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What we will do in this module.
- Funding your business
- One Page Business Plan
- Simple Planner
- Annual Budget/Full Business Model
Funding Your Business
We talked in a previous module about Capital and planning for capital needs. Nothing kills a business faster than running out of cash. Most new business owners don’t understand that as their business grows the business requires more “working capital” that is cash that is floating inside the business. Indie publishing also has long pay cycles so your cash flow cycle is 60-90 days. If you are beginning or initiating larger more ambitious projects you need to plan your cash better to assure that your cash doesn’t dry up. If you are just starting you should do a budget and make sure that you have the cash to invest. Keep in mind if you are investing your cash as capital that is used as expenses in your business this will offset revenue and reduce your income and therefore your taxes.
Every dollar in a business is not the same. How they come into the business and go out impacts how they are viewed for tax purposes.
Your Capital gets taxed at capital gains tax rates not Income tax rates. What makes a dollar Capital? Investment in the business.
Capital contributions can come from the income of your day job or previous book sales post income tax. The capital is earmarked as capital in the business and is part of your capital account. The expectation is that Capital will have a return and its return should be much higher than what you could get putting the same money into the S&P 500.
How much capital does your business need?
This is where planning comes into play. If we do this right you should be able to budget for the capital you need to invest in your new business at the beginning. However, you can contribute capital to your new business at any time, but you must keep track of the contributions. Why?
Because capital in your business is taxed only on capital gains (short or long-term). That means that if you invested $5,000 in capital and later the company bought back stock from you the first $5,000 is tax-free and the gains are at the capital gains rate.
The main objective at this point is to plan and budget the money required to properly fund this new business.
Are you a Pantser in writing and apply the same to the business?
Do you have a business plan?
Well, that’s about to change!
Every business needs a simple one-page business plan that helps you to remember what this is all about. Also, have a look one and awhile from a high level may give you insight into what is really important.
A one-page plan should include:
Purpose: A simple one or two sentences describing why you do what you do, who you do it for and why.
“I Write Romantic Comedy for my personal enjoyment and to help yoga loving readers process family conflict. My writing enriches the lives of the reader and produces a lifestyle for me and my daughter.”
Expected Result: you are a creator, so create a vision twelve months out that you plan to achieve.
“ABC LLC will have a series in print in German by the end of 2019.”
“I will have a line of yoga pants selling on a website by June 2018”
Capital Required: Make a budget of what you think you will need to achieve your vision. If you’re not a numbers person take five minutes scratch out some numbers and think of what it will cost. If you are prepared to do a deeper dive there are worksheets further down that will help.
Now do it. Below is a template for a one-page business plan. Please complete it and I will review it comment and send it to you by email.
Full Business Model
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I am a business model geek. Having started many businesses and having to assess risk I like to create a business model for budgeting and comparison to actual. This model included is what I used with Authors that have hired me to do strategic planning of their business.
I suggest you challenge yourself to adopt this tool and use it to plan your whole business operations to understand all the ins and outs of your business for the next 12 months.
The building block of Indie publishing business is the book. Multiple books create a series. We need to get the basic building block right to support the rest of the business. Each book launch should be planned with capital dedicated to the project and an expected return.
I suggest if you have never budgeted or planned before you start with the simple planner and set quarterly and monthly goals with some general costs associated with them. This should be a quick exercise and give you a benchmark as to what you expect to do in the coming year.
Use the spreadsheet to set quarterly goals. Think about what you want to have accomplished at the end of the next 90 days. Break this down into monthly chunks and then associate a word count with the project is a great start. From this sheet, we create a simple roadmap as to the goals and costs.
Rather than discuss Stretch goals and SMART goals I am looking to establish habits. The habit of making an annual plan, reviewing the plan quarterly and making adjustments based on new information.
The Old and the New
While planning your content creation, mix into your plan the creation of new content alongside the refresh of old content.
Take a moment to look at your older content and review if it aligns with a one or five year anniversary that you can use as an event to refresh and celebrate. The ROI on existing work is higher and most authors are hung up on rapid release and the new content treadmill. Experiment with rejuvenating and relaunch and purposely build in the time for those projects just as if they were a new book.