In this episode, Mak & G look at the costs involved with starting a business, how we can work out a budget for a new company, and the steps we need to take to ensure financial success.
A key part of setting up a successful business is working out what your costs are going to be and setting yourself a budget.
In this episode Mak & G look at the steps we need to take to set up a company for financial success, how to reduce the cost of starting a business, and the importance of making a contract…
“Preparing for the unexpected is vital for success.” – Ben Jones
“It takes discipline to remain on course and meet your goals, you’ll make mistakes so forgive yourself when it happens and imagine how you’ll feel when you reach your goals.” – Ben Jones
00:29 – How to make sure you’re set up for financial success.
00:41 – How to decide how much to charge for your services.
01:26 – The expenses involved with running a pet sitting service.
02:30 – The costs of starting a new business and why you need to have a budget.
04:48 – How to reduce the costs of starting a business.
05:29 – What buying in bulk means and how it can save your business money.
06:43 – Why does your business need an emergency fund?
07:32 – Why do you need a contract for the work you do?
09:27 – How to prioritize the expenses of a new business.
Connect with Ben Jones:
#1 Where are higher-income families more likely to do most of their Christmas shopping, compared to lower-income families?
#2 What are lower-income families more likely to use to pay for Christmas shopping?
#3 How do 29% of Americans plan to pay off their holiday bills?
#4 How long did we calculate a typical $1500 credit card bill would take to pay off at average interest rates if you only paid the minimum amount?
#5 Prices today are around 50% higher than 20 years ago because of what?
A) 44 months
C) Ten years
GRANT: Ok, I really want to get started making money.
MAK: You sound like a broken record. But, I agree. First, we need to make sure we’re set up for financial success. You know, Dad says that all the time!
GRANT: Great, but how do we do that?
MAK: Well, Dad said it’s important we spend less than we take in, otherwise we won’t ever make a profit.
GRANT: Yeah, I don’t want to work and burn money! How much should we charge for our services anyway?
MAK: I’m not sure. Let’s look at what other companies charge for their services.
GRANT: Good idea!
MAK: From what I see, it looks like the average price for dog walking is between $15 and $30 for a 20-30 minute walk. The average for pet sitting is between $20-$40 per day, but it looks like many companies charge extra depending on the number of pets or if the pet is being watched on special occasions, like the holidays.
GRANT: Wow! That’s a lot more than our $5 a week that we get in allowance! We’re gonna be rich!
MAK: Don’t forget that’s before expenses.
GRANT: Oh yeah, what are our expenses anyways?
MAK: Well, what are we going to need? I think we might have to have a harness or leash as a backup.
GRANT: Oh and we’ll need a water bowl for long walks!. Those puppies will be thirsty! Then 2 separate sound effects]. What if a puppy pees on the floor? Do we need cleaning stuff, like mom uses when Oreo pees on the carpet?
MAK: We probably should. And, we should also carry some treats with us, just in case they need a little extra motivation.
GRANT: Let’s not forget the poop scooping supplies! We can’t leave that lying around. And, Brutus across the street does a really big #2.
MAK: Gross, but true.
GRANT: Wow, if we need leashes, treats, water dish, cleaning supplies, poop bags and more, it really adds up doesn’t it? I don’t think we have enough for all that.
MAK: And we still haven’t paid for our advertising either…
GRANT: This is getting pretty complicated. Maybe we should ask Dad for some more help.
MAK: Hey Dad! Daaaad! We need you!
DAD: What is it, kids?
GRANT: Dad, this business thing is getting complicated, and we’re feeling a little stuck.
MAK: How are we supposed to afford all of our expenses when we have so little income right now?
DAD: Starting a new business can certainly be a lot of work, and sometimes you won’t have the money up front to do everything you want to. Sometimes you’ll have to grow your company slowly, that way you don’t burn through all your cash upfront.
GRANT: But how do we do that?
DAD: Well, if you want to plan for success you need to have a budget. It’s another fantastic word that starts with a “B” like “Benjamins’.
GRANT: Or Ben, right Dad?
DAD: Ha ha yes. And when you do a budget, you’ll know how much of your revenue is going towards expenses, and how much you’ll be able to earn each fiscal period.
MAK: Wait, what’s a fiscal period again?
DAD: A fiscal period is a period of time where all expenses and income for your business are counted or tracked. This allows you to see how your company is doing over a period of time. Many businesses use a year, a quarter, or monthly. But, you can track your company’s health over whatever time period works best for you.
MAK: Daaaad, we need you to make this less complicated, not more!
DAD: Sorry kids, what I’m trying to say is you need to work within your budget to grow your company, and you have to look at it over a period of time. If you get business, but don’t have the right tools, you won’t be able to do the work, and you’ll lose customers.
GRANT: Yeah, if we run out of poop bags, we’ll have to use our hands and stop walking dogs!!
MAK: And, I’m not going to use my hands, I eat with my hands. YUCK!!
DAD: Right now you only have a combined income of $10 a week to put towards growing your business from your allowance. So you’ll have to prioritize which expenses are most necessary, especially when you start out. And, you should always be looking for ways to cut expenses.
GRANT: I think we absolutely need a leash and a collar because you can’t walk a dog without those. Since we’ll walk a couple at a time, we probably need a coupler as well, that way we can attach two dogs to one leash.
MAK: But if the owner already has a leash and collar we’ll have bought them and won’t need them. And then we might not have money to pay for other supplies we do need.
DAD: Exactly, so for now only spend money on the expenses you absolutely need to get started. What about saving money?
MAK: Dad, you know I love coupons and a good sale. I could keep a close eye on that online pet company called “Love your pet.com”. They do a lot of BOGO offers and have sales all the time, sometimes because people don’t like something about it, like the color.
