Types of debt and why they matter

Types of DebtIf you’re starting out with your financial education then a good starting point would be to understand the different types of debt and why they matter.

Personally I categorize debt as either good debt or bad debt.

Understanding the difference between the two is essential if you don’t want to remain poor all your life.

Do you carry some debt dear reader? If you do, you’re not alone.

Now you may think that debt is just part of life, and you may even believe that debt can’t be avoided?

Debt is certainly very hard to avoid, that much is true.

However don’t forget that personal debt is a burden on us because it has to be serviced and eventually repaid.

Yes, it may be a burden you can’t avoid but it’s no less stressful potentially for that technicality.

For emphasis let me repeat, in my opinion, there’s good debt and then there’s bad debt.

The obvious question is when is a debt considered bad debt? To put it another way, when is debt a bad idea?

Let’s consider some examples of debt.

TYpes of debt1. Secured Debt:

Buying a house is an example of a secured debt.

When buying a house, most people need a mortgage, which is of course a debt.

However, as long as you don’t overstretch yourself, mortgage debt is usually manageable for most people. And it’s rare that a lender will allow you to overstretch yourself these days.

With a mortgage the debt is secured against your property, so the risk for the lender is small.

If you fail to repay the mortgage loan, a lender simply repossesses the property and sells it to recover their money.

So because the associated risk to the lender is low, interest rates on secured debt are low too.

Coupled with long repayment periods, typically around 25 years, the monthly repayments on a mortgage are not significantly different from what you might pay if you were renting a property.

However by borrowing to purchase a property, that’s a good debt because eventually you’ll repay the debt and own the property, assuming you repay in full.

It’s a good debt because it results in the long-term acquisition of a valuable asset.

You need a roof over your head, of course, so buying with a mortgage makes good financial sense because at least you’ll own the property in the future.

And with luck, you’ll enjoy some capital appreciation on the value of the property too. That’s not guaranteed of course but historically that’s been the trend for those holding property assets for an extended period of time, certainly in the United Kingdom.

In summary, secured debt bears the lowest interest rates and leads to the acquisition of a valuable asset. So in my opinion that makes it a good debt.

2. Unsecured debt:

So when is debt a bad idea? The simple answer is when it’s an unsecured debt.

And what’s unsecured debt?

It’s a debt against which nothing valuable has been put up as security.

If the borrower fails to repay, the lender has nothing it can repossess to sell on to recover the balance outstanding. So for the lender that represents increased risk.

And because unsecured debt has no form of security then to compensate, the interest rate charged by the lender will be high, and sometimes very high.

The interest rate charged reflects the risk to the lender. The higher the risk the higher the interest rate applied.

Lenders recognize that there’s a risk that a proportion of their clients will fail to repay unsecured loans, so those who do make the repayment in full, have also paid a premium in order to protect the lender from any losses they might have incurred due to non-payment by others.

Now of course there will be occasions when unsecured debt is unavoidable.

For instance, young people just starting out might need some basic items of furniture for their homes. A bed would be a good example. You must have one and if you can’t afford it, then you might need to use a hire purchase arrangement. Handled with care then this shouldn’t be a huge problem.

So when is unsecured debt a really bad idea?

Put simply, when you start buying with unsecured credit that which you could live without. That gadget you couldn’t resist or those shoes that looked really nice in the store. Non-essentials you could have lived without until you had the money to pay for them.

You know the experience, I’m sure. You see something you can’t resist, out pops your flexible friend, and an impulse purchase is made before you’ve thought about whether it was a good idea or not.

The reckless use of credit cards, store cards, and payday loans can be a disaster because this type of debt is not secured against anything, so naturally the associated interest rates applied are very high.

Credit card or store card debt can bear an interest rate of up to around 30% or more.

In the UK, payday lenders have been known to charge interest rates equivalent to 3000%, 4000%, or even 5000%.

I find it hard to believe people fall for these loans but they do. I guess if your desperate sometimes then perhaps it’s a case of ‘needs must’.

3. The magic of compounding:

Why does this matter? The simple answer is the magic of compound interest.

The compounding effect of high rates of interest will quickly turn small sums borrowed into enormous sums owed.

For instance, if you borrow $1,000 at 3% interest, after five years you’ll owe $1,159, assuming nothing was repaid.

However if you borrow $1,000 at 35% interest then after five years you’ll owe $4,484, again that’s assuming nothing was repaid.

The difference is a massive $3,325. And more importantly, the value of your debt has also quadrupled.

