Ah… Good Old Extra Costs Adding Expense

It’s the costs you don’t plan for which cause the most problems. The costs which suddenly appear and at the time you see them, there is no going back so you have to pay-up. It’s annoying, but its part of the business life and because of this, you need to be aware of these costs so that you can plan for them in the future.

In my last post I was working out payback for some investments I wanted to make. I have now done one of these investments and therefore have had to update the payback that I worked out for it, as I went a bit over what I was originally going to spend. However, this was all quite simple and it didn’t actually change the payback period too much, instead of being a 15month payback period, it is now 16months. It seems like a lot, but this is only a plan based on what the investment currently earns each month, I’m planning on a least doubling the money it makes and therefore halving the amount of time it takes me to get back the money I have spent.

Or So I thought…

Turns out I didn’t plan for the extra costs which would incur, such as the costs to transfer everything over to me and also the cost of wiring money through the bank. I thought I planned everything out… Turns out that the initial $320 which was  a 15month payback is now a $400 investment, which looking back at my payback will now takes 20months to payback. That’s a long time.

On the Brightside

Ah, there is always a Brightside. As I mentioned above, I’m looking to at least double my earnings from the investment. This means that the 20month payback will be halved to 10months, and that’s only if I only double my earnings. I think that I can get the earnings up to $100 a month, this is where I am planning If the project is a success (you have to cover all of the possibilities, as then you have a clearer idea of what could be achieved and what will be achieved). At $100 a month that’s only 4months of payback!

What I’m Really Getting At

What I am really looking into here is that I should have planned both scenarios before proceeding with the investment. You should look at what you will be getting if multiple things happen, make a payback plan encase costs rise, make one encase costs down. By doing this you can make sure that you are prepared for all the types of circumstances that may present themselves to you. Being more prepared in business is one of the keys to success. Wait, actually, its not just one of the keys, its one of the most important.

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