November 3, 2025 • 50 mins
Right Thinking with Steve Coplon.
This week's show is called "Personal Finance and Small Business Ownership Part 3 - Encore Edition #17." Tune in and hear Steve as he continues to teach this powerful seminar on starting your own business. If you are going to succeed in owning your own small business, you need to know your costs and expenses and how much sales you need to cover them and pay yourself!
https://www.talknetworkradio.com/hosts/right-thinking
This week's show is called "Personal Finance and Small Business Ownership Part 3 - Encore Edition #17." Tune in and hear Steve as he continues to teach this powerful seminar on starting your own business. If you are going to succeed in owning your own small business, you need to know your costs and expenses and how much sales you need to cover them and pay yourself!
https://www.talknetworkradio.com/hosts/right-thinking
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:13):
There must be lies parted rider somewhere got to be
heard in the sky.
Speaker 2 (00:28):
Good morning, welcome to Right Thinking with Steve Copeland. I'm
your host, Steve Copeland, and thank you for tuning in.
Let's have a great day.
Speaker 1 (00:41):
Good morning everybody, welcome back. I hope that since last
Memorial Day a week ago, all of you had a
is just a wonderful week. I certainly did. I want
to say one thing when I said last week, then
I wanted to have a moment of silence, and that
silence isn't really a good thing. On the radio, A
(01:05):
lot of people real close to me kind of kind
of joked me a little bit about my moment of silence.
I actually said, let's have a couple seconds of silence,
and that's what we did. But I wasn't trying to
be cute or funny. I did. I did get silent,
and then it seemed like a lot longer. But again,
you know, Memorial Data is a is an absolutely wonderful
(01:28):
day where we honor our soldiers and the many women
that have served and fallen to give us the freedoms
that we have. And I then proceeded to read who
is your favorite American hero, and I just want to
thank all of you for the wonderful comments that I've
received over the last week, and I just say thank
(01:48):
you for that. Today I'm going to pick up on
on the theme that we have Personal Finance and Small
Business Ownership Part three, and today we're going to be
centered in on the idea that I said, if you're
going to succeed excuse me, if you're going to succeed
in owning your own small business, you better know your
(02:12):
cost and expenses and how much sales you need to
cover them and pay yourself. I'm very pleased with that
one sentence. I think it sums up a lot of
the things that I'm here trying to do. It encapsulates
that owning your own business is not just something that
(02:35):
you get up and say this is what I'm going
to do. You have to be very, very focused. You
have to know what your goals are. You have to
know many many things if you're going to succeed. And
to summarize Part one, I think the main things that
I tried to give you in the first part one
(02:55):
introduction Owning your Own Small Business, Personal Finance, Owning your
own small Business is that there is absolutely enormous risk
and that you have to think like a business owner.
On Jeff Heiser's show this morning on his mental toughness,
(03:18):
he's worked very, very freely today and related a story
of this past weekend when he had a major production
I think it was some sort of a concert and
event and there was a major sponsor that he said
had paid tens of thousands of dollars to have it
(03:41):
video so that they could use the video, and that
the equipment wasn't working properly, and that it was kind
of a mere disaster panic situation, and Jeff kind of
chronicled how he went through maintaining his composure and his
focus and with that situation. Well, what I want to
(04:05):
tell you about that, it's at the very end that
I got the mersed out Of Jeff's show, he said
that when he finished, he came home at about twelve
thirty at night. The event was over at nine, and
he was totally exhausted. He had risen to the occasion,
(04:26):
so to speak, and he came home and he just
crashed out all day Sunday. But he talked about when
he woke up, he had his grandkids at his house
and he made this comment. He said that his grandson
is seven years old and really really wanted him the
(04:52):
man's son, thinking that I want my granddaddy to do well,
succeed at what he's doing. And you know that part
of the story that Jeff told just really brought it
home to me that you've got to have your priorities
right now. What is the priority here pulling off the event,
(05:16):
honoring the contract with the sponsor to produce a video. Yeah,
that's part of it. But the real thing is it's
knowing what's important in your life. Jeff's grandson and that
Jeff wants to do well at all that he does,
(05:37):
to give it as all because his grandson cares about
him and he doesn't want to disappoint his grandson. If
you listen to the show this morning on Talk Network
Radio Success and Intentional Lifestyle Jeff's show, you'll understand what
(05:57):
I'm talking about. Well. As I go through life, and
I'm trying to run my foundation right thinking foundation with
its purpose to help make the world a better place,
to help people make their lives better, which is also
(06:17):
the same purpose of many many other nonprofit organizations and
people that are serving. I met with one of my
major donors last week to give him an update on
all the progress that Right Thinking's making, and he gave
me just some of the most beautiful counsel that anybody
(06:38):
could be blessed to receive from another person. He said, Steve,
don't worry about the business aspects of what you're doing.
That'll all fall into place. Just keep serving and if
you keep doing that, it'll keep moving forward. Just keep
doing that. And I said to him at the very end, well,
(07:02):
so I guess we just got to climb that mountain
and get to the top of it in order to
see the next mountain that's on the other side that
we couldn't see when we're at the bottom of the
first mountain. And yeah, sure we're going to have a
couple valleys that we got to go through, but just
cheap moving forward. I told you six six seven weeks
(07:26):
ago that my wife and I went to a Joyce
Meyer conference and the number one thing that I got
out of there that I just can look back and say,
this is what I really want to remember from from
what I heard at that couple of day conference. If
you don't know what to do, keep doing what you
(07:47):
know is right. Well that's the best advice I think
I can give you. So let's let's get started on
today's show. Today's show is going to be if you
are trying to start your own business, or you're already
in business and you want some partners on how to
succeed in your business. I said, you better know your
(08:07):
cost and your expenses so that you'll know how much
money you've got to got to be able to make
in sales in order to be able to pull out
money for yourself. Never lose focus on the purpose of
your business. And I've been talking about it for the
last couple of weeks. The purpose of your business is
(08:30):
to support your lifestyle, the way you want to live.
If you're going to be self employed, you always got
to remember it's a perpetual, perpetual in motion activity. You
can do great this week, next week, for the next
month or two, but remember this. If you're working for yourself,
(08:51):
you got to do great in six months, a year,
two years, three years, five years, because you are responsible.
Let me say something very quickly. I'm going to slip
this in the number one thing that I haven't said
this pointed in the two parts of this series. For
(09:12):
you to be able to succeed, I've said in the
tools that I'm giving you, you have to know how
to think like an owner. You have to be able
to think like an owner, and you have to understand
your risk, and you have to plan ahead, you have
to do a business plan, all those kinds of things.
But I want to tell you one thing that is
above all that you must believe in yourself. You must
(09:39):
believe in yourself and who you are in what you're doing.
And if you don't have that, whatever you attempt is
not going to succeed. Period. So once you start to
get more confident, truly believe in yourself, and then you
(10:02):
start to go through all the right steps to focus,
to meditate, to plan on what it is that you
want to set as your goals, and then go into
the to the actual steps to achieve them, you will succeed.
Last week I talked about the Ultimate Financial Plan Jim
(10:24):
Snowball and Tim Bowler and I and I got kind
of mixed up on the subtitle Balancing Your Money and Life,
So I wanted to clear that up. But I read
the next book in that series, The Ultimate Productivity or
just Ultimate Productivity by Jim Stowball and I want to
(10:45):
put this on your reading list. This is, without a doubt,
one of the very best books I have ever read
on how to look at your life to decide how
well to be who you want to be and how
to get there that I've ever read in my life.
(11:08):
I just a totally enjoying Jim Soball, his approach to life,
his advice that he gives, and I really want to
recommend that book to you. I'm not going to talk
anymore about it today. We'll come back to it at
another time. But Ultimate Productivity. Don't let the title for you.
(11:29):
The word productivity is not like it's just some deep
business book on how to make a manufacturing plant more
productive and get more output and cut your unit costs
and stuff like that. No, this is about looking at
yourself and knowing that of all the consultants in the world,
the very best consultant that you will ever find that
(11:50):
will understand what you have as your own goals is yourself.
You have to believe in yourself and then lay it out.
