NFIB

Maximize Your Financial Returns
04/ 15/ 2002


Business owners often find that they're not getting ahead as quickly as they had hoped. In today's Workshop, Jeffrey Moses discusses basic principles that are universal to growth.

If you are paid by the hour, your income has a ceiling. While some professionals can command enormous hourly salaries, most small business owners are in a different financial situation. You must transcend hourly production to achieve greater financial results.

Being paid per project can increase income. As a person gains experience in their field, they become more proficient, thereby commanding higher pay. One can judge how long specific projects will take, given the initial parameters. Bidding on a job based on the total price of work performed, rather than on how many hours the project will take, is often attractive to clients because they know up front how much they will have to pay. For this reason, working on a per-project basis can be a win-win situation for both provider and client.

Working for one client at a time limits your income. For instance, a software designer can only make so much money when working on a specific project for a client. But if the software application can be sold to other companies later, the designer has the potential to increase his or her income. Always consider the bigger picture when beginning a project. This will help you maximize your returns for your effort.

If you design a product and only sell it atone location, you limit your profits. But if you contract out and sell the same product in 1,000stores, your potential income will be greatly enhanced. If you have a good product, it is often more beneficial to develop a variety of sales channels rather than to develop new products that may not be as successful.

Don't overlook the potential of catalogues and the Internet. If you have a product that has proven successful, try selling it through catalogues and online. If you have numerous successful products, or if your store is very successful, consider starting your own E-store. E-stores can be opened very economically these days, and you can market your products to millions of customers worldwide. Advertising costs can be significant, however, so consult with experts before undertaking E-ventures.

Some of the largest returns in business come from others' services. For example, you might make 5% of every rep's sales. Such financial gain requires ingenuity and management skills, but it can increase yearly income a great deal.

Overall, starting a company and taking it public (selling shares to investors) will reap the greatest financial rewards. Shares of stock in a company are usually sold at a multiple to the company's earnings, or expected earnings. If a company has an annual net profit of $1 million, the total value of the stock might be anywhere from $5 million to $500 million, depending on how investors view the company's ultimate potential. Founding members of a company often reserve 10-30% of the stock for themselves and sell the rest to the public. If a company with $1 million in annual net revenue had a $10 million total stock valuation, an owner with 30% of the stock would have a personal holding of $3 million. Taking a company public requires enormous time and attention, so consult with business advisers about every step of the process. Selling shares to the public is inappropriate for certain business.

While it's rare to impossible to "get rich quick," strategic planning often enables small business owners to make money rapidly.

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