MBA1712 How to Create a Safety Net For Your Business + Free Ride Friday

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Hey O welcome to the $100 RMBA show, helping you build a better business every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the $100 MBA, a complete business training and community online over at 100mba.net just a heads up, today's episode is Free Ride Friday. On Fridays we give away a free lifetime membership to one of our programs, hence calling it Free Ride Friday. We're giving away ezcourse, our $500 course over at ezcourse co on showing you exactly how to build your own online course in 30 days. If you want to win a free ride to this program, just leave us an Apple Podcast rating and review and you enter our weekly random draw we call Freeride Friday. Just listen in on Friday to see if you won. It's that simple. We usually announce the winners right after the lesson, so look out for that. Speaking of today's lesson, in today's lesson you will learn how to create a safety net for your business. Entrepreneurs are notoriously overly optimistic. They don't plan for when things don't go well. If growth does not happen, if the line on the chart or the graph doesn't always hockey stick One of the things that really can help you sleep better at night is knowing that you have a plan ready to go in place just in case things don't work out as you hope they will. This lesson might force you to rethink the way you are running your business. Economies go up and down. Markets change. How can you ensure that your business can endure all this and have a fallback, have a system, something to rely on when you're not always experiencing explosive growth? Specifically, what do you do if you have a bad month, a bad quarter, a bad year? Does it mean the end of your business? That shouldn't be the case. You should have a safety net that kicks into gear and saves your business and saves your hair from falling out. So let's get into it. Let's get down to business.

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I decided to do this lesson today because I hear from so many entrepreneurs about the stresses of running a business, the stresses of the unknown, the stresses of the market. Whether it's a market crash or a pandemic, or in some cases in some places in the world, a war, these things can affect economies, can affect your market, can affect your business for an indefinite amount of time. You don't know how long that slump's gonna last. When Covid started, people thought, oh, this is gonna be all done and dusted in maybe in a couple of months. We're a good year in, and people still don't know how long this is going to affect our lives and, of course, our businesses. So what do you do when the inevitable will happen? Of course I'm talking about change. Things will change around your business, in your environment, in your market. One of the best things you can do to set yourself up to have that safety net is to make sure you have healthy profit margins. I know this sounds very obvious, but this is just the first step, and it's going to allow you to feel a little bit more comfortable. You should be working on building a war chest of funds for your business. This is not just for a rainy day, but it allows you to have a fallback, something that you can use to pivot in your business just in case you have to reinvent yourself. This is why Apple is so powerful. They have over $245 billion in cash in the bank. Why do you think Apple doesn't just reinvest that money to make more money, to build more products, to hire more people? Well, they know this rule. You have to have a safety net. Even Apple is not totally immune to the things that can happen to them. Now I'm not asking you to have $245 billion in the bank, but the healthier margins, the more likelihood you'll be able to have some cash reserves. If you're a self funded business, a 2 to 1 ratio should be your minimum. Meaning for every dollar you spend, you should be making two. That means at the end of the month, you should be making double of what you spent that month, which means you have the equivalent of what you spent that month in cash left over that you can put in the bank and save. Now of course that's going to be counted as a profit come tax time, but your corporate tax are going to be a lot less than your income tax than if you just pocketed the money. Now having cash reserves is not just good because you can use that cash. If you need to create a new product, you need to pivot, you need to change. But also by having some surplus, having some cash in the bank, lenders are so, so more likely to give you a line of credit that will extend your Runway, that will extend your likelihood to be able to reinvent yourself. Like we say, money is the oxygen of any business. So the more of an extra reserved tank you have of oxygen, the better. Because things might be going well right now and they could go better, but they could go worse. So you gotta plan for those rainy days or months or even years. Sometimes, sometimes a this can take a slump and then come back. It could be the market, it could be the fact that they're still doing research and the technology is not there yet, but it will be in a couple years. It could be that they took a hit on their brand and they need some time to recuperate. So that's the finances, okay, but that's not all. There are other liabilities in your business that you may not be aware of. Like the people that you work with, the people that you hire. What's your safety net? What's your backup plan if your top engineer leaves you or decides to retire? What do you do if your best copywriter decides to part ways or your social media marketer decides to work for a different company? You can't be in a state of panic and you can't allow your systems or your business to just totally stop doing what it normally does because somebody's leaving. This is why systems are so important in a business. When you're building a business, you're building a set of systems and you want to document these systems in what we call SOPs, standard operating procedures. It's literally Google Docs writing out exactly how to do every task in your business and the person who does every role. So say for example, the customer service manager in your company, their job, other than being the customer service manager is creating an SOP for their job. This is gold, alright? This is one of the biggest assets you can build to your business because that way every everybody can live and breathe comfortably. Why? Because say for example, somebody in your company leaves, you have a playbook to give somebody new and say, hey, this is how you do your job. This is what was done before, this is what your predecessor was responsible for and this is how they did it. So building systems and SOPs in your business creates a layer of safety. Just in case something happens. And by the way, something will happen, people will leave your business. It's just the nature of employment. People move on. Next, if you can afford it, especially in the most critical positions in your business, have some redundancy. So for example, if you're in the service industry and you service people on the phone, then it's a good idea to have more than one customer service agent, right? Just in case somebody leaves you, you don't have any agents left, you have a few backup, right? You have people that are trained up and can do the job. They might have to do some ext hours, but you're not left high and dry. If you're running a software company, need some redundancy in the engineering department. This creates a safety net. Okay? You don't lose nights of sleep if somebody leaves your company. Next is your critical tools. Have some redundancy with your tools. And I'm talking about just the major ones. You don't actually have to buy these tools, but you have to have the research and know what's available. So if you need to switch out, you know exactly where you're going. What are your backup tools? What's your backup website servers. What's your backup domain name? Registrar. What's your backup payment processor? If you have to change things around, if you have to swap out which ones are there, it's just going to be a list people that you've already vetted. You don't have to do any homework afterwards when it's time to switch. You're ready to go.