It's a beautiful book to read over the weekend. When
I started meditating on the show this week and how
(12:12):
I was to present the topic knowing your cost the
main part of today's show. I actually googled biblical references
to knowing your cost and a lot of good stuff
came up, that's for sure. But I want to share
this with you because it could not be more precise
(12:33):
for today's topic. This is the Book of Luke, chapter fourteen,
verse twenty eight through thirty. But don't begin until you
count the cost. For who would begin construction of a
building without first getting estimates and then checking to see
(12:57):
if he has enough money to pay the bills? Otherwise
he might complete only the foundation before running out of funds.
And then how everyone would last see that fellow there?
They would mock he started that building and ran out
(13:19):
of money before it was finished. When I came across that,
I said, Wow, how could anything be more exact in
the Bible to being careful when you're doing a project
that you better know how much it's going to cost. Well,
(13:40):
as straightforward as that is, I want to tell you something,
and this is the beautiful part about what I'm saying today,
that message about knowing your costs. In other versions they
call it to build a tower a tower, not just
a building. It's really not about a construction project. Or
(14:01):
building a building. But on the surface level, there couldn't
be any more exact to what I'm trying to tell you.
If you're gonna be successful in business, you better understand
your cost And last week I went deep into how
much working capital you need you would need. I told
you how to calculate your working capital needs to anticipate
(14:21):
when you'd hit your break even point and how much
money you would need ahead of time so that you
would be able to continue with your project even though
you hadn't hit the sales level enough to cover your costs. Well,
that's exactly what this is. I mean, it says right there,
Otherwise he might complete only the foundation before running out
(14:44):
of funds. Well, for those of you that are listening
to everything that I've been trying to say for the
last sixteen weeks, success is not just about money, about persevering,
not quitting, not giving up, surrounding yourself with the right
(15:05):
people making the right decisions. And what this is talking
about is the building the tower. It's building your own character.
It's building your own character of who you are, what
you stand for, what you want to set the example of.
(15:26):
And basically that's the beautiful thing about the Bible. It's
at many, many levels, and that's why we read it
our whole life over and over again. Some of the
things that we read last year, you read them again
today and it'll get a whole deeper understanding because hopefully
you've matured and you're more ready to receive the message
(15:46):
that awaits you in the word there. So what I'm
trying to tell you is Luke fourteen twenty eight to thirty.
It's got the exact at the surface level. You better
understand what your costs are going to be before you
start the project. But if you go a lot deeper,
it's really your project building your life and what their
true cost is about filing Christ. So it's all right
(16:10):
there for you. And I can tell you this, if
you listen to what I just said, I believe that
the chances for you to succeed in life are going
to be absolutely outstanding. So with that said, remember this,
if you go into business for yourself, it's going to
(16:31):
be hard, difficult, but the rewards can be phenomenal. The
freedom that you have when you're your own boss is
one of the most wonderful, precious freedoms that we have
here in America. But you have to be prepared, you
have to know the risk, you have to do your homework.
(16:53):
So with that said, let's take up a little story
that I wrote. It's on page forty of Personal Finance
Small Business Ownership. I've told you all along that this
the series that I'm doing Personal Finance and Small Business Ownership,
(17:14):
is coming right out of a seminar that's in a
workbook that's on the website right dot org under documents
by the same name Personal Finance and Small Business Ownership.
So here's a little story that I want to give
you to illustrate the following point. Many many people are
(17:34):
in business and they do not have a clue of
what their costs are. And so just a real sip,
a little praise the hurry owner I go, the behinder
I get. So keep that thought in mind as I
(17:55):
read you this. This is called it's on page forty
example of not knowing your cost There's this little second
grade girl who wants a fifty dollars Barbie dollar. Say
she ask her parents, Mommy, Daddy, will you buy me
(18:16):
that Barbie doll They can't afford to buy the fifty
dollars doll and it's not Christmas or her birthday. They
don't have any extra money. They just can't do it.
Time's are take there's tt There is a PTA bake
sale coming up at her school, so they say to her,
(18:38):
why don't we sell cakes at the PTA bake sale
and if we make fifty dollars, we will buy you
the Barbie doll. So they get a table in the
hallway at the PTA bake Sale and sell cakes. Their
cost for each cake is six dollars. They sell each
(18:59):
cake for ten dollars, so they're going to make four
dollars each time they sell a cake. They need to
sell twelve and a half cakes to make the fifty
dollars that they need, but since they aren't selling half cakes,
they need to sell thirteen cakes to make enough money
(19:22):
to buy the Barbie doll. As soon as the little
girl sells five cakes and has five ten dollar bills
in her hand, she starts jumping up and down saying, oh, goody,
goody money and Daddy, we can buy the Barbie doll. Now.
She doesn't have a clue about the cost. All she
(19:47):
knows is that she has the fifty dollars that they need.
There are many, many businesses that operate just like that
little girl. They don't have a clue about their costs.
All they think about are their sales. Okay, so that's
(20:10):
the fifty dollars Barbie Doll story. It's on page forty
on personal Finance Small business Ownership under documents on right
think dot org, r I g h G g h
I n K dot org. Let's talk about the fifty
dollars Barbie Doll story for a minute. There are many,
(20:31):
many businesses that are small businesses, and they're very, very dedicated.
They work hard. They get up, they get up in
the morning, could be husband and wife or whatever, and
they go to work and they work really, really hard.
(20:52):
One of the things about being in small business that
you have to understand is you will not be able
to generally afford or to pay for other people to
do a whole lot of the functions that are necessary
for you to do in your business. Just remember this.
You got to have bookkeeping, you got to keep track
(21:14):
of things. You're gonna have to do sales tax reports.
You're going to have to do income taxes. You're going
to have to do payroll tax reports. You're gonna have
a lot of administrative functions that require information that is
going to be gotten from your bookkeeping. Other than that,
you need it to be able to monitor your activities
(21:35):
so you can see how you're doing and make adjustments
as you go further. Well, when you're in business for yourself,
you're going to be wearing a lot of hats. You
are going to be the chief cook and bottle washer
of your business. Later on, when you grow and get
more successful and stabilizes and you start to become profitable
(21:57):
and very successful, then you hire other people and then
you do other things that can bring more business to
the company and grow it. But in the beginning, you're
not going to have a lot of money to pay
other people to do things that need to be done.
So this morning Old Jeff Show to come back to
that for a second. Boy Jeff talked about last week.
(22:19):
He had a hard week. He worked from seven in
the morning till seven point thirty at night just about
every single day, and when he had a technical problem
he had to get in there and take care of
how to fix it. Well, just remember this. If you're
not the kind of person that is prepared to do
whatever it takes to clean the toilets, to mop the
(22:43):
floors to put out the trash. If you're not that
kind of person, do not go into business for yourself,
because there's not going to be anybody else there ultimately
the end of the day. And if you're not running
your business and manage it properly and your employees get
disgrunted with you and they leave you. If you can't
(23:04):
meet payroll and they leave you, you're gonna be stuck holding
the bag, so to be. To speak, you're gonna be responsible.
So one of the very best ways to become successful
in business is to fully understand what your goals are
other than once it gets into operation. The big goal
(23:26):
is to support your lifestyle. I've covered that pretty completely
the last couple of weeks, but now let's talk about
how you actually are going to manage your business to
achieve that goal. And in the book that I that
I have, there's gonna be a page in there. I
don't know the page number right now, but it shows
you the basic financial statement of a business. And to
(23:49):
simplify it, you have sales at the top. So you're
gonna you're gonna make You're gonna sell something, a service
or product, whatever, You're gonna sell something, and there's gonna
be a direct cost associated with whatever it is you sell.
The costs to produce raw to turn raw materials into
(24:13):
whatever your product is, So there's a cost, and there
may be labor that has to be put in. So
there's raw materials and labor, and then there's incidentals. And
if you're doing something that requires tools to make, you're
gonna have to replace the drill bits every now and then,
and you're gonna have to buy a bunch of nails,
and you got all sorts of little costs that you're
(24:33):
gonna have to keep track of. Okay, after you get
these costs that we're gonna call your direct costs, you
get a subtotal, and that number in general accounting is
called your gross profit. So above the gross profit is
your sales less whatever it costs you to directly make
(24:56):
or be able to produce your product, that's your gross product.
And then after your dressed product profit, rather, you're gonna
have all of your expenses that are you're what they
call variable in some classrooms, that are your rent teletone utilities.
