“The poor man’s budget is full of schemes”. — Proverb
“The definition of insanity is doing the same thing over and over and expecting different results”. — Albert Einstein
How are your budgeting strategies doing?
As a small business owner, it can be far too easy to get stuck in a bad budget rut. We set lines and parameters; we stick to them; and, after a while, we get so engrossed in our new budding business that we forget to check up on our budgeting health once in a while.
Let’s talk about the four kinds of income:
1. Work income: You work in the pizza store, and that’s work income — money you’re paid for the hours worked.
2. Transactional income: When I come into the pizza store and buy a piece of pizza, I give you money and you give me pizza. The deal works for both of us. I may come back; I may not. The transaction is finished and a one-time deal.
3. Renewal income. This income renews itself; one real-life example may be a magazine that you continue receiving, renewing every year when the notice comes. This is much better than the other forms of income because you don’t have to keep looking for new people. The same people come again and again—repeat business. Most people will continue getting the same magazine they like.
4. “Till forbid” income. Every single month, money is charged to your credit card or deducted from your bank account—until you say stop, whether it’s a membership site online, or any other form. For example, business magazines automatically charge your card at the current rate. GoDaddy, a popular company for registering domain names, provides this service for the small amount of $7.49. Unless you choose otherwise, the domain name will automatically get renewed every year. When they do it automatically, as opposed to giving you a notice that your domain is going to expire, you will be charged $7.50 (or more, depending on the current renewal rate). That may not sound like much unless you have 50 or 100 domains, or if you just don’t like wasting money you realize they’re really getting you. All subsequent years, your rate will be billed at the non-discounted rate which is currently of $11.99. After the first year at a special rate, the automatic renewal is at full base price. Another example: NEBS is a company that sells blank checks and stuff like that. When you try to order from them the first time, you get what’s called a mail code, which gives you 50% off the price. You’re getting a steal of a deal. You get 1000 envelopes for pennies. However, when you reorder, there is no mail code.
GoDaddy and other online registrars work the same way. They are not exactly giving you the perceived “steal of a deal”; their real money is made on the automatic renewal at a coupon-free, full price. This also works well because by artificially raising the prices, you think of the “true retail price” as being discounted and you feel so slick about having found a coupon code online- while, in all honestly, you are actually paying the “true retail” price.
In business, you really want to try to get one of these forms of income. Work income, once you stop working, you don’t get this anymore. Transaction income, if you’re closed for the day, you don’t get any more income. And out of the two remaining incomes, the “Till forbid” income is the much better income than renewable. You can automatically charge your customer’s credit card every month until they cry, “Stop!” — and the potential for profit triple, because many people may forget to cancel.
What’s my bottom line? Funnel your income into the most profitable type possible. If you can increase the amount of repeat income, you can increase the value of your business tremendously.
Rabbi Issamar Ginzberg is often called “the marketer for marketers”, a strategy and marketing advisor, ideas generator and action planner, experienced mentor and friend consulting to independent professionals and businesses large and small worldwide. For more info visit: www.issamar.com or reach him on Twitter at @RabbiIssamar . Find secrets like these and more at his blog: www.issamar.com/strategy
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