If you don't have a business budget, this is why you need one.

1. ASSIGNING A BUDGET???
Don't Hate Me… It's not what you think, and I'll make this easy, I promise!
This post assumes that you have the basic technical skills for setting up a website and an autoresponder.. if not, click
here.
Wouldn't you love to be able to say to yourself, "I need to make $x.xx amount each month," and then
know exactly how much you needed to spend in terms of time and money to get there? Of course you
would. We all want to know, how much money will writing an article make me, or how many people do
I need on my list to make $xxxx.xx per month… and the 'common' answer is always, 'you have to test.'
That's pretty frustrating. Think about this… when someone goes to a bank, or a venture capital firm, for
funding for a business, the bank wants to see certain things. A business plan detailing the model and
operational system of the business; a finance plan detailing what assets and resources the prospective
lendee has to offer, a plan for the money they will borrow, and what the projected revenue is; and a
marketing plan, detailing the marketing strategy and costs of it. No bank is going to lend money on the
grounds that you will just have to 'test' until you make a profit. The bank will want to see, from
research and statistics, what a business can 'expect' to generate each month in order to be assured that
the lendee will make enough to cover expenses and repay the loan.
Creating a budget doesn't have to be "I have $10,000 to invest." Creating a budget is about knowing
what your business is, and what it will cost to operate it and pay it's expenses. Creating a budget is how
you determine what you need to invest in terms of time or money, into getting what you need for the
business to be a business. You don't have to invest your time into writing articles on the 'hope' that
you'll generate some traffic to a ClickBank product that you might make a commission off of.
While it could be suggested that you have to start with a model first, and then go on to assigning a
budget, it's often more practical for an informal entrepreneur to start with the knowledge of how to
create a budget. Informal entrepreneurs will determine how much they themselves need to cover their
own expenses, and most likely, quit their jobs. So it makes the most sense to determine that while
choosing a model.
INSTEAD, YOU CAN DETERMINE HOW MANY ARTICLES
YOU NEED TO
MAKE WHAT YOU WANT TO MAKE!
This is done through researching 'statisics', with a budget that knows what it will cost to acquire a lead,
to acquire a customer, and what else to have in the funnel to get a return on your investment in those
costs, and then creating a business plan, with a sales funnel, a strategic marketing plan, and the cost of
it.
Start With Your Model
You start with your business model. For all intents and purposes, your business model is defined as
'how the business produces it's main source of revenue.' Online businesses have one of the greatest
opportunity for 'multiple' streams of income, but the 'main revenue producer' is the 'model.' So while
you may have a blog that has 'passive advertising' (banner ads, Adsense and other passive Pay Per
Click advertising income) ClickBank products, Amazon Products and possibly your own products (or
resell rights products), and any other hosts of profit centers, the one you 'focus' on for bringing revenue,
is the model.
Professor Micheal Rappa, has an excellent article on Business Models on the Web, which breaks down

2. all of the various online business models to a group of five.
• Brokerage
• Advertising
• Infomediary
• Merchant
• Manufacturer (Direct)
• Affiliate
• Community
• Subscription
• Utility
*http://digitalenterprise.org/models/models.html#Brokerage
These models are a starting point. For example, Google's model is 'advertising.' That's where they focus
their revenue producing activities. When Google first decided that it was going to make advertising it's
model, it had to know what would draw people to it's website (which is their 'branded' 'Most Relevant
Search Results Search Engine) to see the ads. If their website had no eyeballs to it, they weren't going
to be able to command any advertising at all. By knowing that they would have to invest $xxxxx.xx
into developing a worthwhile 'publication' that would command advertising dollars, they knew what
their model was, and what their market was, wanted and needed…
Determine The Market
Google chose "Internet Users" as it's market and created an 'online publication' to serve it's market with
published information. Once it had 'traffic', everyone wanted to 'feature' their business on it's various
pages.
Home Depot sells building equipment, from materials to tools, all the way down to home decorating
and gardening products. Their market is builders, homeowners and contractors.
Once you determine who your market is, who you 'serve', you can begin to profile them, and figure out
what they buy. Not just one product, but what they need on an ongoing continuous basis.
Advertisers need to place their ads every month. They need more places, to place their ads, and they
need more relevant places to place their ads.
Builders need new materials every time they start a new project, homeowners will buy materials only
about once on average, and tools always about only once every so many years, on average, but they
also buy new sod every year or two, (depending on their location), seeds and plants for their
landscaping, fertilizer and other 'perishables' that need to be replaced on a continuous basis.
The entrepreneur builds the 'store' and stocks it with what the market buys, and stocks according to
statistical data of what the market buys, when they buy it, how often they buy it, what they buy with it,
and how much they will spend on it… and all, during statistical data even on the 'time' they buy it, such
as 'season'.
With this data, you create a 'funnel' of products you sell, with a projection of how many sales you can
make in a given time period based on how many people actually know about and visit your business.
The Budget
This is when the 'budget' finally starts to make sense.
We'll assume that your goal is to net $5,000 per month Gross.
• Operating Expenses of $500.00 per month
• Salaries: $2,500.
• *$2,000 divided into various percentages for various growth strategies.

