It is time to get into the nuts and bolts of running a business. This week’s Entrepreneur University comes courtesy of Mark Gwilliam. Mark uses his international experience to coach small business owners on how to run successful businesses. Mark shares his advice on how to create a budget for your small business:

“There you are, running around in small circles with deadlines to meet and bills to pay. Can you really afford the time required to produce a detailed budget? Isn’t your time better spent generating revenue?

Yes and no. To paraphrase Alice and the Cheshire cat: “If you don’t know where you are going, you are sure to get somewhere if you only walk long enough”. The budget provides you and your investors with a numerical map that leads somewhere specific.

What is a budget?

A budget is a forecast of revenue, expenditure and profit. Most budgets are revised annually.

What does it achieve?

There are two (often overlapping) reasons for producing a budget. One is to persuade potential investors that your company is a good bet. The other one is to plan your business finances - how much money do you have and how do you plan to use it? How much revenue do you need to generate to achieve your target profit? Is your business plan viable or does it need adjusting? In retrospect, did the year pan out the way you planned, or did something go wrong?

How to approach a budget First, find out how your accounting software deals with budgets. It’s far more efficient to use the same package for accounting and budgeting. Next, meet your accountant to plan how to structure the budget. Arrive prepared, with a chart of accounts and a list of informed questions. Take copious notes.

Traditional budgets are very difficult for start-ups and firms with a short history, because there is little or no historic data. Revenue is particularly problematic, because no matter how carefully you have planned, it’s impossible to predict the future. There are two main approaches to budgeting:

The projections approach Here you enter projected costs and projected revenue, and calculate projected profits from these. This is reasonable and rational if the company has several years of relatively stable history to project from. If it’s a new company, such a budget is likely to become an exercise in denial and wishful thinking.

The required profits approach An alternative method is to enter projected expenses, and then calculate how much profit you require, and how much you think you can actually generate.

Eventually this should be enough to pay your salary and provide a return on your investment in the company. However, it might be realistic to plan for a loss in the first year or two, and only a small profit for a year or two thereafter.

Having settled on a number, you now add expenses to profit to come up with your required revenue.

Turn this number inside-out. Is it realistic? Is it achievable? Instead of guessing wildly how many widgets you may be able to sell, or how many hours you hope to bill, you can now soberly assess whether you will be able to reach your targets. Don’t have 10,000 billable hours in the year? Can’t afford enough machinery to make a million widgets? Go back and adjust the business plan.

Once the company is liquid, determine your salary based on what you would be earning if employed in a similar job, and your return on investment based on the interest you would receive if investing outside the business.

EXPENSES Fixed costs Fixed expenses remain the same regardless of sales volume. They include rent, loan repayments, and insurance.

Semi-variable costs These are costs with fixed and variable components, such as telephone, salaries and wages. The fixed component is the minimum cost of supplying goods or services, while the variable component changes depending on sales volumes.

Variable costs Variable costs increase or decrease in line with sales, and include costs of materials, distribution and commissions.

Start-up costs Initial costs must be factored in for a start-up.

REVENUE If you use the required profits method outlined above, you will have generated a total figure for required revenue. This is a goal rather than a prediction. You need to break it down to decide how many of what you need to sell, what you need to charge, and whether the targets are realistic. It has the added advantage of generating very clear monthly sales targets.

Once the business has been running for some years, revenue will be predicted in a more conventional way, based on past performance.

MONITORING THE BUDGET Once you have set up the budget, compare it to the actual figures every month, to look for differences and establish why they are there. Adjust expenditure or sales efforts as you go along, to bring the next group of numbers in line with the budget.”

Have you set a budget for your business?

SCORE “Counselors to America’s Small Business” is a nonprofit association dedicated to educating entrepreneurs and the formation, growth and success of small business nationwide.

In a recent announcement, SCORE has created a website specifically for young entrepreneurs. The nonprofit organization, a resource partner with the U.S. Small Business Administration, says visitors to its new section will find:

• Key articles on topics such as entrepreneurship as a career choice, Web site design, university assistance; and how to start smart.

• Listing of more than 35 organizations, groups and Web sites that offer news, strategies and assistance.

