The so-called big break is not always as good as it sounds. It’s always good to make more money, but that’s not always the case. Working with bigger clients requires some capital set aside.
Let’s take for instance a large order of one million units of whatever it is your selling. Assuming you earn $10 on a unit you are likely to make $10,000,000 sounds great right? Let’s break it down.
A bigger sale mean more raw materials, more work hours and that adds up to more expenses. In addition, bigger purchases usually mean more payments. So is it worth it? Depends on your situation.
If you’re able to cover the expenses till you get paid then of corse it’s worth it. On the other hand, if you can’t it could mean the end of your business. While I do recommend that you bite off more than you can chew, you have to do it intelligently. Take as much work as you want but under no circumstances risk the future of your business.
So how much money do you need set aside? Ideally enough to cover two to three big breaks. Assume that a big client will make a purchase ten times your average sale. Multiply it by three and calculate your expenses. Make sure to have that amount in the bank so that you can safely accept bigger clients.
If larger clients come along take a 50% cash advance. Do not start working till the cash is in the bank. This payment is meant to both cover most of your expenses and makes sure the client won’t back out.
As a business owner, you can’t afford to trust anyone. Make sure you’re covered before you risk your future.
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