October 11, 2011, 5:00 am

3 Reasons Why You Should Not Care About Your Spending When You Are Building a Side Income

by: The Financial Blogger    Category: Business,Make Money Online
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After publishing my blog income report yesterday, I got several questions with regards to my operating costs. Last year, I wrote a detailed post on how much I spend per year. After reading this post, you will realize that during the past 12 months, I was in line to spend about $67,000 to run my business. This obviously cut out the glamour surrounding my company income which is around $8,000 to $10,000 per month.

 

So what’s the point of working extra hours on a company that will bring about $30,000 in profit per year? It’s even worse when you calculate that I have a partner and that I have to split everything 50/50! I tried to explain my reasoning in a previous post but I don’t think that people realized how I separate my costs and why it’s not important to look at cost when you are building your side income.

 

#1 I don’t derive income from my side business

I do have a pretty decent day job and this is why I don’t need my online money. Instead of receiving dividends or a salary from my online business, it pays for some of my expenses. For example, my blackberry, internet and cable are supported by the company. Same for my partner.

 

So these expenses are essential for running my business but I would definitely spend money on a Blackberry and internet if I didn’t have a company. These are small rewards we are getting for our efforts.

 

Since I don’t count on my online income right now, I don’t really mind if one month I’m a little short. In fact, since we have massively increased our expenses, we only went negative during the month of July 2011. This is a great liberty as, in the end, if I make more money, I’ll just spend it on creating another project!

 

I think it’s a key factor in our success; we don’t really care about money at this point. That sounds a bit odd from people publishing their income report, right? In all honesty, I don’t really mind if I have a good month or a bad month. The fact that I report my income on a monthly basis increases the level of accountability I have towards my company and towards you. On top of that, it helps using an hour per month to see how things are going. To look at what went well and what requires improvement.

 

#2 I reinvest every single penny in my company

As I just mentioned, we have made the decision to reinvest each dollar within our company. My ultimate goal with my company is to see how big it can become. So am I going to stop buying or creating websites one day? I guess I will… but this won’t be tomorrow! We first spend money on our servers and security (I have a full article explaining everything about hosting services in a draft so send me all your questions regarding this topic and I’ll cover them!). Then, we hired some writers (for reasons described in #3). But when we decided to hire Virtual Assistants, we were going to play on a totally different level.

 

We now have the resources to go above and beyond our regular business. In the past 12 months, we were able to launch 2 books, several niche websites and are about to launch a few bigger sites in the upcoming months. Most of them will be related to investment topics because:

#1 this is what we like best

#2 people who are interested in investing are also interested in spending a few bucks to help them make money from their investments!

 

 

#3 Time is more valuable than anything

The main reason why I spend so much within my company is definitely because I don’t want to end-up working 25-30 hours per week on my online company while I work an additional 30 hours a week at my day job (+ transportation!). I value quality time with my wife, family and friends more than anything else. Therefore, if I can pay people to write on my sites instead of writing, I’ll do it. I want to keep my baby (TFB and The Dividend Guy Blog) but as for the rest, I’m trying to find interesting writers.

 

The key in finding a good writer is that you need to find someone with a specific tone. Someone that is original and that will be passionate about a specific topic. I’ve found some great writers among the blogosphere`

MD who blogs on Studenomics,

Laura who used to own Green Panda Treehouse and now authors Couple Money

Chris, previous owner of Broker Professionals

Kristina who’s a writer on Dinks Finance (Thx to J Money who sent me her contact info!)

 

As you can see, I’ve found my writers amongst previous or actual blog owners. They know what is required to write on a regular basis and are familiar with the blog industry. I liked them before and they bring personality to their posts and to me, this is the most important thing.

 

Technically, if I wanted to fire all of them, I could do it and write all the articles myself. That would be a big mistake for 3 reasons:

#1 They are amazing writers so why try to write great stuff when they do it already!

#2 I would have to take several hours away from my week to write these articles… I would still rather go play soccer with my son and watch my daughter dance ballet 😉

#3 It would prevent me from managing my empire and looking at the big picture!

 

What’s the True Cost of my Operations?

If you are really curious about the real cost of operation (e.g. keeping my site as is and growing within these sites instead of diversifying my empire), I am showing them right now. I am taking this info from my original post about cost of running my business but cutting down what is being used for growth and what is really required to keep my business as is.

 

Accounting: $3,200

Regardless if I’m making 30K or 300K, my accounting costs will be similar. This includes book keeping (this is why I’m so bad at keeping track of my expenses!), tax reporting and producing financial statements.