• Competitions that features eight awards to help encourage and recognize business success.

• The latest research and facts on Generation X and Generation Y entrepreneurship.

• Free online and face-to-face counseling, low-cost workshops and free e-newsletters.

SCORE is a resource partner with the U.S. Small Business Administration (SBA). SCORE is headquartered in Herndon, VA and Washington, DC and has 389 chapters throughout the United States and its territories, with 10,500 volunteers nationwide. Both working and retired executives and business owners donate time and expertise as business counselors. SCORE was founded in 1964.

SCORE, based in Washington, D.C., has 389 chapters in the United States. To reach the local SCORE office, call 316-269-6273. To use the resources online, go to score.org/young.html.

What do you think of the new SCORE website? Will you be a regular visitor?

I woke up a couple of days ago and checked my AdSense stats as a part of my regular morning routine. I was shocked to find out that my earnings for the day so far were less than 10% of what they usually should be.

Was my site down? No.

Were my AdSense ads showing? Yes.

Did AdSense send me an email about my account? No.

Was it just my site? Why were the bloggers I follow not talking about this?

What happened?

As it turned out, it was just a reporting issue on Google’s side. AdSense was still tracking clicks and making me money but was having problems displaying the data in the reports. Whew. It took a while to figure it out and I was relieved when I got the official word through Google’s AdSense blog.

The research I was doing, however, did send me to an interesting new feature that Google has just launched called AdSense Known Issues. According to Google the page gives readers a “list of currently known AdSense issues and possible work-arounds. Please know that we are working as quickly as possible to resolve these issues and appreciate your patience.”

I was pleased to see that my particular issue was known and being worked on:

Reports not being updated with current data. Last Updated May 6, 2008

Issue: Reports are taking longer than usual to generate, and aren’t showing complete data for earnings, clicks, and impressions.Work-Around: None at the moment, but rest assured that this delay in reports won’t affect your earnings or payments.

Updates: Our engineers are aware of the issue and are working to resolve it as quickly as possible.

Network World put out a list of what the top CEOs from the technology world are making. Here is how some of the top execs lined up by their 2007 compensation:

• Steve Jobs, Apple, $1
• Eric Schmidt, Google, $480,561
• Steve Ballmer, Microsoft, $1.3 million
• Dan Heese, Sprint Nextel, $3 million
• Michael Dell, Dell, $4.5 million
• John Thompson, Symantec, $4.8 million
• Edgar Masri, 3Com, $5 million
• Matthew Szulik, Red Hat, $5.2 million
• Scott Kriens, Juniper Networks, $5.3 million
• Ronald Hovsepian, Novell, $5.4 million
• Edward Mueller, Qwest Communications, $5.6 million
• Dan Warmenhoven, Network Appliance, $6.4 million
• Greg Brown, Motorola, $7.1 million
• Richard Notebaert, Qwest Communications, $7.5 million
• Robert Beauchamp, BMC, $7.8 million
• Hector Ruiz, AMD, $8.1 million
• John Swainson, CA, $8.5 million
• Mike Zafirovski, Nortel Networks, $10.1 million
• John Chambers, Cisco, $11 million
• Paul Otellini, Intel, $11.5 million
• Jonathan Schwartz, Sun Microsystems, $14.1 million
• Ed Zander, Motorola, $17.3 million
• Joe Tucci, EMC, $17.3 million
• Randal Stephenson, AT&T, $22 million
• Sam Palmisano, IBM, $25.1 million
• Mark Hurd, HP, $25.3 million
• Ivan Seidenberg, Verizon Communications, $26.6 million
• Larry Ellison, Oracle, $35 million
• Gary Forsee, Sprint Nextel, $40 million
• Edward Whitacre, AT&T, $78.4 million

In his youth, Tom Watson was anything but the picture of success he would later come to be. He was asthmatic, shy and had few friends.

But, this loner would soon become one of the greatest and richest salesmen in the world.

As one of the most successful self-made industrialists of his time, Watson would turn the winds of fate, transforming his humble beginnings into a career whose legacy continues to this day.