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It feels good to save big. It feels good to Geico guys. Some of the strategies, some of the tips I share today to have a safety net for your business. It's not some sort of worry warts checklist, okay? It's going to make you feel great. It's going to make you feel like you have things in order, that you have a plan, that you can rest easy knowing that, that when things change, you're not going to scramble, you're okay. And as your business grows, as you hire more people, as you make more money, this becomes more and more important. As the stakes get higher, so does the chances of you losing things, losing talent, losing money, losing maybe even opportunities. So what you want to do here is not bury your head in the sand. Recognize that this will happen. Some of these things will happen. You're just making sure that you have a plan of action so you know what to do when it happens. Thanks so much for listening to the 100 RBA Show. Today's episode's not over though, because it's Free Ride Friday. Let's see who won this week's Free Ride. And the winner is. Harry and Finn from Australia. Harry and Finn say Best podcast for startups 5 stars. I'm so glad I found this podcast. I'm currently studying my MBA and I wanted something to supplement my studies. This show is more than that. It teaches everything my MBA doesn't about how to successfully start a business that's successful. I absolutely love it and I'll be going back to all the episodes as I move up in my own startup. Don't do an mba. People listen to this podcast. What a great review. Thanks Harry and Fit for that awesome review. You are our Freeride Friday winners. Congratulations. Your mission is to email me@omar mba.net so I can hook you up with the Free Ride to easy course, our 30 day course on how to build your own online course. It retails for $500 over at EasyCourse Co. Or you can win it for free. Just leave us an Apple podcast rating and review and you'll enter our weekly random draw we call Free Ride Friday. That simple. Thanks so much in advance for doing that. Before I go, I want to leave you with this planning for change. Planning for critical situations, even disasters, is not being negative, it's being thorough. It's being responsible. Is understanding that you love your business and you want to make sure that you can continue to do it for as long as possible, no matter what happens around the world. Thanks so much for listening and I'll check you on Monday's episode. I'll see you then. Take care. Of.

We've all been there. You hold on to a coupon but forget about it and suddenly it's Expired.

Expired in 2012.

Dang it.

Fortunately, by switching to Geico, you could save about $900 on car insurance without ever touching a coupon.

It feels good to save big. It feels good to geico.