 

Writing/Editing: $9,800

This is for writing articles on all my sites + correcting my articles so I don’t sound like a French guy 😉

 

Banking & Interest Fees: $6,000

We still have a pretty decent business loan and this is why we are paying so much in interest. But that’s all right since we are making more money with the site we bought than the interest being charged  😉

 

Hosting and domain renewals: $1,500

Here again, nothing can be cut as keeping our domains is an absolute must for our  business!

 

Life Insurance: $1,200

This ensures that my wife will get what the company’s worth if I ever pass away. This is also the main reason why I put the value of my shares in my net worth statement; it’s because we have a potential buyer if I die : my partner will have enough cash to buy them!

Telecommunications: $7,000

This is the very basic of our company. Without cable, internet and cel, we don’t have a business!

So my true cost of operations is more like $28,700 per year and not 67K…

 

In fact, by dropping my cost to less than $2,400 per month, I could still run my company with 10 hours per week. The problem is that I would have to cut my 2 VAs, investment in software and promotions. My 2 VAs are a tremendous help in the creation of new websites and products. However, in order to keep my company as is I would not need them.

 

My main goal is to create enough “money making machines” that my VAs will take care of them while we will be making 15K… 20k… or even 25K per month! In the past 12 months, I have built the structure I need to grow my business to over 250K annually with the SAME COST. This is why I don’t care about how much it costs me to run my business today ;-).

 

Do you have any questions? Do you find that I’m spending too much money for nothing?

 

If you are looking for more details, be sure to register to my newsletter!

 

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Comments

Wait. Are you French?

Either way, thanks for sharing the details of your income and expenses. It’s nice to see empire building in progress. 🙂

Also, are there any books, publications, etc. you’d recommend on what to look for when buying a website?

Hey Shawanda,

Yup I’m French. But not from France, from Quebec (Canada). Since there is no market for personal finance in French, I’ve decided to write in English.

I don’t know any book you can buy on how to buy a website (maybe I should write one!) but I’ve written a 4 parts series on the topic:
http://www.thefinancialblogger.com/how-to-buy-a-blog-in-3-easy-steps/

If you have any questions, you can always send me an email at thefinancialblogger at gmail dot com.

cheers,

Mike.

Thanks for this information. I like what you are doing and think it is brilliant. I signed up for your newsletter. I might even be able to start making enough to hire out a few articles soon.

by: The Financial Blogger | October 11th, 2011 (10:02 am)

thx!
you’ll get even more info through the newsletter ;-D

don’t hesitate to contact me if you have any questions regarding hiring (and managing!) a writer!

cheers,

Mike.

Hey Mike.

Sam had some good points about gross revenue not telling the whole story. You also correctly point out that net income also doesn’t tell the whole story.

This is why there is a whole profession (accounting) which keeps busy figuring out the numbers and determining how profitable a company really is.

by: The Financial Blogger | October 11th, 2011 (7:56 pm)

@Mike,

I wanted to highlight the fact that I really don’t care about my expenses with this post. The only thing that matters to me right now is growth. Expenses can always be cut while growth is hard to find.

In the end, there are tons of ways to show net profit, but there is only way to calculate gross income. This is why I think it’s the best way (right now) to show how my company is going. I don’t need half of my expenses to run the business, but I keep them because I want to make 15K, 20K + per month one day 🙂

Accountants are magicians, never forget that 😉

Mike, do you account for the business loan on your net worth? You value the company, shouldn’t you value the corresponding liability against it?

by: The Financial Blogger | October 12th, 2011 (5:51 am)

@Financial Uproar,
The company value factors its business loan. This is why I don’t have a “business loan” in my liabilities. If I hadn’t debts in my company, I would put the share value higher. The number (98K) is what my wife would receive from my partner if I were to die today.

Technically, since it is not my debt, but the company’s, it should not figure in my personal net worth.

Excellent and detailed post. Growing empire indeed! 🙂

Great stuff Mike, really is.

Maybe I am completely risk adverse, but I would want/have more of a safety net besides “just fire everyone.” Panda can happen again and then what?

by: The Financial Blogger | October 12th, 2011 (1:21 pm)

@Evan,

I think it’s pretty hard to have growth and no risk… if it was possible, we would be all millionaire by now ;-).

This is why I have multiple blogs on multiple servers covering multiple topics: to avoid that any other “Panda earthquake” could bring my entire business down.

This is also why I’ll be focusing on building my mailing for all my sites: to be completely independent from search engine traffic.

By hiring people, I spread my risk among them instead of dedicating each hour of my life to grow my business. Since I keep my day job, I’m not too nervous about seeing my company going down. I would be pretty upset though 😉

[…] a couple weeks ago, he delivered on the expenses side, writing a post called 3 Reasons Why You Shouldn’t Care About Your Expenses When Building A Side Income, or NAMBLA for short. In the post, Mike admitted to having $67k inyearly expenses, meaning his net […]

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