3. From here, we look at our model, and our market, to find the various products and services that they
sell….
We start with the 'loss leader" the product we sell at break even, or at a loss to acquire a customer
Then we look at what else they will buy, and what they will pay for it, and create a 'funnel.'
It's very hard to start with too cheap of a product and ladder customers up to spending more… and it's
very hard to start them at a high price point before they know you or the quality of your products and
services.
However, in certain marketplaces, you have to use either of those strategies for success, and sometimes,
even in those marketplaces, if everyone else is doing the same thing, you have to stand out… that's part
of 'Step 2,' which we'll talk about tomorrow "The Heartbeat Of The Market."
By having a well defined marketing system, knowing where your target market is, what
they want, what they are feeling in any given 'place' where they 'congregate' and what it
costs to advertise there, you can determine the best strategy for your pricing funnel.
For the purpose of this article, we're just going to look at 'pay per click' advertising…
Looking at The DMA 2010 Response Rate Trend Report, we can see that if we plan to use pay per click
advertising to reach our audience, that the 'industry wide average' cost per click is $3.79.
Of course, as you narrow down the industry and the niche, you can lower, (or sometimes raise) that cost
per click, through micro niche keyword strategies and by purchasing certain types of advertising, such
as text on the search networks, or text on the content networks, or display on the content networks.
First let's assume that we have a "Click Through Rate" of .05%. This number represents the percentage
of people who are 'exposed' to the ad vs. how many actually 'click' on it.
Let's look at the DMA Report stats:
• Paid search had an average cost per click of $3.79, with a 3.81 percent conversion rate.
• The conversion rate (after click) of internet display advertisements was slightly higher at 4.43
percent.
• The cost per click for paid search in B-to-B was also higher than in B-to-C. Conversion rates
were better in B-to-B—5.27% versus 3.63% in consumer—but the average CPC was $4.59,
versus $3.79 in consumer
Just to use 'round numbers', we'll say that we have a cpc of $3.80 and a conversion rate of 4%.
This means you have to 'spend' $380.00 to acquire 4 customers. You need to charge $95 for a product
to break even on this campaign.
Assuming your product has a 'cost' of $75.00, you have a $20.00 per sale profit margin.
You need to make 250 sales, per month, of this product to meet the 'gross revenue goal.'
And if 4 out every 100 turn into sales, you need to get 6,250 clicks. At $3.79 per click…
Effectively, you need to spend $23,687.50 in 'clicks' to generate 250 sales for a gross of $23,750.00
leaving you at a negative ROI of $62.50. *Over time however, with the 'Lifetime Value of a
Customer", as your customer purchases more from you, you begin to profit… and that's a part of
the funnel… but as you can see, 'you can't start here.'

4. So what do you do?
First, you find cheaper advertising… and you scale it up, but you start from the same kind of
statistical analysis….
Next, you create a funnel (it's cheaper to serve an existing customer more products and services than it
is to acquire a new customer)
Finally, you find products with a lower cost to you, and a higher profit margin for you…
And from here is where you start to 'refine you business plan. Because those numbers don't work,
do they? (Hint, they might if you had your product 'cost' is $1.00 and your margin is $95.00…)
This is when you start looking at the statics of your market research and creating a strong funnel while
searching for more inexpensive advertising opportunities, and enough 'of' them, to reach the same
goal….
Assuming you choose the worst converting, but most
inexpensive marketing and advertising if you know the
average stats of what it will convert at , and you have a
strong sales funnel, you will know exactly how many
ads you'll need to place, and where to place them, to
reach your revenue goal every month, with the financial
plan for scaling up already in place, allowing you to
command the company's complete needs for not only
covering expenses, but also, for bootstrapping for
growth…
Choose your model and your niche, research your
competitors, you know, the sites that are currently
holding the top search engine positions, or the sites
you've heard of and 'type in the url for'…first, take a
look at their sites, get a feel for how they connect with
their audience as well as what they sell to their audience,
… then copy their url and head over to Quantacast.com
and look at the 'demographic profile' of the average
vistior to that site. You'll see their average education level, income range, sex, and, 'other sites' they
visit… which you can also visit to get more ideas of things they buy to help you create a sales funnel.
Now that you are armed with how to use stats to make 'projections' of revenue, and you know a little bit
about a sales funnel, you can start immediately, with some guerilla marketing strategies to begin getting
traffic and income to your online business right now.
Any stats you need will be available by searching "[kind of stat, ie, email open rates for (indusrty)
DMA Report [previous year]". All bloggers blogging in the subniches of marketing will publish the
DMA Findings for that subniche. So if they blog about 'email marketing', they'll publish the DMA's
statistical findings on email marketing.
Quantacast will give you a profile of what products to put in a funnel.
And Uncle Google is more than adept and answering your questions on where to 'find' products for that
funnel. Whether you are going to sell physical or digital product, create them, act as an affiliate for

5. them, buy and warehouse them, or simply have them drop shipped, you can get started immediately by
offering a freebie offer (resell rights products in the niche) for free, using some free advertising
opportunities. Knowing the 'statists' on the advertising platforms and what the platforms are, will give
you an idea of what you can expect to get in return for your efforts of placing your ads there, and if you
have the 'funnel', [Optin to email, One Time Offer/Upsell, email with with subtle calls to action for
buying product] you can place enough ads to make your efforts as profitable as they need to be,
because you'll know how much 'effort' you have to expend to do it.
*Hint: Search Google for 'Free Resell Rights Clubs" to get access to hundreds of free resell rights
products… and if you haven't even chosen a model or a niche yet, you'll have no shortage of ideas once
you have access to the huge assortment of niches and products you'll find within the clubs.The Earn 1K
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