The secret to get­ting paid enough to sup­port your lifestyle

Accord­ing to stud­ies, what it takes to sat­isfy small busi­ness own­ers is to earn enough money to pay for their accus­tomed lifestyle. When I hear that, I think to myself, “Surely that is feasible.”

The first thing many new or prospec­tive busi­ness own­ers do is check out the competition’s prices. We told you to do that when writ­ing your busi­ness plan, right? I know for a fact that many statups do that because I get those calls, often thinly dis­guised, embar­rassed spy calls. So if you have gath­ered that infor­ma­tion, hang on it. You’ll use it later. For now, we’ll be look­ing at what really counts.

What you need counts the most

You have to know how much you spend. I hear your pain, but until you know, you can’t estab­lish prices. Here’s your assign­ment. Start­ing today, write down every penny you spend and what it bought you. If pos­si­ble, do this for a few months. This includes your busi­ness expenses, of course. It may sur­prise you that you also need to track you per­sonal expenses too.

Why is that? Because your goal is to live from your busi­ness prof­its, as well as to pay your busi­ness expenses. For exam­ple, Kel­ley and Syd­ney each open small retail busi­nesses across town from each other. They plan to sell the same mer­chan­dise and esti­mate their busi­ness expenses will be roughly the same. Does that mean they can charge the same prices for their Got­taSell­Now Widgets?

Kel­ley is a happy-​go-​lucky sin­gle, still liv­ing at home within walk­ing dis­tance of the store. Sneak­ers and lat­tés are Kelley’s great­est expenses for now. Syd­ney, on the other hand, has a spouse, three chil­dren, a mort­gage and car pay­ment. Hav­ing writ­ten down all these expenses for a cou­ple of months (includ­ing por­tions of occa­sional expenses like sum­mer camp for the kids) it becomes very clear that Syd­ney has to charge more for his wid­gets than Kel­ley does.
Will this put you out of busi­ness or keep you from set­ting a fair price? If so, get out now before you lose your shirt.

More likely, you can com­pare your prices to the com­pe­ti­tion and will see that you’re fairly close. Get out you pen­cil and sharpen it on those friv­o­lous wants. As for Kel­ley, one day he’ll acquire expenses of his own.

And you? Oh, you’ll see where you can cut per­sonal expenses now that you’re track­ing them. Maybe get the kids to pay part of their sum­mer camp feeds from what they earn cut­ting laws, babysit­ting, and deliv­er­ing news­pa­pers. Yes, indeed, you’ll be train­ing the next gen­er­a­tion of entre­pre­neur. They’ll thank you someday.

Tip

If there is more than one house­hold mem­ber con­tribut­ing to per­sonal expenses, deduct their contribution.

Look over you expenses. How many of those items are wants as opposed to needs. Can some of the wants wait until your busi­ness is on its feet?

Need help get­ting a han­dle on per­sonal spend­ing. Google “How to reduce per­sonal expense” or “liv­ing fru­gally” and you will have a moun­tain of infor­ma­tion appear before your eyes.