When Watson decided to change the name of his company to International Business Machines, he knew that it was a big name for a small company.

But, over the next few decades, Watson would build the company to live up to its name.

From a traveling door-to-door salesman to CEO of one of the largest expanding companies in the U.S., Watson’s name has since become synonymous with not only the beginnings of the computer industry but with what it takes to become a successful entrepreneur.

How did he do it?

“It’s quite simple, really. Double your rate of failure. You’re thinking of failure as the enemy of success. But it isn’t at all. It is better to aim at perfection and miss it than to aim at imperfection and hit it. You can be discouraged by failure or you can learn from it. So go ahead and make mistakes. Make all you can. Because, remember that’s where you’ll find success. On the far side.

Plan for the future…Have faith in the future. Resolve to stand for something big and fine outside of your business life.

Solve it. Solve it quickly, solve it right or wrong. If you solve it wrong, it will come back and slap you in the face, and then you can solve it right.

Expose your ideas to the danger of controversy. Speak your mind and fear less the label of ‘crackpot’ than the stigma of conformity. Follow the path of the unsafe, independent thinker. Every time we’ve moved ahead in IBM, it was because someone was willing to take a chance, put his head on the block, and try something new.

Too many people are waiting for someone else to give them a push. We have tried to develop self-starters in IBM.
All the problems of the world could be settled easily if men were only willing to think. The trouble is that men very often resort to all sorts of devices in order not to think, because thinking is such hard work.

You must guard constantly against those who lack vision. You must guard against the reactionary mind. Always cultivate and associate with persons of vision and with persons who believe that things are going to be better. When you do this, you take on the kind of vision, backed by the right kind of inspiration that you need if you are going to grow in this business or any other business.

It is impossible for any man, I don’t care how able he may be, to do the work and attend to all the details of a business – to accomplish anything – without the support of his entire organization. This business is such that neither I nor any executive staff can run it alone. It is too big. Our company has grown each year and succeeded because everybody has been contributing to its success.

Your success will be determined by the manner in which you use the tools you have been given to work with. When practicing the art of selling use all your talents. Put everything you have into your efforts; above all put your personality into them. Never copy anybody. Be yourself.”

For this week’s Entrepreneur University we turn to Cynthia Minnaar. Cynthia lives in South Africa and runs her own online home business. She is the proud owner of www.cyns-home-biz.com, the online home business site for online home based business start-up ideas, extra income opportunities, internet marketing training, affiliate marketing solutions and resources.

Cynthia shares with us how online entrepreneurs can get started on a shoestring budget:

“The secret to start making money online with your own internet home business is in the actual marketing of your business and there are many methods of internet marketing that are highly effective and will cost absolutely nothing if you give yourself time to learn the ropes and apply them.

In actual fact, the running costs of an internet home business can reduce every month as you learn how to market effectively at no cost at all.

If you are serious about building an online home business income from a real internet home business then at the outset you need to be sure that you select a reputable hosting company for your website. This is one area where it is not advisable to opt for free hosting.

Your aim is to drive targeted traffic to your website and if you are on a budget this just may take a little longer than someone who has spare dollars to purchase targeted leads. But, rest assured you will gain a great deal of knowledge as well as achieve huge personal success if you learn the methods that drive targeted traffic to your site at no or very little cost at all.

Here are some highly effective internet marketing methods that you can start working on immediately to drive targeted traffic to your home internet business website and start making money online.

Choosing Relevant Keywords

This is the foundation of your business and you need to establish what keywords or keyword phrases people will type into the search engines to locate your website. There are many free keyword selector tools available on the internet to help you with this, for example you could use the free version of Wordtracker or the Google keyword tool or the Overture keyword selector tool.

Search Engine Optimization

Once you have established what keywords you are going to use then you need to optimize your website for those keywords. You can also obtain free software on the internet to help you optimize your website, for example WebCEO can be downloaded free. Once you have completed optimizing your website, open a Google Webmasters account for free, create a sitemap and submit it to Google. Keep your sitemap current by submitting a new sitemap whenever you make changes to your website. Also submit your website to the search engines and it is advisable to submit to the major search engines manually.

