Entrepreneurship
Posted on September 1, 2008
Filed Under Free Financial Course |
In previous lessons we have discussed how to budget, save, and invest the money that you earn. But, what if your current job is not providing you the income level that you need to retire on? There are many ways to increase your income, such as, getting a different job or getting multiple jobs. However, the most lucrative option is often to start your own business.
The purpose of this lesson is not necessarily to encourage you to start a business or even to tell you how to start a business. The purpose is simply to make you aware that most individuals with great personal wealth are all entrepreneurs. So, starting a business could be the missing link between you and great personal wealth.
If you take a look at the world’s richest people as ranked by Forbes, you will see that most of them are entrepreneurs.
Type of Business to Start
The easiest business to start is the one in which you are already in. In other words, if you are a janitor, start a janitorial service; if you are an accountant, start your own practice; if you are a software designer start a software design company. You get the idea.
The main types of businesses can be segmented into three main categories: Services, Products, or Retail.
Services: These businesses tend to be easier to start because they usually do not require as much money to start. Examples of service businesses include the following: house cleaning, window washing, garbage removal, paper shredding, delivery service, consulting, etc. There are millions of service businesses, and they can potentially be very profitable. There are plenty of millionaire plumbers and janitors. They simply started a business and now have hundreds of plumbers or janitors working for them.
Products: In a product business, your company tends to revolve around a new product or invention. If you invented a better stapler, or a different kind of hat, or a way to dispose of nuclear waste; then your business revolves around the product. Most likely, you will need a patent to protect yourself from others stealing the idea.
This is probably the most difficult type of way to start a business; because not only will you need to invent something; but you will also have to develop it, produce it, market it…all before you make any money.
Retail: I call the final categories of businesses “retail”. This simply means that you are selling products (that you did not invent) to someone else; typically the general public. Wal-mart, Saks Fifth Avenue, and the local thrift store all fit into this category. Many people try to open restaurants, which is fine; however, you should know that a restaurant has a VERY low success rate. The costs are high, and it is very difficult to project how many customers you will get.
Other businesses in this category include: eBay type businesses, vending machines, wholesalers, distributors, and many others.
If you are looking for ideas of different types of businesses to start; or more advice on starting a business, visit Entrepreneur.com.
Many things should be considered when starting a business. Explaining all the considerations is beyond the scope of this course. However, one vital component of a successful business is a good business plan that considers Market Potential, Competition, and Strategy.
Have a Plan
First and foremost, when starting a business you need a plan. It doesn’t necessarily need to be a full, written out business plan; however, you should jot down your ideas. Some items to consider are the company’s: Market Potential, Competition, and Strategy.
Market Potential
First, you need to consider whether or not you can make any money with your business. You may have a great idea, but maybe no one can realistically use it, or they don’t want it, or it costs too much. For example, a company called WebVan, decided they would allow people to order anything (bubble gum, t-shirts, pizza, books, groceries), really anything from their website and they would deliver it to your door. They spent hundreds of millions of dollars and opened nationwide. The company lasted less than a year. Why? Because the the market potential was small. The company creators did not account for the reality that they would spend more delivering a pack of gum than they would make from selling it!
Competition
Second, you must consider who you are competing against. If you have created a new and better macaroni and cheese dinner and you want to sell it in Wal-mart; then you have fierce competition. Kraft is a HUGE company and they will squash you before anyone ever tastes your delicious invention.
However, don’t let competition discourage you from developing a good idea. Just because there are lots of janitors, doesn’t mean that you can’t beat them out. The key to overcoming your competition is a good business strategy.
Strategy
Strategy really defines how you will be different from your competition. How will you appeal to your customers? Will you be a low price leader (like Wal-mart)? Will you have the perception of best quality (like Tiffany diamonds)? Will you provide the best service (like Nordstroms)? These are the three main strategies that companies use. There are lots of other strategies that you can utilize, but the key is developing a way that you will be different from your competition.
In conclusion, starting a business is a viable way to build your personal wealth. The main types of businesses are service, products, or retail. In starting a business, it is essential that you have a plan that considers the market potential, competition, and strategy.
The information here really only gives a brief introduction into the opportunities and complexities of starting your own business. If you would like to get step by step instructions on how to start a business, then Entrepreneur.com has excellent books that can help. Visit their website at Entrepreneur.com to learn more.
Review
- Determine if you would like to become an entrepreneur.
- If so, consider if your current occupation could become a business, or if you have any other ideas that you could develop.
- Visit Entrepreneur.com if you would like more complete instructions on how to start a business.
To review all of the lessons covered please continue onto the: Review.