So when interest rates are high, even if you make minimum payments, your debt can grow rapidly if you’re not careful.

And that’s when you can become enslaved by your debts.

And that’s why it matters. Ultimately this burden can become very stressful.

4. Manage your money or your money will manage you:

Far too many people borrow money in the form of unsecured debt to purchase discretionary items. That’s items they could live without, if push came to shove.

Wasting money is this way is a really bad move. Not just bad it’s seriously stupid.

I recommend that you follow this simple rule: If you can live without it, never use debt to buy it.

Yes of course it’s nice to have the latest smartphone or the latest television or whatever but is it really worth the pressure of unnecessary debt?

When high rates of interest start pushing up the sum outstanding significantly, you have to ask yourself, will the burden of this unnecessary debt still seem worth it? I doubt it.

Wouldn’t it be better to wait until you’ve saved up the money to make the purchase instead?

Wouldn’t it also be cheaper in the long-term to save up and buy the product when you actually have the money? You’ll appreciate the item so much more too.

5. Debt is a form of slavery:

Being indebted is just a form of slavery. It’s as simple as that really. And, once again, that’s why it matters.

For as long as you owe money you can never be truly free.

If you’re debt-free then you’re stress-free too. Wouldn’t you prefer to be debt-free and stress-free?

Good debt will help you but bad debt will make your life a misery.

6. Conclusion:

Put simply, there are two types of debt, good and bad. Debt is either secured or unsecured. Interest rates on the former will be relatively low, whereas interest rates on the latter can be very high.

Interest rates matter because of the compounding effect.

Unsecured debt can be the road to the poor house, particularly if you use it to buy stuff you could live without with credit that bears interest rates that are very high.

The type of debt that’s bad will enslave you and it’ll become increasingly stressful.

If you only take one message away from this article then that’s it.

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15 Things Poor People Do That The Rich Don’t

Can we learn from the habits of poor people when it comes to money?

Yes, when considered against what the rich would not do.

It’s a fact that the choices people make will affect the life they experience.

Quite simply our lives are dictated by the choices we make whether we like it or not.

The video in this post makes some interesting observations about the choices made by people destined to remain poor relative to those who enjoy greater prosperity and the finer things in life.

Now you might feel that some of the observations made here are a little harsh on the less fortunate but actually in my experience the points being made are ‘bang on the money‘, if you’ll excuse the fashionable terminology dear reader.

I think you’d be wise to listen carefully and think about the underlying messages in the video and be honest with yourself.

Just think about it for a minute and I’m sure you’ll agree.

We enhance our value by increasing our knowledge and skills, rather than making sure we know who the latest fashionable celebrity is dating. Why would that matter to anyone?

Listen, learn, and make changes as necessary.

You don’t have to be poor but, if you are right now, then you need to start making some changes.

Nothing will change unless you do first.

Things Poor People Do That The Rich Don’t:

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The 4 steps to financial freedom

Steps to Financial FreedomFinancial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this. ~Dave Ramsey

Many people are searching for the steps to financial freedom. Search the internet and there will be references to seven, eight, nine, and even ten steps but I think only four steps really matter.

However before I discuss those steps, let us first think about the biggest cause of people remaining poor, namely the burden of debt.

Statistics suggest that most people these days are heavily in debt. And debt is a burden that enslaves us. Knowing we have debts can be stressful.

What is the underlying cause of such debt? That’s simple. Mostly it’s the overuse of credit cards with little or no thought to how this will affect our financial well-being.

Unsecured debt built up through the excessive use of credit cards is very expensive.

That means even a small sum outstanding on a credit card can quickly become a large debt due to the effect of compound interest if you only make the minimum payment each month.

Are you affected by debt dear reader? Are your finances out of control? Would you like to achieve financial freedom?

Steps to Financial Freedom:

Often I hear people say things like, if only I could increase my income I could pay off my debts.

In fact those same people, if they did increase their income, would probably just spend more. And financial freedom would still remain a distant dream.

If financial freedom is your aim then it’s essential that you take control of your finances. And the steps to financial freedom are as follows:-

1. Spend less than you earn:

It all starts with spending less than you earn. If you spend less than you earn you can work on becoming debt free and then start to build capital.

2. Pay yourself first:

You must always pay yourself first. What does that mean? It means that as soon as you get paid each month you take a minimum of 10% of what you earn and put it away somewhere safe immediately.

Never, ever wait until the end of the month to see what you’ve got left.

