Should your activity be business or recreation?

If your business activity is not accompanied with a clear business plan and way of monitisation, your activity must be part of recreation.

 

Entrepreneurs often fail in their business, not because of a lack of skill or a good product, but because of a bad use of time. What most fail to recognise is time really is money. Let me break it down for you.

 

Each month you have business overheads. Money is leaving your bank account. Even this moment sitting at your computer screen reading this message you are spending money on electricity, or if you are reading it on your phone you are able to do so because of the mobile contract you have subscribed to.

 

With money continually draining out of your bank account, in order for you to stay afloat and keep out of debt you must be earning that sum of money back to replenish your stock. Note: If you are building your business living off your savings an even more serious principle applies {insert link to second post].

 

If your business overheads (including your living costs) are 2250 GBP month and you work 35 a week each month, this means you need to SPENDING 15 GBP an hour to running your business (and this does not account for holidays or sickness). Therefore every hour you invest into your business must earn you 15 GBP per hour. This might not show up right away, but knowing this figure and aiming to earn it will help you work out which activities are right for you to be working on and which ones are a distraction.

 

If I have a website that I want to build because one day I hope to it will make me money I should not invest 7 working hours into it, because doing so will mean I’ve invested 105 GBP into it’s creation.

 

If a man walks up to you in the street and says ‘give me 100 GBP’ but has nothing to offer in return you wouldn’t do it. Actually this would be considered robbery. So why do you allow your business project to rob from you?

 

Now I am not saying that you can’t build this website or work on this project. Far from it. If you want to do it, do it. Just be aware of whether this activity is financially profitable for your business or whether it should be something done in your spare time i.e. outside of those 35 hours.  Those 35 hours need to be spent on money-making activities.

 

In the early days of a business this is a fine balance to find. Sometimes you’ll get it right and sometimes you won’t, but being financially aware and asking these questions will get you closer to what you need to be doing and beginning to profit in your business. The important thing is that you recognise whether your activity will make you money or not.

 

For more information read my book Grass Roots to Green Shoots

Naomi Johnson is the author of Grass Roots to Green Shoots, available now. In 2008 after a catalogue of mistakes Naomi had to close down her coaching business after three years of blood, sweat and tears. Now she is a highly sought after  small business consultant in London. This bo ok shares the wisdom she learnt on the way and offers an insightful read that will help any small business entrepreneur who wants to avoid the pitfalls and be a success!

 

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