These are your overheads, and these are going to be
(25:18):
there whether you sell product or not. And then somewhere
in there, you're gonna have to take out payroll for
whoever it is that you're you're hiring to help you
do this. Some of the payroll may be a direct
cost because they're on the line making the products, or
some of it they may be administrative costs. But either way,
(25:40):
you're gonna have payroll or labor expense. So you finally
get it down to a subtotal, and somewhere in there
you want to pay yourself. If you don't want to
pay yourself, which there are some situations where you don't
have to pay yourself. There's a lot of very successful
(26:03):
people who start a small business. It's more of a
hobby that doesn't matter if it really makes money or not.
It keeps everybody in the family happy and they don't
really need the money. Well, if you're fortunate enough to
be in a situation where you can run your own
small business without having to be concerned whether it's profitable
(26:27):
or not, and my definition of profit includes paying yourself
your paycheck money that you need to take out. Hey,
if you're fortunate enough to not have to take any
money out, and you've got extra capital in reserve, that
if your business is actually losing money that you can
afford to keep it going by putting in more of
(26:49):
your own money, then I'm glad for you. That's a
very good situation. And in some cases it's just really nice.
It might be a company that that doesn't care about
making money, but it does a lot of things for charity.
It gives a lot of donations to food kitchens or whatever.
(27:09):
So hey, if that's who you are, then keep doing
what you're doing because you're doing your part to help
make the world a better place, and I compliment you
for doing that. But if you're one of the many,
many people that business is a little more critical that
you pay yourself, then let's talk about what's involved in
paying yourself. I'm going to talk at a very simplified
(27:33):
level for a second, and then I'm going to delve
into some of the details. Basically, you're gonna have to
sell enough product get enough money coming in to cover
all of the direct costs and all of your expenses
to be able to make enough money to pay everybody
(27:55):
that needs to get paid, including yourself. So you have
to be profitable to sustain. If you don't make enough
to do that, it's just a matter of time before
your personal resources are gonna be not enough to keep
the business going, your credit's not gonna be there to
keep it going, and you're gonna have to say I tried,
(28:17):
but I can't keep it going. I'm gonna close my
business down. Well, I'm a problem solver. You know, this
is America. You can do anything you set your mind
to if you surround yourself with the right people and
have the right values and go about it the right way,
(28:37):
get all the right licenses, market yourself correctly. There's lots
of things. Hey, being in business for yourself has hundreds
and hundreds of things that you're gonna need to do
if you're gonna be successful. But right now I'm talking
about cost again. I told you the fifty dollars Barbide story.
So if you manage your business and you have in
(29:00):
your mind the gross profit, which is the sales left
the direct costs. If you know that number and you
achieve that number by selling enough sales, make enough sales
cover all your costs, hit your gross profit, your targeted
(29:22):
gross profit, and you've calculated what that number needs to
be ahead of time to do two things. And this
is the Steve Copeland method of managing. And I've been
doing it for forty five years. I've passed it on
to quite a few people, had some wonderful successes. It
(29:45):
works for me. And I'm going to give it to
you now. And it's not buy my book. My book's
right there on the internet for fruity. I hope you
enjoy it. I'm giving it to you from my heart
because i want you to have a better life. Here's
what it is. Instead of starting at the top number,
like the little girl that needed the Barbie doll and
she got her fifty dollars, Instead of starting at the
(30:08):
top number, start at the bottom number. This is what
my method's all about. Know how much you need. Take
that number. Say you need fifty thousand dollars to come
out of your business, which might have been called profit
in order to get a subturtle. Pay yourself a fifty.
(30:30):
And maybe you don't have any profit, so to speak,
but you paid yourself fifty so that you now have
enough money to live the way you want to live.
You've paid all your bills in your business. So here's
what you do. Instead of starting at the top with
your sales number, let's start at the bottom with how
much you need to pull out for yourself, and for
(30:53):
this example, I'm gonna give you fifty thousand dollars is
what you need now in your business. Let's say that
you have another fifty thousand dollars of expenses called overheads.
The G and A is another word that in accounting
(31:16):
they use general and administrative. The variable expenses the ones
that are not the direct expenses, rent, telephone, utilities, contracts,
car payments, things of that nature, loan payments, not contracts.
Is what I meant to say. If you take that
number of your overhead and add your overhead to what
(31:41):
you need for yourself, and I'm giving you, in this example,
fifty thousand for yourself and fifty thousand to pay all
your bills each month they harbor average little over four
thousand a month, twelve thousand, fifty thousand a year for
twelve months. You need a hard a thousand dollars. Now,
(32:02):
if you're driving in your car and you're traveling, which
I know a lot of people that listen to the
show listen to me while they're traveling. Don't close your eyes,
but just picture this. If you look at if you
look at sales less costs equals gross profit less overhead
equals the normal net profit. And you flip it upside
(32:27):
down and say, if my net profit is going to
be fifty thousand dollars ultimately that I'm going to pay
to myself or you pay it before the profits are
your profit zero's out because you've got your fifty. It's
the same thing, and you add that to your overhead
to get to one hundred. Then that gross profit number
(32:48):
that I call the target goal, you can get to
it from the bottom and say I need to have
a gross profit of one hundred thousand dollars in order
pay myself fifty and pay all my overheads. Period. Now
I'm gonna stop for just a second. It's taken me
three weeks of teaching this seminar the series to get
(33:11):
to that point. That is the secret to everything I'm
trying to pass on to you. Instead of being like
a general store in eighteen seventy two, and I'm gonna
call it Tulsa, Oklahoma in the West. That's where Jim
Stobar lives, and I'm hoping to go there and visit
him in the next couple of weeks. The days of
(33:34):
the Wild West and having a general dry goods store
where you open up your doors, you hang your single
and people just come in and buy from you constantly.
It's not that easy anymore because you're not the only
store in town that sells those dry goods anymore. The
Internet and delivery, with free shipping and Amazon and FedEx
(33:59):
and everything else, it makes it harder and harder and
harder if you sell a product that anybody else is
selling to capture their business. In the next couple of weeks,
we'll do part four and we'll talk about marketing and
sales extensively. But right now, if you open up your store,
you hand your shingles what they used to call it,
(34:21):
open up your doors, and you wait for business, and
all day long you were just slamming. You were hitting
that cash regis that cash register is singing. And you
come home at night and your kids and your wife
they say, had we do today? And you say, I
never had a break, I never got to take lunch.
(34:43):
We did incredible today. If that's the way you're operating
your business, that is great. That's how you want to be.
You want to be having that cash register singing and
play music. But let me tell you something. If you're
doing that and you don't control your cost or know
(35:03):
what your costs are, you could be hitting your sales
goal and go out of business. I got to take
a breather of this one for a second. I want
to let it sink in. What I just told you
is you could be in business and be just jamming
slamming your sales. If your goal is to do two
(35:28):
hundred thousand dollars in sales a year and you're doing
twenty five thousand this month, you're going to be well
over your sales goal. You're going to be way over
your sales goal. But if your cost of what it's
costing you to make those sales is not on your budget,
(35:52):
it's way higher than what it should be. You might
be rejoicing because you're you're making so many sales, But
at the end of the day, when you catch up
your books and your talent, it looks at it. Can
you realize ask yourself the question, why didn't we make money?
(36:18):
What happened? I thought we were doing great? That, my friends,
is the biggest downfall in small business is to think
that you're doing well when you're really losing money. I'm
going to give you a real simple example that I'm
(36:39):
going to give you a very detailed example of what
I'm trying to say. If you are selling something and
your cost or higher than what they should be, Hey,
in some cases, you might not even know what your
costs are. You might be like the little girl with
(37:00):
a barbie doll. She thought that that sales number when
she sold five dollars for ten dollars each and made
fifty dollars, she thought she was ready to go in
the store and buy that doll. Well, the profit on
that particular barbie doll was only the gross profit, not
counting anything else. In the simple example, it cost six
(37:21):
dollars for every cake, so she only made four hours.
Her parents had to shell out six bucks. They might
have gone to Costco. They might have gone to a bakery.
They might have just bought the cakes and refilled them.