If you do that you’ll never save anything.

If you take 10% upfront it will just be another debit on your income like taxes and pension contributions. You’ll quickly get used to having only the remaining 90% to live on.

And what do you do with the 10% or whatever you’ve put away?

3. Eliminate credit card debt:

Initially if you have a credit card debt burden then it makes sense to use that money to deal with paying off your debt first because the interest you’ll pay on the debt is always greater than any interest you’ll get on savings.

To pay off your credit card debt it’s essential that you find a way to eliminate the interest element each month so that any payments you then make go against the outstanding balance.

And how is that done?

Well, when you take out a new credit card account it often comes with a period of zero interest, usually six months. These accounts also usually allow you to transfer in an outstanding debt from another credit card account.

So by moving from one card provider to another and transferring the debt across to the new account, you then have a period of six months to make payments against the outstanding balance without accumulating interest on the old debt.

Never, ever use this card to increase your debt. Use it only for reducing your debt.

At the end of the period of zero interest on your new card repeat the process if necessary. Once again, you move to another card account offering you a zero-interest period. By focusing only on the outstanding balance it will be paid off quicker.

Eliminating the burden of debt is the first step on the road to financial freedom.

Freedom from debt will give you peace of mind. And peace of mind is a good reason for spending less than you earn.

Once the debt is cleared, what next with the money you’ve paid yourself first.

4. Build capital:

Initially put your money into a savings account. Then, as that builds into a larger sum, you can start thinking about other forms of investment like stocks, bonds, and property.

Once you develop the habit of putting some of your money away each month it’s amazing how quickly it accumulates into a decent capital sum and you’ll be on the road to achieving financial freedom.

Conclusion:

Learn to live within your means.

If you live modestly and spend your money wisely, you can ensure that you have enough money when you really need it.

You can also build that nest egg for your retirement and give a little back to those less fortunate than yourself. And you’ll feel so much better about yourself too.

Conversely, gathering too much clutter through excessive spending on things you don’t really need can become stressful, as well as wasteful. The choice is yours.

Financial freedom is achievable and it will give you peace of mind.

You will sleep better knowing you’re debt-free.

The steps to financial freedom are really quite simple. Spend less than you earn; pay yourself first; eliminate expensive credit card debt; and start building capital.

Do this and one day your older self will be grateful you made the effort I can assure you.

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Creating a life plan: 17 ways the rich and poor think differently

Why is it that some people are wealthy and others not?

You might argue that the rich inherit money and therefore they’re just lucky. That may be true in some cases, perhaps.

Having wealthy parents certainly helps no doubt but there are plenty of examples of self-made millionaires and billionaires. And there are plenty of examples of people who lost all their wealth and then just created another fortune.

There are also plenty of examples of poor people who’ve enjoyed good fortune on a lottery only to squander their millions within a few short years.

This would suggest that the rich and poor have a different philosophy with respect to creating a life plan and money as a resource.

The video embedded here explores 17 ways in which rich people and poor people think differently. The video is interesting and informative and well-worth a few minutes of your time.

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How to turn your yearly income into your monthly income

How to turn your yearly income into your monthly incomeAre you one of those people who feel you should be earning more than you do?

Would you like to know how to turn your yearly income into your monthly income?

To have enough money to enjoy the lifestyle you’d love?

You’d like a greater income but you don’t know how, right?

Perhaps you feel that big money never flows to people like you?

A natural assumption perhaps, but it’s wrong. With the right approach you too can have a lot more money than you have right now. Yes, you can become truly wealthy.

The question is where do you begin?

Well you can start by understanding the Law of Compensation. In the video included here the American, self-help guru Bob Proctor explains that income is earned according to the Law of Compensation.

The Law of Compensation:

Bob explains that the Law of Compensation states that the amount of money you earn will always be in exact ratio to the following three points, namely:-

  1. The NEED for what you do.
  2. Your ABILITY to do it.
  3. The DIFFICULTY there would be in REPLACING YOU.

Now you have no control over points 1 and 3, so you must concentrate on point number 2. You must be constantly honing your skills and become a master of whatever you do.

That said, becoming a master of what you do is only part of the solution.

To earn more you must decide on your strategy for earning money. In the video Bob Proctor explains that there are in fact only three strategies for earning money.

The Strategies for Earning Money:

So what are the three income earning strategies? Bob Proctor describes these are M1; M2; and M3. In more detail that means:-

M1: Trading your time for money:

Essentially this is paid employment and it is the way that 96% of people earn an income.