Blog, Tag and Ping

Ideally you need to post on your blog at least once a day and be sure to hyperlink your keyword into the post so that it points back to your website in order to build back-links to your website that will help you rank higher in the search engine results. You need to aim to continually build back-links to your website. Be sure to tag your posts and then ping your blog to announce to the blogging community that you have just added a new post. There are many free pinging services available on the internet. Add your Blog RSS url to your My Yahoo account as well, which will ensure the indexing of the links on your blog posts.

Post in Forums

Forums are another free method of not only advertising your internet home business, but where you can also gain a tremendous amount of knowledge and assistance. Set up your signature with your keyword linked to your website and this will be free advertising for you as well as adding back-links to your site. Get involved and constructively post and contribute 3 to 5 times a day.

Article Marketing

This is a very highly effective method of gathering back-links to your site and securing high positions in the search engine results. If you write an article or two every week and distribute it to as many article directories as possible you will notice a massive change in your rankings weekly. Be sure to write articles based on the theme of your website and use the keywords you have selected and hyperlink the keyword to your url in the author resource box. You may at a later stage want to spend a portion of your budget to pay to have your articles distributed or purchase an Article Submitter.

Directories

Search the internet for seo friendly directories and start submitting your website to them, try and submit to 5 directories a day.

In Conclusion If you get involved in learning these free very effective methods of driving targeted traffic to your website, you will not only start making money online but you will automatically find that you start learning and getting involved in other marketing methods such as RSS, Social Bookmarking, etc., which will take your internet home business to the next level.”

After the success of our last poll on The Top 20 Startup Mistakes that entrepreneurs make, we’re ready to get our new poll started!

This time I want to talk about raising money. It’s been said that there is no such thing as a startup with too much money. You need capital to invest in sales, marketing, staff, offices, research, etc.

Every business needs some startup capital so my question to you is what’s the best way to raise money?

I’ve created a new post in our forums where you can vote. Please take the time to share your thoughts and experiences as the results will help other entrepreneurs become successful in building their businesses.

To cast your vote and get involved in the discussion, click here.

Two weeks ago I offered free SEO advice to Supper Thyme USA. I’m going to continue my SEO Advice series today by helping out another YoungEntrepreneur.com blog reader, Mark from TheLocoMono.

TheLocoMono - http://thelocomonowebsite.com

I would like to take you up on your offer for SEO advice. I have been reading your blog for some time now so I am curious to hear what you have to say. My website, TheLocoMono Website started out as a popotouri of topics and last month I simplified these topics into sub-domains so along with a remodeled design using a paid WP theme, it is starting to look a lot better, traffic is somewhat the same as it was before but more spread out across the sub-domains and main site.

I am curious to see what I can do to increase traffic to my sub-domain and/or somehow tie them into my main website. A challenge but neverless shoot for Pluto as I like to say.

–
Muchas Gracias,

Mark

My Recommendations

1) Pick Better Keywords
I like your category idea but you should pick keywords that you have a change of ranking for. As an example, look at your Just Business section. Are people really searching for “Just Business”? Use keywords that are related to the topics you are writing about but will also drive targeted traffic for you because you can get on page 1 in Google for them.

2) Use Your Pictures For SEO

Your images can not only help you rank for select keywords, they can also drive some serious traffic to your site through the Google image search. Your logo is called TLMlogo.gif and your alt tag is “Logo”. Change your pictures around so that the file name and, at the very least, alt tags are helping you with your SEO efforts.

3) Increase Your Keyword Density

If you don’t use your keywords on your page in multiple locations it will be hard to get Google to pay attention. Look at your Just Personal Finance Page. You have the key phrase Personal Finance in your title tag, in your url, and your H1 tag. Then you don’t use Personal Finance anywhere else on the page. You need to make sure that your posts mention the keywords you are trying to rank for. If your posts aren’t related to personal finance then consider changing the topic name to something that you are likely to write about in your posts (and a key phrase that is not as competitive as Personal Finance).

Good luck Mark!

Readers, what do you think about TheLocoMono’s website?

To learn more about how to get SEO tips for your website please read my post: Need SEO Advice? Submit Your Site!