Or the mother might have made all the ingredients and
by the time she put all the stuff into it,
she knew that it cost six dollars a cake. They
(37:44):
only made four dollars a cake, but the little girl
thought that she made ten dollars a cake. So, if
you don't blind into your business and you're selling things,
and you don't know what it cost you. It's only
a matter of time before it's going to catch up
with you. Now, if you go into your business, though,
and you know that you need a gross profit of
(38:06):
target goal of X dollars in the example that I'm
building today, one hundred thousand dollars, so you can make
the fifty to support your lifestyle and the fifty thousand
to cover all your overheads, then you can calculate. You
can calculate how much in sales you need to do.
(38:29):
If your cost of those sales is a certain percentage
of every dollar you sell, you know it's going to
cost you a certain amount of cost. In the Barbie
dollar example, if you sell the cake for ten dollars
and your cost is six dollars, then you have a
(38:53):
cost of sixty percent. So let's just make this easy.
Let's say that the example of your own small business,
and you need one hundred thousand dollars gross profit. Let's
just say that you know in your business, because of
statistics and research and other things that you've been able
(39:13):
to get information and good BALLI data. You've gone in
the Small Business Development Center and their counselors have helped
you figure out what your costs should be, what the
norms are in your industry, in your geographical area, and
you learn that your cost is fifty percent of sales.
What that means is is this, if you sell a
(39:37):
dollar a product for a dollar, that fifty cent out
of every dollar, fifty percent of that dollar is going
to be part of your direct costs that need to
be subtracted from your sales to get to your gross profit.
It's a little technical, but I'm trying to keep it
to where we can follow it. So if you need
(40:00):
one hundred thousand dollars to cover your overhead and to
guarantee yourself that you're going to be able to pay
your salary, your own money that you need, and I
tell you that in your business, your direct costs are
going to be fifty percent. But if you know how
(40:22):
to do the algebra, how to do the math, if
you do two hundred thousand dollars in sales at fifty
percent direct costs, your direct cost fifty percent of two
hundred thousand is one hundred thousand, and that's the number
(40:43):
that you need if you hit your goal, your target goal,
your gross profit of one hundred thousand dollars you can
pay the fifty thousand of all your overheads and you
can take out the fifty and you win. You succeed.
Your budget comes out exactly the way that it needed
(41:04):
to be. Now, if you are selling your product and
you need one hundred thousand dollars, and you know that
you have to be within fifty percent of your cost
in order to sell at two hundred thousand, So now
you know your sales goal that I backed you into.
(41:25):
So remember what I said instead of looking at it
from the top saying, if we do this much sales,
and this is our cost, this is our gross profit,
we pay our overheads, we take what's left. Let's get
more aggressive than that. Let's not take what's left and
not have enough to pay our own bills. Let's say
(41:45):
I need to have this much in a gross profit
in order to pay all my overheads, which I know
exactly how much they are, and then I will take
out exactly how much I know I need that I
budget it for myself, and my cost needs to be
within in this percentage. So therefore my sales have to
be two hundred thousand. You are guaranteed to succeed if
(42:09):
you do the following things. If you keep your overheads
on budget, do not go over your budget on your overheads,
pay attention to your budget. Don't spend anything you don't
need it's not in your budget. If you keep your
cost percentage for everything you produce in line, then you
(42:32):
will be able to know exactly the amount of sales
that you need. And if you hit your sales goal,
you are guaranteed success. It's just straight Matt. If you
hit your sales, stay within the costs that you need
it two percentage, stay within the overhead budget, you'll have
the money you need to pay yourself and you will
(42:53):
be successful in your business. But what if you're what
if you're direct costs go over budget? Well, if you
need a fifty percent direct costs and the example that
I gave you to cover your one hundred thousand of
overhead plus your own money, and instead of doing fifty percent,
(43:17):
your costs are really sixty percent. Whatever it is you're doing,
you're not doing right, You're not buying them efficiently, you
have too much waste. There's pil fridge, there's different things.
If you come in at sixty percent of two hundred thousand,
then your costs under this example are going to be
one hundred and twenty thousand, and your gross profit is
(43:39):
only going to be eighty. You're gonna be twenty thousand short,
and your personal draw of the fifty that you need
to pay all your own bills is only going to
be thirty. That's the math. That's the math. So what's
the best way to succeed is to is to have
a budget, have a plan, stay on it, and make
(44:00):
sure that you manage make sure that you manage your
business to stay on your budget. Now we've taken your
budget and we've broken it into a couple of categories.
We've broken into one your overhead budget, two your direct
cost percentage which becomes a budget number, and three your
sales goals in your budget. So now we can sort
(44:22):
of divide and conquer. It's like a military strategy. So
now we're gonna gonna break it down and get really detailed.
Remember this, and we're gonna get deep into this next time.
If you do not make the right sales number, you
may need to increase your price if you can be careful,
(44:43):
or you may need to market and advertise more. But
remember this, if you spend money in marketing, advertising, dollars
and it doesn't increase your sales, then your overheads are
higher and you're gonna lose even more money. So never
forget that marketing is a form of investment and it
has to produce advertising and marketing dollars have to get
(45:06):
a return. Let me just tell you a really quick
story here, and then I'll tell you that next week's show.
I had a client for years, one of my very
most successful clients I've ever had. And this client had
a wonderful, wonderful company until I talked to the client
and get complete approval to discuss things. Names and who
(45:28):
they are. I'm not going to share that, but this
particular client is an absolutely phenomenal business started off with
next to nothing, operated for twenty five or so years,
maybe longer. The owner became the Entrepreneur of the Year
in the state of Virginia. I was honored to be
at her awards ceremony where she got recognized in front
of a thousand people by the Governor of Virginia as
(45:50):
being the business person of the Year. And she told
her story for an hour and I was part of
her story. And it's one of the greatest honors I've
ever had me publicly as one of the three people
that helped her succeed her father that had had passed
away and left her some insurance money. A close friend
of her father's that that was her mentor of the
(46:12):
first early years when she first went into business. But
then she thanked me for teaching her how to make money,
and I will always be indebted to her for letting
me be with her. Well, she had a great, great business,
and she sold one hundred and twenty five products, and
of those one hundred and twenty five products, we found
(46:33):
out when I did a detailed cost study that twenty
five percent of those products were not making money. She
was selling something for seven dollars that was costing her
eight dollars to make. Basically, I'm going to hold off
on this story because this is a very very detailed
business story. But what I want to tell you is
we spent two months figuring out exactly what her costs
(46:54):
to produce every one of those one hundred and twenty
some products that were on her shue with in her
catal and we found out that many of them were
losing money. And uh so we had a decision to
make can you raise the price can we manufacture it
and make it for us and without changing the quality,
or do we need to just discontinue it. Well, we
(47:17):
went through this whole process, and I'm going to give
you more detail on it later, but we figured it out.
We dropped a lot of the products, and UH chained
up being incredibly successful, expanded and went national sober businesses
past year for a lot of money. And that's just
a quick thumbnail of that. I want to stop for
today on knowing your cost and understanding what your sales
(47:41):
need to be. And I encourage you to go to
right think dot org to the website and study this.
It's right there for you and UH send me, send
me a correspondence, join the website, register and then I'll
get back to you. It's all right there. And I
hope that today has helped you. I just really hope
(48:04):
that you're following what I'm saying. I've been trying to
talk to you at different levels, just like the Bible,
the Bible story that I gave you today, the first
that I gave you, it's at different levels. Everything's at
different levels. Well, one of the levels that I want
to talk to you about is going to be our
show next week. I am incredibly honored to next week
(48:30):
to be able to have as my guest Robin Consertion.
I've talked about Robin a lot on the show. She's
one of the most beautiful human beings that I've ever known.
She has a nonprofit foundation called the Lion Heart Foundation
that she started I think twenty five years ago. She
(48:50):
goes into prisons throughout the country with the program called
Houses of Healing. She has several other programs through her
nonprofit that are geared toward emotional literacy for youth and
at risk youth. She is just an incredible person. She
wrote a book. She wrote a book twenty five years
ago called Forgiveness, a both choice for a peaceful Heart.
(49:14):
And I just want to read you one thing in
the last few seconds here before I'm off the air
about this book. Robin Cassargean elevates the concept of forgiveness
to a new level, like a rose giving off its fragrance.
This book radiates amidst love, compassion, and caring. Here's another one.