GRANT: BOGO, what’s that?
MAK: That’s when you Buy One, you Get One free, Grant!
DAD: Those are great ideas. Making sure the owner provides the items you need is certainly the most cost effective, but if you do need to purchase some items to get started, cutting down on the number you actually have to pay for or using coupons will help you save a lot. Since you might need a lot of treats, buying in “bulk” works too.
GRANT: What is “bulk” dad?
MAK: Grant, it’s when you buy a lot of things at a time, and it costs less for each serving. Just like when we buy Lucky Charms for you, or Grandpa buys that butterscotch candy he loves so much. They both buy the size that’s twice as big, but it costs less since you’re buying more at once.
GRANT: I can do that math problem. If we buy a small box for $4, and I get 4 bowls, that’s $1 a bowl. But if we buy the box that gives 10 bowls for $7, that’s 70 cents a bowl, right?
DAD: Exactly! It’s much less expensive for each bowl. You can buy doggy treats that way, as long as they don’t go bad.
MAK: Wait, can we buy glue for homemade slime that way too Dad?
DAD: Sure you can. Most companies love to sell in bulk, as it costs them less in packaging. You know, cardboard, plastic bags and all the other stuff to protect the product.
GRANT: That’s awesome! We could build Mega Slime!
DAD: Let’s not get too carried away. You could end up in a ‘sticky situation’.
MAK: No ‘Dad Jokes’ Dad!
GRANT: More ‘Dad Jokes’ Dad! More!
DAD: Sorry! Couldn’t resist! But speaking of ‘sticky situations’ it’s a good idea to keep an emergency fund set aside, just in case anything unexpected comes up while you’re working.
MAK: Like what?
DAD: Well, what if a dog you’re walking accidentally gets loose? You may need to make fliers to help find them.
MAK: Or what if a pet we’re watching gets really sick and we need to pay for a ride to get them to the vet quickly?
DAD: Exactly, preparing for the unexpected is vital for success. Having an emergency fund for these kinds of situations will make sure you’re never caught off guard. So, have a plan of action in place, kind of like how you do fire drills at school that way when an emergency does happen, there’s no time wasted trying to figure out what to do.
GRANT: We really want our customers to feel secure knowing we’re doing our best to care for their pets, but how do we make sure we have all the information we need?
DAD: It sounds like you need a contract with a term of Service Agreement. It’s a fancy name for coming to an agreement on what you’ll do. This would include an emergency contact or a pet’s medical conditions you should be aware of. Generally, the information is done so that both you and the owner have a clear understanding of how situations will be handled.
MAK: So basically, a contract outlines the expectations and actions we’ll take. It’s a way to clearly communicate with our customers so we all know what is expected from each of us?
DAD: That’s absolutely right Mak. A contract makes it clear who is responsible for what.
MAK: We should probably ask for the number and address of their vet too, just in case of an emergency.
DAD: That’s a great idea. You should always try to call the owner first, but in the case you can’t get ahold of them and the pet is in need of emergency treatment, it’s best if they are seen by their regular vet if possible, because they’ll have all their medical info.
GRANT: What about getting paid? Can we include that in the contract?
DAD: Of course! How much and when you should be paid for your services is an important part of any contract and helps you avoid confusion later on. Some companies may charge daily for services, while others bill customers at the end of the week. Writing that into your contract ensures everyone is aware of when payment is expected and how much is owed.
MAK: Wait, what if a dog were walking doesn’t get along well with other dogs and someone gets hurt?
DAD: That can be tough. We may have to look that one up or talk to Scott next door. He’s a lawyer. But, the owner needs to tell you if the dog is difficult. And, you should have the right to refuse walking the dog too.
GRANT: Thanks Dad, you’ve given us a lot to think about.
MAK: We’ll make sure to plan carefully so both us and the pets we care for can be safe.
Ben’s 2 Cents:
In order to save money and grow their company, Mak & G will have to prioritize which expenses are most necessary for starting out. Finding ways to reduce the cost of your expenses can go a long way in starting a healthy company and making it successful in the future.
Here are a few things to keep in mind:
Putting together a budget is a cornerstone for hitting any financial goal. You have to know what comes in and what goes out. It works the same for a business or your home. You’ll need to track your expenses and be aware of the “recurring” ones. For Mak & G’s business, these are the doggy treats, cleaning supplies, poop bags, etc.
You don’t want to be caught without important daily supplies because you forgot to put aside money for it before the end of the month. Factor these expenses into your budget ahead of time so you never have to go without.
You can also save money on regular expenses by using coupons, waiting for sales, buying in bulk, and doing comparison shopping to ensure you get the most value for your money.
Once you account for your regular expenses, you can see how much is left over to further invest in the company and of course how much you can allocate for your own paycheck.
Sometimes, you have to plan for the unexpected. In a household, there are a couple of ways to do that. You can:
Have a plan, just like a business. To make ends meet you might get a part-time job, sell some investments or borrow money.
Save up an emergency fund, where you put aside money. In a business you don’t take out all your profits.
Have insurance to cover potential issues with your business, or if you run it out of your home, make sure to have insurance if you get hurt and can’t work.
It takes discipline to remain on course and meet your goals, just like a new business. So getting into a money mindset is helpful. You’ll make mistakes, so forgive yourself when it happens, and imagine how you’ll feel when you reach your goals. Understand you’ll run into some challenges you will overcome. So, help your kids set goals. And, make them reasonable, because a goal that’s overwhelming will demotivate more than it will motivate. Start small and keep working at it. Because you can make it happen!