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<p>In the time since I’ve been operating as a home business entrepreneur, and even in my time spent consulting with other small and not so small businesses, I continue to see people committing this one mistake over and over. It is absolutely one of, if not the single biggest reasons for their business failure. Are you positioned to avoid this sure fire business killer?</p>
<p>One of the basic principles to successfully starting up your home business (or any business), and to continue to operate your enterprise successfully, is to ensure you have adequate operating capital. Your operating capital is the life blood of your business. It is the reason virtually all large companies have an “operating line”. And lack of adequate operating capital is the the single biggest reason most businesses fail.</p>
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<p><strong>Your Operating Capital Is the Life Blood Of Your Business</strong></p>
<p>Just like any other business out there, your network marketing or home based business is going to take some time to build and it is inevitable you will lose money at least the first couple of months, if not longer. So from where are you going to access the money with which to operate your business while it remains in a negative cash flow position?</p>
<p>If you don’t have much, or perhaps you don’t have any extra cash flow to begin with (which presumably is part of the reason you’re looking to build a home business), then how do you expect to adequately fund your ongoing business if it’s losing money the first few months? You can’t fund it from cash flow that you don’t have.</p>
<p><strong>Inadequate Operating Capital Will Kill Your Business Quickly</strong></p>
<p>When you try to fund your business with cash flow you do not have, what happens? You begin to make decisions contrary to what your goals are and what’s best for your business. You choose to stop funding the very activities that are necessary for you to successfully build your business.</p>
<p>You choose not to place a particular ad. Or pretty soon, you choose to scale back your advertising altogether. And so, pretty soon, you only have people to talk to sporadically - at which point it “isn’t working”. And since you can’t afford to keep it operating, pretty soon you quit … and so now you really have failed.</p>
<p>The irony is that no one would ever approach a traditional business in this fashion. So why approach your network marketing business this way? It is still a business and if you intend to be successful, you must always treat it like a business.</p>
<p><strong>Determine Your Cashflow Requirements And Figure Out The Funding</strong></p>
<p>Determine your monthly operating budget. This will include items such as your phone, Internet connection, supplies and advertising. Your advertising includes all sources from which you generate leads.</p>
<p>Say, for example, your decide your business requires $1000 per month to effectively operate based on your business plan (you have a business plan, right?) The goal is to capitalize at least the first six to twelve months worth of your business to ensure you have the funds to properly operate. So if you need $1000 per month, that’s $6000 for 6 months. In this example, you’d borrow, or otherwise fund $6000 which is deposited into your operating account. At 10%, the monthly carrying charges on a $6,000 loan will be approximately $50 which becomes a monthly operating expense.</p>
<p>Now you have the funds to properly operate your business according to your monthly budget for the next 6 months. The advantage is that you no longer need to worry about what you can and can’t afford in operating your business. Instead you just have to focus on most effectively utilizing your monthly budget amount and executing your business plan.</p>
<p>Revenues you begin to collect go back into your operating account and replenish the amount you have available to continue to operate your business. Over time, you will begin to find yourself in a position where your business is generating enough positive cash flow that you can begin to pay back or retire your operating line loan.</p>
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