Coming from an employee mindset I initially found the concept of spending money to make money hard to swallow.
An online business requires a much lower investment and financing, compared to a traditional brick and mortar business, but there are still expenses to deal with. Depending on what business model you chose, that can include the basic business operation costs all the way to inventory, outsourcing, licensing fees, training, coaching, marketing and more.
As your income might fluctuate from one month to another, you’ll require some wiggle room to deal with your expenses. Having access to a credit card or line of credit can be a huge factor in your success.
For example, if you’re dealing with physical products and you get a huge order from a client, you’ll have to put up the money and pay the supplier yourself—before your client pays you. If you don’t have access to financing, you might not be able to fulfill that order. That’s exactly where many businesses fail. They reach a point where they cannot scale because they have no money to deal with the costs of scaling.
Or you might have a great product or upcoming event and you need to spend money on advertising and promotions to bring in sales. If you don’t invest in advertising, very few people will know what you have to offer, which means you won’t have many sales.
Unlike consumer debt where people spend money they don’t have on unnecessary purchases, entertainment and vacations, spending money on business investments that generate an income is a must.
Line up some financing options that you can leverage to start and grow your business. That could include credit cards, line of credit, business loans, savings account, investors or social lending sites like Kickstarter. Depending on where you live and your personal circumstances, you might be able to borrow from your long-term investment accounts.
Use this option with caution and remember you have to return the money you borrowed with interest and additional fees. Think of it like a mortgage for your home where you borrow money from the bank and pay it back with interest and fees. Short-term it might not seem like a great idea but if you keep the home long enough, it will eventually be paid for and even sold for a profit as property prices increase.
This should only be applied if you’re confident that your investment will yield some profits or at least break even over time. If you have a proven product or represent a line of products that’s already converting and showing profit in the marketplace then you can be more confident that you’ll have results as opposed to creating a brand new product from scratch and hoping someone will buy it.
Save Money By Marketing First
In chapter four of Pajama Paydays, How To Make The Internet Work For You I reference the various forms of products you can sell online and which ones have a higher profit margin. If you are planing to make the product yourself or manufacture it, one of the recommendations was to market and promote it before you even create it. Spending a small amount of money advertising a product you have not created in order to get feedback is much more economical than spending hundreds of thousands on creating a new product only to realize no one is interested in it.
Make sure you have easy access to additional financing, as sooner or later you might need it.
This is where education can also help you.
Learning business negotiation techniques and how to increase your credit score can save you hundreds of thousands of dollars over the years.
This article was take from Pajama Paydays | How To Make The Internet Work For You