The problem is that, unless you’re a Wall Street banker, you’re unlikely to get rich this way. In fact it probably explains why you’re not rich right now.

M2: Invest Money to Earn Money:

Assuming you’re working for the man as a salaried employee, you can start saving, and gradually as your savings grow you can invest your money in stocks, bonds and property and over time your investments will start generating an income of their own.

That’s great but you need to know what you’re doing and, if you have nothing now, it will take some time before you can start generating anything approaching a useful extra income.

Of course should you have a large sum of money right now then this might be a solution but for most people it’s not really, which is why only around 3% of people make an income this way.

M3: Multiply your time with multiple sources of income:

How to turn your yearly income into your monthly incomeEstablishing multiple income streams is where you can start making serious money.

Even fewer people make an income this way, around 1%, but that has more to do with the fact that most people fail to recognize it’s potential.

Now let me make one thing clear, having multiple income streams does not mean working multiple jobs.

It means having income streams that will earn money for you even whilst you’re sleeping.

M3 is the income strategy that will help you earn far more than you earn now. Certainly it will if you do it right.

Bob Proctor offers the example of Network Marketing (also known as Multi-Level Marketing) whereby not only do you sell products but you also create your own network of sellers which means when they sell you get a part of the commission generated on those sales.

The best network marketers have made a lot of money this way but it’s not the only answer to generate multiple streams of income.

The internet offers multiple ways of getting rich online nowadays.

For instance you can use Amazon as a market place and sell products with fulfillment (delivery to customer) handled by Amazon.

You can also generate commissions through affiliate marketing with Amazon, as well as others like Clickbank and Commission Junction (CJ). These can be great ways to make money whilst you sleep.

Blogging and Vlogging are other ways of producing income streams too.

There are numerous ways for the ambitious and determined. In fact it’s never been easier for people prepared to put in the effort.

So listen to what Bob Proctor has to say and be inspired to take action now.

Further Reading:

In the video, Bob Proctor makes reference to Think and Grow Rich by Napoleon Hill.

Think and Grow Rich is a classic of the financial education genre.

Originally written in the 1930s but it’s still around today and still very popular.

And it’s still around for a reason. It’s exceptional and definitely worth adding to your personal reference library. I have my own copy and you can take a look at the book if you CLICK HERE.

Bob Proctor himself has also produced some excellent self-help books too and you can take a look them if you CLICK HERE.

DISCLOSURE: This website is an Amazon affiliate. Should you click on any of the links included in the text above and you then make a purchase, you should be aware that this website will receive a small commission. These commissions serve only to cover the cost of maintaining this site. Your understanding is truly appreciated dear reader. Thank you.

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25 inspirational stories of people going from rags to riches

Inspirational StoriesInspirational stories can be so uplifting. They tell us that if other people can be successful then so can we.

Did you have a tough start in life?

Perhaps you feel that your difficult past will prevent you from enjoying a successful future?

Well a tough past doesn’t mean you’re doomed to a tough future.

The same goes for a mediocre past.

The past is the past of course and it can’t be changed. However it serves only as a series of lessons to be learned. Remember, it’s not a life sentence.

You can create any future you want, as long as you’re determined, focused and prepared to put in plenty of hard work. You won’t get anywhere without those ingredients. Nevertheless it can be done, though it will be all down to you.

The future is an endless stream of opportunities that you can choose to take or not.

Don’t just accept my word, look around for people who’ve actually done it. There are plenty of inspirational stories if you’ll just look for them. Today I offer you a video with 25 inspirational stories.

Inspirational Stories25 Inspirational Stories:

In the video included here there are 25 excellent examples of people who had a tough start in life but went on to enjoy considerable financial success.

These are all inspirational stories of people going from rags to riches. And if they can do it, why not you?

And remember this; you’re never too old.

Colonel Sanders started KFC at the grand old age of 65.

And Ray Kroc began building the business empire we now know as McDonald’s at 52.

Believe you can and you will.

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Warren Buffett’s Top 10 Rules For Success

Today I offer you Warren Buffett’s Top 10 Rules For Success dear reader.

If you want success then you would be wise to listen to people who have already achieved some success.

Identify what they did to achieve their success and copy it.

If it worked for them then it will probably work for you.

Now there are few people more successful in their chosen field than Warren Buffett.

So he offers you his ‘Top 10 Rules For Success’ in this video, embedded here. It’s definitely worth your time to listen him.