Robin Cassargeant's book Forgiveness can help us find our path
(49:38):
out of guilt, fault, blame, resentment, and rage. Forgiveness will
hear your life and the lives of those you touch,
and your true potential can then manifest itself. Next week,
Robin's going to be my guest. Make sure you tune
in and God bless you and have a great week.
Speaker 2 (49:54):
Thanks for listening to Right Thinking with Steve Cooper. I'll
look forward to being with you again next week and remember,
don't quit. Plan ahead, It will get better. God bless
you and have a great week.
There must be lies parted rider somewhere got to be
heard in the sky.
Speaker 2 (00:28):
Good morning, welcome to Right Thinking with Steve Copeland. I'm
your host, Steve Copeland, and thank you for tuning in.
Let's have a great day.
Speaker 1 (00:41):
Good morning everybody, welcome back. I hope that since last
Memorial Day a week ago, all of you had a
is just a wonderful week. I certainly did. I want
to say one thing when I said last week, then
I wanted to have a moment of silence, and that
silence isn't really a good thing. On the radio, A
(01:05):
lot of people real close to me kind of kind
of joked me a little bit about my moment of silence.
I actually said, let's have a couple seconds of silence,
and that's what we did. But I wasn't trying to
be cute or funny. I did. I did get silent,
and then it seemed like a lot longer. But again,
you know, Memorial Data is a is an absolutely wonderful
(01:28):
day where we honor our soldiers and the many women
that have served and fallen to give us the freedoms
that we have. And I then proceeded to read who
is your favorite American hero, and I just want to
thank all of you for the wonderful comments that I've
received over the last week, and I just say thank
(01:48):
you for that. Today I'm going to pick up on
on the theme that we have Personal Finance and Small
Business Ownership Part three, and today we're going to be
centered in on the idea that I said, if you're
going to succeed excuse me, if you're going to succeed
in owning your own small business, you better know your
(02:12):
cost and expenses and how much sales you need to
cover them and pay yourself. I'm very pleased with that
one sentence. I think it sums up a lot of
the things that I'm here trying to do. It encapsulates
that owning your own business is not just something that
(02:35):
you get up and say this is what I'm going
to do. You have to be very, very focused. You
have to know what your goals are. You have to
know many many things if you're going to succeed. And
to summarize Part one, I think the main things that
I tried to give you in the first part one
(02:55):
introduction Owning your Own Small Business, Personal Finance, Owning your
own small Business is that there is absolutely enormous risk
and that you have to think like a business owner.
On Jeff Heiser's show this morning on his mental toughness,
(03:18):
he's worked very, very freely today and related a story
of this past weekend when he had a major production
I think it was some sort of a concert and
event and there was a major sponsor that he said
had paid tens of thousands of dollars to have it
(03:41):
video so that they could use the video, and that
the equipment wasn't working properly, and that it was kind
of a mere disaster panic situation, and Jeff kind of
chronicled how he went through maintaining his composure and his
focus and with that situation. Well, what I want to
(04:05):
tell you about that, it's at the very end that
I got the mersed out Of Jeff's show, he said
that when he finished, he came home at about twelve
thirty at night. The event was over at nine, and
he was totally exhausted. He had risen to the occasion,
(04:26):
so to speak, and he came home and he just
crashed out all day Sunday. But he talked about when
he woke up, he had his grandkids at his house
and he made this comment. He said that his grandson
is seven years old and really really wanted him the
(04:52):
man's son, thinking that I want my granddaddy to do well,
succeed at what he's doing. And you know that part
of the story that Jeff told just really brought it
home to me that you've got to have your priorities
right now. What is the priority here pulling off the event,
(05:16):
honoring the contract with the sponsor to produce a video. Yeah,
that's part of it. But the real thing is it's
knowing what's important in your life. Jeff's grandson and that
Jeff wants to do well at all that he does,
(05:37):
to give it as all because his grandson cares about
him and he doesn't want to disappoint his grandson. If
you listen to the show this morning on Talk Network
Radio Success and Intentional Lifestyle Jeff's show, you'll understand what
(05:57):
I'm talking about. Well. As I go through life, and
I'm trying to run my foundation right thinking foundation with
its purpose to help make the world a better place,
to help people make their lives better, which is also
(06:17):
the same purpose of many many other nonprofit organizations and
people that are serving. I met with one of my
major donors last week to give him an update on
all the progress that Right Thinking's making, and he gave
me just some of the most beautiful counsel that anybody
(06:38):
could be blessed to receive from another person. He said, Steve,
don't worry about the business aspects of what you're doing.
That'll all fall into place. Just keep serving and if
you keep doing that, it'll keep moving forward. Just keep
doing that. And I said to him at the very end, well,
(07:02):
so I guess we just got to climb that mountain
and get to the top of it in order to
see the next mountain that's on the other side that
we couldn't see when we're at the bottom of the
first mountain. And yeah, sure we're going to have a
couple valleys that we got to go through, but just
cheap moving forward. I told you six six seven weeks
(07:26):
ago that my wife and I went to a Joyce
Meyer conference and the number one thing that I got
out of there that I just can look back and say,
this is what I really want to remember from from
what I heard at that couple of day conference. If
you don't know what to do, keep doing what you
(07:47):
know is right. Well that's the best advice I think
I can give you. So let's let's get started on
today's show. Today's show is going to be if you
are trying to start your own business, or you're already
in business and you want some partners on how to
succeed in your business. I said, you better know your
(08:07):
cost and your expenses so that you'll know how much
money you've got to got to be able to make
in sales in order to be able to pull out
money for yourself. Never lose focus on the purpose of
your business. And I've been talking about it for the
last couple of weeks. The purpose of your business is
(08:30):
to support your lifestyle, the way you want to live.
If you're going to be self employed, you always got
to remember it's a perpetual, perpetual in motion activity. You
can do great this week, next week, for the next
month or two, but remember this. If you're working for yourself,
(08:51):
you got to do great in six months, a year,
two years, three years, five years, because you are responsible.
Let me say something very quickly. I'm going to slip
this in the number one thing that I haven't said
this pointed in the two parts of this series. For
(09:12):
you to be able to succeed, I've said in the
tools that I'm giving you, you have to know how
to think like an owner. You have to be able
to think like an owner, and you have to understand
your risk, and you have to plan ahead, you have
to do a business plan, all those kinds of things.
But I want to tell you one thing that is
above all that you must believe in yourself. You must
(09:39):
believe in yourself and who you are in what you're doing.
And if you don't have that, whatever you attempt is
not going to succeed. Period. So once you start to
get more confident, truly believe in yourself, and then you
(10:02):
start to go through all the right steps to focus,
to meditate, to plan on what it is that you
want to set as your goals, and then go into
the to the actual steps to achieve them, you will succeed.
Last week I talked about the Ultimate Financial Plan Jim
(10:24):
Snowball and Tim Bowler and I and I got kind
of mixed up on the subtitle Balancing Your Money and Life,
So I wanted to clear that up. But I read
the next book in that series, The Ultimate Productivity or
just Ultimate Productivity by Jim Stowball and I want to
(10:45):
put this on your reading list. This is, without a doubt,
one of the very best books I have ever read
on how to look at your life to decide how
well to be who you want to be and how
to get there that I've ever read in my life.
(11:08):
I just a totally enjoying Jim Soball, his approach to life,
his advice that he gives, and I really want to
recommend that book to you. I'm not going to talk
anymore about it today. We'll come back to it at
another time. But Ultimate Productivity. Don't let the title for you.
(11:29):
The word productivity is not like it's just some deep
business book on how to make a manufacturing plant more
productive and get more output and cut your unit costs
and stuff like that. No, this is about looking at
yourself and knowing that of all the consultants in the world,
the very best consultant that you will ever find that
(11:50):
will understand what you have as your own goals is yourself.
You have to believe in yourself and then lay it out.
It's a beautiful book to read over the weekend. When
I started meditating on the show this week and how
(12:12):
I was to present the topic knowing your cost the
main part of today's show. I actually googled biblical references
to knowing your cost and a lot of good stuff
came up, that's for sure. But I want to share
this with you because it could not be more precise
(12:33):
for today's topic. This is the Book of Luke, chapter fourteen,
verse twenty eight through thirty. But don't begin until you
count the cost. For who would begin construction of a
building without first getting estimates and then checking to see
(12:57):
if he has enough money to pay the bills? Otherwise
he might complete only the foundation before running out of funds.
