is $95.00…)This is when you start looking at the statics of your market research and creating a strong funnel whilesearching for more inexpensive advertising opportunities, and enough of them, to reach the samegoal….Assuming you choose the worst converting, but mostinexpensive marketing and advertising if you know theaverage stats of what it will convert at , and you have astrong sales funnel, you will know exactly how manyads youll need to place, and where to place them, toreach your revenue goal every month, with the financialplan for scaling up already in place, allowing you tocommand the companys complete needs for not onlycovering expenses, but also, for bootstrapping forgrowth…Choose your model and your niche, research yourcompetitors, you know, the sites that are currentlyholding the top search engine positions, or the sitesyouve heard of and type in the url for…first, take alook at their sites, get a feel for how they connect withtheir audience as well as what they sell to their audience,… then copy their url and head over to Quantacast.comand look at the demographic profile of the averagevistior to that site. Youll see their average education level, income range, sex, and, other sites theyvisit… which you can also visit to get more ideas of things they buy to help you create a sales funnel.Now that you are armed with how to use stats to make projections of revenue, and you know a little bitabout a sales funnel, you can start immediately, with some guerilla marketing strategies to begin gettingtraffic and income to your online business right now.Any stats you need will be available by searching "[kind of stat, ie, email open rates for (indusrty)DMA Report [previous year]". All bloggers blogging in the subniches of marketing will publish theDMA Findings for that subniche. So if they blog about email marketing, theyll publish the DMAsstatistical findings on email marketing.Quantacast will give you a profile of what products to put in a funnel.And Uncle Google is more than adept and answering your questions on where to find products for thatfunnel. Whether you are going to sell physical or digital product, create them, act as an affiliate for
  5. 5. them, buy and warehouse them, or simply have them drop shipped, you can get started immediately byoffering a freebie offer (resell rights products in the niche) for free, using some free advertisingopportunities. Knowing the statists on the advertising platforms and what the platforms are, will giveyou an idea of what you can expect to get in return for your efforts of placing your ads there, and if youhave the funnel, [Optin to email, One Time Offer/Upsell, email with with subtle calls to action forbuying product] you can place enough ads to make your efforts as profitable as they need to be,because youll know how much effort you have to expend to do it.*Hint: Search Google for Free Resell Rights Clubs" to get access to hundreds of free resell rightsproducts… and if you havent even chosen a model or a niche yet, youll have no shortage of ideas onceyou have access to the huge assortment of niches and products youll find within the clubs.The Earn 1KA Day Forum isnt free, but its one of the best of the best, and you can get a trial for $2.95.Click Here To Get The Platforms And The Stats You Need To Get Started Right away.