Here are his tips and I recommend them to you.

Warren Buffett’s Top 10 Rules For Success:

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Steve Jobs’s Top 10 Rules For Success

Looking for the Top 10 Rules for Success dear reader?

Certainly it’s true, if you want success then look for successful people and copy what they do.

The late Steve Jobs is not only an icon but also a great role model to use as your template for achieving success.

Here are Steve Jobs‘ Top 10 Rules For Success. Watch this video, it is inspirational and well worth your time and I recommend it to you.

Top 10 Rules for Success:

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How to build wealth from nothing – 5 Top Tips

How to build wealth from nothingThere’s nothing anyone can do if you were born poor. That was just unfortunate. However you don’t have to go through life poor.

It is possible to build wealth over time and people do.

Many people born poor become very wealthy through their own efforts and you can too dear reader.

Here are five tips to help you build wealth from nothing.

How to build wealth from nothing:

1. Pay yourself first:

You’ll know I’m sure that making money can be relatively easy, whilst holding on to it is very, very hard.

We’re all constantly bombarded with reasons why we should spend our money in return for some fleeting sense of gratification. Would that be an experience you recognise dear reader?

It doesn’t have to be that way of course and rich people know that only too well.

So what do rich people do that’s different to everyone else? Simple! They always pay themselves first.

And what do I mean by paying yourself first?

I mean when you’re paid, you take a slice off the top of your income immediately and you put it away somewhere safe. And by a slice I mean say 10%.

And what do I mean by somewhere safe?

Well initially that would be depositing your money in an interest-bearing account.

However once your money starts building into a larger sum then you can start thinking about other forms of investment that’ll give you greater returns potentially. Stocks and bonds for instance.

Building a capital sum is important because as your money grows it starts to generate a second income stream for you. That may not seem important to you now but it will be as you get older.

So paying yourself first is a discipline to which you must adhere until it becomes a habit you do without thinking.

You must always put some money away and you must make that money work hard for you. You must grow and protect your investment portfolio with careful diversification and over time you’ll find yourself building a sizeable fortune.

So here’s today’s mantra for you: Pay Yourself First. Never forget that please dear reader.

2. Be an investor not a speculator:

You must understand that there’s a big difference between investing and speculation. They’re not the same thing at all.

I don’t wish to imply that there’s something wrong with speculation though. There isn’t.

In the world of finance speculation brings liquidity to the market and therefore it does have its place.

However speculation tends to operate on the ‘greater fool’ principle.

By that I mean someone is prepared to buy an asset for a given price in the hope that it can then be sold quickly to someone else, the greater fool, for a greater price.

This is what professional speculators do and they can make money this way because they know what they’re doing and they have sophisticated systems to support them.

However for ordinary people speculation is like gambling in a casino. And you should never invest your money as though you’re gambling in a casino.

You might get lucky occasionally of course but over time your losses will outstrip any gains you might make, and almost certainly by a significant margin.

So my recommendation to you dear reader is you should never speculate. Instead you should focus on becoming an investor.

By investing I mean buying stocks and shares in solid, well managed, cash-generative businesses which have the ability to pay good dividends on a sustained basis.

Buy stocks worth holding for the long term. This will provide you with a steady income stream from the dividends regardless of any short to medium term volatility in the market. And spread your risk by building a diversified portfolio.

If you reinvest your dividends then over time you will find that this approach should give you a good return on your money.

If you want to make money and build capital, then my advice to you dear reader is to be an investor not a speculator.

3. Focus on value not price:

The legendary investor Warren Buffett once said, “Price is what you pay; value is what you get.

With this observation he’s making a very important point. There’s a distinction between price and value.

A low price for an asset doesn’t necessarily mean you’d be getting value. And a high price doesn’t automatically mean you would not be getting value. Price in itself is not a measure of value. You must consider other factors to judge value.

When you’re buying any financial asset, says stocks and shares, you should always focus on value and you must establish metrics by which you can adequately judge the intrinsic value within that asset.

Judged in isolation price is just a number, nothing more.

A lower price means absolutely nothing if you’re getting little or no value in return for your money.

Never, ever forget that it’s the intrinsic value that will determine whether something is really worth buying or not.

Get real value at the right price and then you can get a decent return over time from an investment.

4. Create a personal private income:

Much as we all aspire to do work we love, you must never forget dear reader that ultimately work is simply a means to an end.