And then how everyone would last see that fellow there?
They would mock he started that building and ran out
(13:19):
of money before it was finished. When I came across that,
I said, Wow, how could anything be more exact in
the Bible to being careful when you're doing a project
that you better know how much it's going to cost. Well,
(13:40):
as straightforward as that is, I want to tell you something,
and this is the beautiful part about what I'm saying today,
that message about knowing your costs. In other versions they
call it to build a tower a tower, not just
a building. It's really not about a construction project. Or
(14:01):
building a building. But on the surface level, there couldn't
be any more exact to what I'm trying to tell you.
If you're gonna be successful in business, you better understand
your cost And last week I went deep into how
much working capital you need you would need. I told
you how to calculate your working capital needs to anticipate
(14:21):
when you'd hit your break even point and how much
money you would need ahead of time so that you
would be able to continue with your project even though
you hadn't hit the sales level enough to cover your costs. Well,
that's exactly what this is. I mean, it says right there,
Otherwise he might complete only the foundation before running out
(14:44):
of funds. Well, for those of you that are listening
to everything that I've been trying to say for the
last sixteen weeks, success is not just about money, about persevering,
not quitting, not giving up, surrounding yourself with the right
(15:05):
people making the right decisions. And what this is talking
about is the building the tower. It's building your own character.
It's building your own character of who you are, what
you stand for, what you want to set the example of.
(15:26):
And basically that's the beautiful thing about the Bible. It's
at many, many levels, and that's why we read it
our whole life over and over again. Some of the
things that we read last year, you read them again
today and it'll get a whole deeper understanding because hopefully
you've matured and you're more ready to receive the message
(15:46):
that awaits you in the word there. So what I'm
trying to tell you is Luke fourteen twenty eight to thirty.
It's got the exact at the surface level. You better
understand what your costs are going to be before you
start the project. But if you go a lot deeper,
it's really your project building your life and what their
true cost is about filing Christ. So it's all right
(16:10):
there for you. And I can tell you this, if
you listen to what I just said, I believe that
the chances for you to succeed in life are going
to be absolutely outstanding. So with that said, remember this,
if you go into business for yourself, it's going to
(16:31):
be hard, difficult, but the rewards can be phenomenal. The
freedom that you have when you're your own boss is
one of the most wonderful, precious freedoms that we have
here in America. But you have to be prepared, you
have to know the risk, you have to do your homework.
(16:53):
So with that said, let's take up a little story
that I wrote. It's on page forty of Personal Finance
Small Business Ownership. I've told you all along that this
the series that I'm doing Personal Finance and Small Business Ownership,
(17:14):
is coming right out of a seminar that's in a
workbook that's on the website right dot org under documents
by the same name Personal Finance and Small Business Ownership.
So here's a little story that I want to give
you to illustrate the following point. Many many people are
(17:34):
in business and they do not have a clue of
what their costs are. And so just a real sip,
a little praise the hurry owner I go, the behinder
I get. So keep that thought in mind as I
(17:55):
read you this. This is called it's on page forty
example of not knowing your cost There's this little second
grade girl who wants a fifty dollars Barbie dollar. Say
she ask her parents, Mommy, Daddy, will you buy me
(18:16):
that Barbie doll They can't afford to buy the fifty
dollars doll and it's not Christmas or her birthday. They
don't have any extra money. They just can't do it.
Time's are take there's tt There is a PTA bake
sale coming up at her school, so they say to her,
(18:38):
why don't we sell cakes at the PTA bake sale
and if we make fifty dollars, we will buy you
the Barbie doll. So they get a table in the
hallway at the PTA bake Sale and sell cakes. Their
cost for each cake is six dollars. They sell each
(18:59):
cake for ten dollars, so they're going to make four
dollars each time they sell a cake. They need to
sell twelve and a half cakes to make the fifty
dollars that they need, but since they aren't selling half cakes,
they need to sell thirteen cakes to make enough money
(19:22):
to buy the Barbie doll. As soon as the little
girl sells five cakes and has five ten dollar bills
in her hand, she starts jumping up and down saying, oh, goody,
goody money and Daddy, we can buy the Barbie doll. Now.
She doesn't have a clue about the cost. All she
(19:47):
knows is that she has the fifty dollars that they need.
There are many, many businesses that operate just like that
little girl. They don't have a clue about their costs.
All they think about are their sales. Okay, so that's
(20:10):
the fifty dollars Barbie Doll story. It's on page forty
on personal Finance Small business Ownership under documents on right
think dot org, r I g h G g h
I n K dot org. Let's talk about the fifty
dollars Barbie Doll story for a minute. There are many,
(20:31):
many businesses that are small businesses, and they're very, very dedicated.
They work hard. They get up, they get up in
the morning, could be husband and wife or whatever, and
they go to work and they work really, really hard.
(20:52):
One of the things about being in small business that
you have to understand is you will not be able
to generally afford or to pay for other people to
do a whole lot of the functions that are necessary
for you to do in your business. Just remember this.
You got to have bookkeeping, you got to keep track
(21:14):
of things. You're gonna have to do sales tax reports.
You're going to have to do income taxes. You're going
to have to do payroll tax reports. You're gonna have
a lot of administrative functions that require information that is
going to be gotten from your bookkeeping. Other than that,
you need it to be able to monitor your activities
(21:35):
so you can see how you're doing and make adjustments
as you go further. Well, when you're in business for yourself,
you're going to be wearing a lot of hats. You
are going to be the chief cook and bottle washer
of your business. Later on, when you grow and get
more successful and stabilizes and you start to become profitable
(21:57):
and very successful, then you hire other people and then
you do other things that can bring more business to
the company and grow it. But in the beginning, you're
not going to have a lot of money to pay
other people to do things that need to be done.
So this morning Old Jeff Show to come back to
that for a second. Boy Jeff talked about last week.
(22:19):
He had a hard week. He worked from seven in
the morning till seven point thirty at night just about
every single day, and when he had a technical problem
he had to get in there and take care of
how to fix it. Well, just remember this. If you're
not the kind of person that is prepared to do
whatever it takes to clean the toilets, to mop the
(22:43):
floors to put out the trash. If you're not that
kind of person, do not go into business for yourself,
because there's not going to be anybody else there ultimately
the end of the day. And if you're not running
your business and manage it properly and your employees get
disgrunted with you and they leave you. If you can't
(23:04):
meet payroll and they leave you, you're gonna be stuck holding
the bag, so to be. To speak, you're gonna be responsible.
So one of the very best ways to become successful
in business is to fully understand what your goals are
other than once it gets into operation. The big goal
(23:26):
is to support your lifestyle. I've covered that pretty completely
the last couple of weeks, but now let's talk about
how you actually are going to manage your business to
achieve that goal. And in the book that I that
I have, there's gonna be a page in there. I
don't know the page number right now, but it shows
you the basic financial statement of a business. And to
(23:49):
simplify it, you have sales at the top. So you're
gonna you're gonna make You're gonna sell something, a service
or product, whatever, You're gonna sell something, and there's gonna
be a direct cost associated with whatever it is you sell.
The costs to produce raw to turn raw materials into
(24:13):
whatever your product is, So there's a cost, and there
may be labor that has to be put in. So
there's raw materials and labor, and then there's incidentals. And
if you're doing something that requires tools to make, you're
gonna have to replace the drill bits every now and then,
and you're gonna have to buy a bunch of nails,
and you got all sorts of little costs that you're
(24:33):
gonna have to keep track of. Okay, after you get
these costs that we're gonna call your direct costs, you
get a subtotal, and that number in general accounting is
called your gross profit. So above the gross profit is
your sales less whatever it costs you to directly make
(24:56):
or be able to produce your product, that's your gross product.
And then after your dressed product profit, rather, you're gonna
have all of your expenses that are you're what they
call variable in some classrooms, that are your rent teletone utilities.
These are your overheads, and these are going to be
(25:18):
there whether you sell product or not. And then somewhere
in there, you're gonna have to take out payroll for
whoever it is that you're you're hiring to help you
do this. Some of the payroll may be a direct
cost because they're on the line making the products, or
some of it they may be administrative costs. But either way,
(25:40):
you're gonna have payroll or labor expense. So you finally
get it down to a subtotal, and somewhere in there
you want to pay yourself. If you don't want to
pay yourself, which there are some situations where you don't
have to pay yourself. There's a lot of very successful
(26:03):
people who start a small business. It's more of a
hobby that doesn't matter if it really makes money or not.
It keeps everybody in the family happy and they don't
really need the money. Well, if you're fortunate enough to
be in a situation where you can run your own
small business without having to be concerned whether it's profitable
(26:27):
or not, and my definition of profit includes paying yourself
your paycheck money that you need to take out. Hey,
if you're fortunate enough to not have to take any
money out, and you've got extra capital in reserve, that
if your business is actually losing money that you can
afford to keep it going by putting in more of
(26:49):
your own money, then I'm glad for you. That's a
very good situation. And in some cases it's just really nice.
It might be a company that that doesn't care about
making money, but it does a lot of things for charity.
It gives a lot of donations to food kitchens or whatever.
(27:09):
So hey, if that's who you are, then keep doing
what you're doing because you're doing your part to help
make the world a better place, and I compliment you
for doing that. But if you're one of the many,
many people that business is a little more critical that
you pay yourself, then let's talk about what's involved in
paying yourself. I'm going to talk at a very simplified
(27:33):
level for a second, and then I'm going to delve
into some of the details. Basically, you're gonna have to
sell enough product get enough money coming in to cover
all of the direct costs and all of your expenses
to be able to make enough money to pay everybody
(27:55):
that needs to get paid, including yourself. So you have
to be profitable to sustain. If you don't make enough
to do that, it's just a matter of time before
your personal resources are gonna be not enough to keep
the business going, your credit's not gonna be there to
keep it going, and you're gonna have to say I tried,
(28:17):
but I can't keep it going. I'm gonna close my
business down. Well, I'm a problem solver. You know, this
is America. You can do anything you set your mind
to if you surround yourself with the right people and
have the right values and go about it the right way,
(28:37):
get all the right licenses, market yourself correctly. There's lots
of things. Hey, being in business for yourself has hundreds
and hundreds of things that you're gonna need to do
if you're gonna be successful. But right now I'm talking
about cost again. I told you the fifty dollars Barbide story.
So if you manage your business and you have in
(29:00):
your mind the gross profit, which is the sales left
the direct costs. If you know that number and you
achieve that number by selling enough sales, make enough sales
cover all your costs, hit your gross profit, your targeted
(29:22):
gross profit, and you've calculated what that number needs to
be ahead of time to do two things. And this
is the Steve Copeland method of managing. And I've been
doing it for forty five years. I've passed it on
to quite a few people, had some wonderful successes. It
(29:45):
works for me. And I'm going to give it to
you now. And it's not buy my book. My book's
right there on the internet for fruity. I hope you
enjoy it. I'm giving it to you from my heart
because i want you to have a better life. Here's
what it is. Instead of starting at the top number,
like the little girl that needed the Barbie doll and
she got her fifty dollars, Instead of starting at the
(30:08):
top number, start at the bottom number. This is what
my method's all about. Know how much you need. Take
that number. Say you need fifty thousand dollars to come
out of your business, which might have been called profit
in order to get a subturtle. Pay yourself a fifty.
(30:30):
And maybe you don't have any profit, so to speak,
but you paid yourself fifty so that you now have
enough money to live the way you want to live.
You've paid all your bills in your business. So here's
what you do. Instead of starting at the top with
your sales number, let's start at the bottom with how
much you need to pull out for yourself, and for
(30:53):
this example, I'm gonna give you fifty thousand dollars is
what you need now in your business. Let's say that
you have another fifty thousand dollars of expenses called overheads.
The G and A is another word that in accounting
(31:16):
they use general and administrative. The variable expenses the ones
that are not the direct expenses, rent, telephone, utilities, contracts,
car payments, things of that nature, loan payments, not contracts.
Is what I meant to say. If you take that
number of your overhead and add your overhead to what
(31:41):
you need for yourself, and I'm giving you, in this example,
fifty thousand for yourself and fifty thousand to pay all
your bills each month they harbor average little over four
thousand a month, twelve thousand, fifty thousand a year for
twelve months. You need a hard a thousand dollars. Now,
(32:02):
if you're driving in your car and you're traveling, which
I know a lot of people that listen to the
show listen to me while they're traveling. Don't close your eyes,
but just picture this. If you look at if you
look at sales less costs equals gross profit less overhead
equals the normal net profit. And you flip it upside
(32:27):
down and say, if my net profit is going to
be fifty thousand dollars ultimately that I'm going to pay
to myself or you pay it before the profits are
your profit zero's out because you've got your fifty. It's
the same thing, and you add that to your overhead
to get to one hundred. Then that gross profit number
(32:48):
that I call the target goal, you can get to
it from the bottom and say I need to have
a gross profit of one hundred thousand dollars in order
pay myself fifty and pay all my overheads. Period. Now
I'm gonna stop for just a second. It's taken me
three weeks of teaching this seminar the series to get
(33:11):
to that point. That is the secret to everything I'm
trying to pass on to you. Instead of being like
a general store in eighteen seventy two, and I'm gonna
call it Tulsa, Oklahoma in the West. That's where Jim
Stobar lives, and I'm hoping to go there and visit
him in the next couple of weeks. The days of
(33:34):
the Wild West and having a general dry goods store
where you open up your doors, you hang your single
and people just come in and buy from you constantly.
It's not that easy anymore because you're not the only
store in town that sells those dry goods anymore. The
Internet and delivery, with free shipping and Amazon and FedEx
(33:59):
and everything else, it makes it harder and harder and
harder if you sell a product that anybody else is
selling to capture their business. In the next couple of weeks,
we'll do part four and we'll talk about marketing and
sales extensively. But right now, if you open up your store,
you hand your shingles what they used to call it,
(34:21):
open up your doors, and you wait for business, and
all day long you were just slamming. You were hitting
that cash regis that cash register is singing. And you
come home at night and your kids and your wife
they say, had we do today? And you say, I
never had a break, I never got to take lunch.
(34:43):
We did incredible today. If that's the way you're operating
your business, that is great. That's how you want to be.
You want to be having that cash register singing and
play music. But let me tell you something. If you're
doing that and you don't control your cost or know
(35:03):
what your costs are, you could be hitting your sales
goal and go out of business. I got to take
a breather of this one for a second. I want
to let it sink in. What I just told you
is you could be in business and be just jamming
slamming your sales. If your goal is to do two
(35:28):
hundred thousand dollars in sales a year and you're doing
twenty five thousand this month, you're going to be well
over your sales goal. You're going to be way over
your sales goal. But if your cost of what it's
costing you to make those sales is not on your budget,
(35:52):
it's way higher than what it should be. You might
be rejoicing because you're you're making so many sales, But
at the end of the day, when you catch up
your books and your talent, it looks at it. Can
you realize ask yourself the question, why didn't we make money?
(36:18):
What happened? I thought we were doing great? That, my friends,
is the biggest downfall in small business is to think
that you're doing well when you're really losing money. I'm
going to give you a real simple example that I'm
(36:39):
going to give you a very detailed example of what
I'm trying to say. If you are selling something and
your cost or higher than what they should be, Hey,
in some cases, you might not even know what your
costs are. You might be like the little girl with
(37:00):
a barbie doll. She thought that that sales number when
she sold five dollars for ten dollars each and made
fifty dollars, she thought she was ready to go in
the store and buy that doll. Well, the profit on
that particular barbie doll was only the gross profit, not
counting anything else. In the simple example, it cost six
(37:21):
dollars for every cake, so she only made four hours.
Her parents had to shell out six bucks. They might
have gone to Costco. They might have gone to a bakery.
They might have just bought the cakes and refilled them.
Or the mother might have made all the ingredients and
by the time she put all the stuff into it,
she knew that it cost six dollars a cake. They
(37:44):
only made four dollars a cake, but the little girl
thought that she made ten dollars a cake. So, if
you don't blind into your business and you're selling things,
and you don't know what it cost you. It's only
a matter of time before it's going to catch up
with you. Now, if you go into your business, though,
and you know that you need a gross profit of
(38:06):
target goal of X dollars in the example that I'm
building today, one hundred thousand dollars, so you can make
the fifty to support your lifestyle and the fifty thousand
to cover all your overheads, then you can calculate. You
can calculate how much in sales you need to do.