Essentially work is just doing stuff for other people in exchange for money. In turn that money is then the fuel on which we run our lives.

Money provides us with the means to put bread on the table, a roof over our heads and clothes on our backs and those of our loved ones of course.

If you work hard enough you can earn a lot of money.

Manage that money wisely and you can build capital. Invest that capital intelligently and you can create your own personal private income streams.

When you have a decent private income in your own right then you can truly pick and choose the work you do.

Then you only have to do what you enjoy doing; that thing that gives you a genuine sense of purpose.

Creating a personal private income is a worthy goal and it’s well worth the effort.

That way you’re in control of your own life and no one else can dictate what you should and shouldn’t do.

You’ll be in control of the good ship ‘Me’ and only you then decide where it goes.

The message here is, work hard so you don’t have to work hard.

5. Never forget what matters most:

It would be very easy to believe that a life filled with lots of money and materiality will make you blissfully happy. Well let me tell you dear reader, in isolation, it won’t.

I’m not suggesting that these things are not important but you must get your priorities right.

Yes of course, go out there and make money. Manage it carefully. Buy nice things and enjoy some of that money too.

However to be truly happy you must never lose sight of the most important thing in your life and that is family and friends. People are social animals; we’re not solitary like cats. We need other people and most of all we need our loved ones.

So make time for your loved ones, especially your children. Enjoy their company and make the most of every minute with them.

Never focus on work to the exclusion of your family and friends. Without them you have nothing. Money is important of course but people are much more important.

Never lose sight of the people in your life.

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8 Top Business Tips for Success

Tips for Business SuccessIntroduction:

I read an article recently about a guy with a college degree who was feeling disillusioned because he couldn’t find a job. At least not one that met his expectations relative to the type of job he felt his degree merited.

Well it’s a tough world out there, as I’m sure you know only too well dear reader, and despite what some people may think, the world doesn’t owe us a living. The world owes us nothing and it’s down to us to make a life for ourselves.

Work is just doing stuff for other people in return for money and there will always be people with stuff that needs doing. So rather than seeking a job, perhaps we’d all be better off if we focused on seeking customers for the services we could provide.

That’s at the heart of what business is all about, providing people with solutions to their problems for profit, and there is much to be said for becoming an entrepreneur.

The advantages of self-employment:

There are many advantages to being self-employed.

For instance, not having to deal with office politics is a big advantage for a start.

And of course being the beneficiary of all of the proceeds of your efforts is another good reason.

Instead of making a lot of money for other people, you make it all for yourself. The harder you work the more you make for yourself too.

Unless you’re a lawyer or an investment banker, the chances are the only way you’ll ever make serious money is through building your own business. Building a business that one day you’ll be able to sell for a lot of money.

However remember this; you might think that if you’re self-employed then you’re your own boss. Well that’s not true. The customer is the boss.

Serve customers badly and you won’t be serving them for very long, that’s for sure.

The first rule of business is that you must ‘know thy customer’.

You must gain a deep understanding of the products, services and marketing that will appeal to your target customer.

One size will not fit all and each market will require a different approach.

Now going into business is not for the faint-hearted. You must be prepared to work very hard, at least in the early days.

However, if you can provide your target customers with real solutions to real problems then you can make serious money.

If someone else is already offering a solution to the target problem then your solution must be better than theirs in some way if it is to sell.

Creating great products and offering great customer service is the route to business success. However never forget your reputation and image. These things matter too.

Make sure you create an image that will appeal to as wide an audience as possible. Running your own business will be a challenge but it can also be extremely rewarding, both financially and in terms of a sense of achievement.

Remember also that running a small business is not a whole lot different to running a large business. The only real difference is one of scale. The key issues are always the same.

So here are some tips for would-be entrepreneurs:-

Business Tips for Success:

1. Control your costs:

Money comes into your business and money goes out. It’s that simple.

However fail to ensure that the former is always greater than the latter and trouble will follow at some point, whatever the size of your business.

A bigger business might be able to weather the storm a bit longer but the consequences of expenditure consistently exceeding income will be the exactly same. Keep losing money and eventually your business will go bust.

Take every opportunity to maximize your revenue and always keep your costs as low as you can. And never, ever lose sight of cash flow.

Don’t spend money unless it is absolutely necessary.

Ask yourself, do I really need to spend this money? What will I get in return? Can I achieve the same result at less or even no cost?

It might surprise you to learn how frequently it is possible to avoid cost, whilst still doing all the things big businesses do.