(38:29):
If your cost of those sales is a certain percentage
of every dollar you sell, you know it's going to
cost you a certain amount of cost. In the Barbie
dollar example, if you sell the cake for ten dollars
and your cost is six dollars, then you have a
(38:53):
cost of sixty percent. So let's just make this easy.
Let's say that the example of your own small business,
and you need one hundred thousand dollars gross profit. Let's
just say that you know in your business, because of
statistics and research and other things that you've been able
(39:13):
to get information and good BALLI data. You've gone in
the Small Business Development Center and their counselors have helped
you figure out what your costs should be, what the
norms are in your industry, in your geographical area, and
you learn that your cost is fifty percent of sales.
What that means is is this, if you sell a
(39:37):
dollar a product for a dollar, that fifty cent out
of every dollar, fifty percent of that dollar is going
to be part of your direct costs that need to
be subtracted from your sales to get to your gross profit.
It's a little technical, but I'm trying to keep it
to where we can follow it. So if you need
(40:00):
one hundred thousand dollars to cover your overhead and to
guarantee yourself that you're going to be able to pay
your salary, your own money that you need, and I
tell you that in your business, your direct costs are
going to be fifty percent. But if you know how
(40:22):
to do the algebra, how to do the math, if
you do two hundred thousand dollars in sales at fifty
percent direct costs, your direct cost fifty percent of two
hundred thousand is one hundred thousand, and that's the number
(40:43):
that you need if you hit your goal, your target goal,
your gross profit of one hundred thousand dollars you can
pay the fifty thousand of all your overheads and you
can take out the fifty and you win. You succeed.
Your budget comes out exactly the way that it needed
(41:04):
to be. Now, if you are selling your product and
you need one hundred thousand dollars, and you know that
you have to be within fifty percent of your cost
in order to sell at two hundred thousand, So now
you know your sales goal that I backed you into.
(41:25):
So remember what I said instead of looking at it
from the top saying, if we do this much sales,
and this is our cost, this is our gross profit,
we pay our overheads, we take what's left. Let's get
more aggressive than that. Let's not take what's left and
not have enough to pay our own bills. Let's say
(41:45):
I need to have this much in a gross profit
in order to pay all my overheads, which I know
exactly how much they are, and then I will take
out exactly how much I know I need that I
budget it for myself, and my cost needs to be
within in this percentage. So therefore my sales have to
be two hundred thousand. You are guaranteed to succeed if
(42:09):
you do the following things. If you keep your overheads
on budget, do not go over your budget on your overheads,
pay attention to your budget. Don't spend anything you don't
need it's not in your budget. If you keep your
cost percentage for everything you produce in line, then you
(42:32):
will be able to know exactly the amount of sales
that you need. And if you hit your sales goal,
you are guaranteed success. It's just straight Matt. If you
hit your sales, stay within the costs that you need
it two percentage, stay within the overhead budget, you'll have
the money you need to pay yourself and you will
(42:53):
be successful in your business. But what if you're what
if you're direct costs go over budget? Well, if you
need a fifty percent direct costs and the example that
I gave you to cover your one hundred thousand of
overhead plus your own money, and instead of doing fifty percent,
(43:17):
your costs are really sixty percent. Whatever it is you're doing,
you're not doing right, You're not buying them efficiently, you
have too much waste. There's pil fridge, there's different things.
If you come in at sixty percent of two hundred thousand,
then your costs under this example are going to be
one hundred and twenty thousand, and your gross profit is
(43:39):
only going to be eighty. You're gonna be twenty thousand short,
and your personal draw of the fifty that you need
to pay all your own bills is only going to
be thirty. That's the math. That's the math. So what's
the best way to succeed is to is to have
a budget, have a plan, stay on it, and make
(44:00):
sure that you manage make sure that you manage your
business to stay on your budget. Now we've taken your
budget and we've broken it into a couple of categories.
We've broken into one your overhead budget, two your direct
cost percentage which becomes a budget number, and three your
sales goals in your budget. So now we can sort
(44:22):
of divide and conquer. It's like a military strategy. So
now we're gonna gonna break it down and get really detailed.
Remember this, and we're gonna get deep into this next time.
If you do not make the right sales number, you
may need to increase your price if you can be careful,
(44:43):
or you may need to market and advertise more. But
remember this, if you spend money in marketing, advertising, dollars
and it doesn't increase your sales, then your overheads are
higher and you're gonna lose even more money. So never
forget that marketing is a form of investment and it
has to produce advertising and marketing dollars have to get
(45:06):
a return. Let me just tell you a really quick
story here, and then I'll tell you that next week's show.
I had a client for years, one of my very
most successful clients I've ever had. And this client had
a wonderful, wonderful company until I talked to the client
and get complete approval to discuss things. Names and who
(45:28):
they are. I'm not going to share that, but this
particular client is an absolutely phenomenal business started off with
next to nothing, operated for twenty five or so years,
maybe longer. The owner became the Entrepreneur of the Year
in the state of Virginia. I was honored to be
at her awards ceremony where she got recognized in front
of a thousand people by the Governor of Virginia as
(45:50):
being the business person of the Year. And she told
her story for an hour and I was part of
her story. And it's one of the greatest honors I've
ever had me publicly as one of the three people
that helped her succeed her father that had had passed
away and left her some insurance money. A close friend
of her father's that that was her mentor of the
(46:12):
first early years when she first went into business. But
then she thanked me for teaching her how to make money,
and I will always be indebted to her for letting
me be with her. Well, she had a great, great business,
and she sold one hundred and twenty five products, and
of those one hundred and twenty five products, we found
(46:33):
out when I did a detailed cost study that twenty
five percent of those products were not making money. She
was selling something for seven dollars that was costing her
eight dollars to make. Basically, I'm going to hold off
on this story because this is a very very detailed
business story. But what I want to tell you is
we spent two months figuring out exactly what her costs
(46:54):
to produce every one of those one hundred and twenty
some products that were on her shue with in her
catal and we found out that many of them were
losing money. And uh so we had a decision to
make can you raise the price can we manufacture it
and make it for us and without changing the quality,
or do we need to just discontinue it. Well, we
(47:17):
went through this whole process, and I'm going to give
you more detail on it later, but we figured it out.
We dropped a lot of the products, and UH chained
up being incredibly successful, expanded and went national sober businesses
past year for a lot of money. And that's just
a quick thumbnail of that. I want to stop for
today on knowing your cost and understanding what your sales
(47:41):
need to be. And I encourage you to go to
right think dot org to the website and study this.
It's right there for you and UH send me, send
me a correspondence, join the website, register and then I'll
get back to you. It's all right there. And I
hope that today has helped you. I just really hope
(48:04):
that you're following what I'm saying. I've been trying to
talk to you at different levels, just like the Bible,
the Bible story that I gave you today, the first
that I gave you, it's at different levels. Everything's at
different levels. Well, one of the levels that I want
to talk to you about is going to be our
show next week. I am incredibly honored to next week
(48:30):
to be able to have as my guest Robin Consertion.
I've talked about Robin a lot on the show. She's
one of the most beautiful human beings that I've ever known.
She has a nonprofit foundation called the Lion Heart Foundation
that she started I think twenty five years ago. She
(48:50):
goes into prisons throughout the country with the program called
Houses of Healing. She has several other programs through her
nonprofit that are geared toward emotional literacy for youth and
at risk youth. She is just an incredible person. She
wrote a book. She wrote a book twenty five years
ago called Forgiveness, a both choice for a peaceful Heart.
(49:14):
And I just want to read you one thing in
the last few seconds here before I'm off the air
about this book. Robin Cassargean elevates the concept of forgiveness
to a new level, like a rose giving off its fragrance.
This book radiates amidst love, compassion, and caring. Here's another one.
Robin Cassargeant's book Forgiveness can help us find our path
(49:38):
out of guilt, fault, blame, resentment, and rage. Forgiveness will
hear your life and the lives of those you touch,
and your true potential can then manifest itself. Next week,
Robin's going to be my guest. Make sure you tune
in and God bless you and have a great week.
Speaker 2 (49:54):
Thanks for listening to Right Thinking with Steve Cooper. I'll
look forward to being with you again next week and remember,
don't quit. Plan ahead, It will get better. God bless
you and have a great week.
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