The key message here is that you must keep an iron-grip on costs and you must manage the flow of money carefully.

2. Do your own market research:

Every product should solve a problem for your customer and you should have some idea of what that problem is and how your product will solve it relative to the products offered by your competition.

Just because you think you’ve got a great product, doesn’t mean you have in the eyes of customers. Your opinion means nothing if there are not enough people willing to buy your product at the price you’re trying to charge for it.

If your product won’t sell then potentially your business could be in trouble.

Perhaps you think you’ve spotted a gap in the market?

If it’s a genuine gap then you might be on to a winner. However a gap in the market doesn’t always guarantee that there is a market within that gap. Maybe there’s a reason for the gap which you’ve yet to understand.

In business, the trick is to find out what people really want and then offer it to them.

How do you find that out?

One very good way is simply to ask them yourself.

I’m not referring to your family and friends here. They’ll be far too polite to give you any meaningful feedback.

You must talk to real customers, if and when you have them, and potential customers.

You can conduct some of your own market research in your local shopping mall or wherever you think your target customers might congregate. And don’t be shy. Only by actually talking to people can you confirm whether your ideas have real potential.

So identify some basic questions, stand there with a clipboard and just start asking people, as politely as possible.

Often they’ll be far more helpful than you might expect.

And don’t forget you can always use the Internet too.

Search engines like Google have keyword search tools which are free to use. These tools allow you to get a ‘rough and ready’ measure of what people are searching for and how frequently.

Market research doesn’t have to be expensive. As a small business entrepreneur it is possible to do it yourself. You don’t have to spend a lot of money on this activity but it’s essential that you do it.

Your results might not be quite as scientific as those produced by the professional market research people but they will provide you with a rough guide and that’ll be good enough in the first instance.

3. Advertising costs money: is there a better way?

It’s true that visibility matters. For your business and your products it’s essential.

Your products might be the best in the world but they won’t sell at all if potential customers have no idea they exist. Surely that much is obvious.

The question is, how does any business ensure that customers have visibility of its products? The obvious answer is advertising of course.

However media advertising can be very expensive and it’s a cost which new businesses often cannot afford.

One small advert in the back of a glossy magazine can cost you a lot of money and yet you have to ask yourself whether that would be money well spent?

How often do you notice the small advertisements in the back of a magazine? In my case, the answer is not very often.

With so many advertisements competing for my attention I tend to filter them all out. I’m willing to bet that you do too dear reader.

So, if you’re not careful, money spent on advertising can be money wasted in my experience.

A better approach might be to use some creative thinking with a focus on public relations.

Smart entrepreneurs know that business is show business. It’s all about getting noticed.

For example the entrepreneur Richard Branson is a brilliant exponent at getting media attention at little or no financial cost to his business.

It helps that he’s a likeable guy of course but he’s also clever and creative in his approach.

If you have an interesting back story perhaps the local press, local radio or even television might be willing to run a story on you and your business and the products you have to offer?

Social media can be a very powerful medium for gaining attention for your business too.

Social media is also a useful way of driving traffic to your company’s website, particularly Pinterest which is an incredible tool.

Then there’s using search engine optimization (SEO) techniques on your website content to ensure you drive traffic to your site from the search engines.

Let’s face it you do need to appear on the first page of a Google search if there’s to be any chance of anyone noticing you and your business. However if you can make that happen you can get enormous amounts for traffic from Google and other search engines, like Bing and Yahoo.

Make sure you offer visitors to your company website the opportunity for signing up to a regular email newsletter. And give them an incentive to sign up.

This could be a free report or perhaps a discount code for one of your products.

How about running a competition using your company’s fan page on Facebook or your company website?

The price of say a smartphone or a Kindle or other electronic device as a prize would be cheaper than the cost of a small advert in a glossy magazine but it’s more likely to get noticed and it’ll probably generate a lot more excitement.

If you have a car or van; don’t forget that it can be emblazoned with your company logo, your website details and product information on the back, sides and front. Even on the roof.

It would be free advertising as you’re driving around.

Park your vehicle at a big event attended by thousands of people and you’re beginning to master the art of guerrilla marketing.

The bottom line is that creative thinking and public relations can produce powerful results in your quest for visibility at a fraction of the cost of advertising. The key message is; be creative.

4. Don’t make yourself indispensable:

The biggest mistake any entrepreneur or business manager can make is to think that every decision should be made by them.

If you’ve started a business from scratch you tend to form an emotional bond with it. It becomes your baby and you become very protective of it.

That’s natural of course but as the business grows you’ll have so many things to do that you couldn’t possibly do them all. You could try, of course. However if you try to do everything you’ll find yourself falling behind in key areas like product sourcing, sales and keeping your accounts up to date.

Fall behind and it becomes very hard to catch up. Potentially it is also very damaging for the business.

So you have to learn the art of delegation.

A good start would be to document every task and process within the business and then create an Operations Manual. This can include everything from the preferred method for answering the phone to completing invoices and dealing with complaints.

It can also include the degree of flexibility which you are delegating to staff, so they can get on with basic tasks allowing you to get on with those activities which are much more important for achieving business success.

No business should be dependent solely on one person.

If it is and that person gets seriously ill or has an accident then obviously the business would be in trouble very quickly and it would struggle.

Delegate basic activities to your staff and you can be sure that the business will continue to function even when you’re not around.

It will also give you a bit more thinking time for steering to the company towards bigger and better things.

The key message here is that you must delegate. Never delude yourself into thinking that only you can do a particular task.

5. Charge sensible prices:

It’s easy when you’re a small business to undervalue your products and your time. The result is that you undercharge for what you have to offer.

This is particularly true when professionals are selling their expertise and time on the basis of a consultancy arrangement.

It’s common for first-timers to lack the confidence to charge what they might perceive to be a high rate for their services.

The problem is that selling things cheaply can be counter-productive because customers then think they’re getting an inferior product or service and can be put off.

It is a fact that price can often be used as a proxy measure for quality when your business is being judged.

You have to be very business-like when considering the pricing of your products and services.

So look at what your competitors are charging and then analyse where you think your products and services fit into the market.

If you struggle with that idea then you can always seek guidance from someone else, like a fellow business owner or your accountant.

However you must always remember that you must believe in your products and services. If you don’t then why should anyone else?

You must project confidence.

If you don’t have the courage of your convictions then the chances are that your business will never succeed.

Believe in yourself and charge what you’re really worth. Sell yourself on the basis of the value you bring.

6. Make the best use of technology:

Sometimes small business owners think that because they are small they can act in a small way. However that can be a mistake.

Don’t be afraid to invest in your business. For instance investing in up-to-date technology like the right phone system and websites do not have to be expensive but they can be the difference between a customer contacting you or not.

These days no business, large or small, can operate without a website.

And that website needs to be as user-friendly as it possibly can be.

Make sure your website provides customers and potential customers with the opportunity to sign up for a regular email newsletter. And as suggested earlier, offer them encouragement so they do sign up.

Ensure also that your telephone system allows customers to reach you at their first attempt. Certainly customers won’t make too many attempts to call you before they will simply go elsewhere.

If you don’t know how to do all this yourself then go on a course or seek guidance from someone with the right expertise.

Good communications will pay handsome dividends over time.

7. Set goals:

You have to know what it is you’re trying to achieve, if you are to have any chance of successfully achieving it.

Never set your sights too low either. Set yourself a challenge and then put all your energy into achieving it.

Once you’ve set a goal then you need to establish a plan as to how it is going to be achieved.

For instance if your goal is to achieve a certain level of turnover over the next year, you have to break that down into the small steps you will need to take for it to be achieved.

How many sales will you need to achieve each day, each week and each month?

What implications will those sales targets have for production?

Do you have enough sales staff to generate that amount of business?

And so on.

Always create a plan and review it regularly making adjustments as and when necessary.

8. If you got a great idea then do something with it:

How many great ideas never see the light of day because the person with the idea fails to do anything about it?

And how many times does someone with an idea see someone else come along with the same idea and beat them to market?

Procrastination stops many entrepreneurs from cashing in on a great idea. Don’t let this be you.

If you’re waiting for the perfect time to do anything you will be waiting for the rest of your life.

Now is always the perfect time.

Don’t wait until you think the economy will be better or your children have left home or some other arbitrary barrier.

The right time to start your business is right now.

So go for it. Yes you’ll make mistakes. You won’t get everything right first time. You won’t become an instant millionaire either.

However by getting started you will be heading in the right direction and you will learn along the way.

Hard work combined with implementing good ideas will get you there eventually.

Concluding Remarks:

I hope these tips prove useful to you dear reader.

It was not intended to be a comprehensive guide for entrepreneurs and I recognise that you may many of your own ideas.

I love to hear them, so please feel free to share them with our readers.

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