profitable

 Continuing on with our talks about running a business during the financial Depression.  We come to another interesting question:

Should you buy an existing business or start your own?

Let us say that you are either out of work, caring for a person with special needs, or simply looking for a part time gig, one of the fundamental questions you need to ask yourself, is do you want to start your own business or buy an existing one?

Questions you need to answer are: 

1.  Do you want something already in place that had been established like a franchise with a proven track record or formula for success?  If you have the net worth of several million dollars and want to open several of them, McDonald’s franchises generally do well in recession and boom economies.  No matter how bad things get, people who are tired still turn to fast food for snacks and meals for their kids.

On the other hand, maybe you have your own recipe for burgers and fries and want to  do it yourself from scratch to keep costs low.

2.  Franchises are good if you want a blueprint for making a profit.  For the better franchises, depending on marketing conditions, you can make a profit easier than starting something from scratch.  On the other hand, you pay a hefty premium at times back to the company you are franchising from for the service.

If you have the business skills from running somebody else’s business already, you can parlay them into your own job hopefully learning from your previous employer’s mistakes.

3.  If your goal is to make money, the larger franchises already have a track record for generating income.  You can talk to people who own them and they can frankly tell you the nuts and bolts of what they like and what they don’t like about dealing with the parent company.  In some cases it is the fees, in other cases there may be lack of marketing support or in even worse cases, the parent company may accidentally shoot the franchisee in the foot by offering the same product/service through a competing store.

Some supermarket chain stores were carrying Baskin and Robbins ice cream and that did not go well with people who were owning the franchised stores.

4.  If you are an independent person who likes to handle things for him or herself, you could do well starting your business from scratch.  The important thing is to still being able to listen to experts, competitors and the marketplace for making your decisions and trying to keep emotion out of the equation.

5.  If you like to work within a system, you may be better off either buying a franchise or an existing store.  The previous owner should share with you his or her secrets and recipes for success and being profitable.  Just bear in mind that past performance doesn’t always equate to future success, especially in the changing economy that we are all living through now.

 

We also haven’t talked about the issues that come with working for one’s self.  Let me spell it out for you here.

Getting back to something from a few posts ago, don’t forget to have a business plan.  That is your map of how you are going to make money.  It should also be something that you can take to potential lenders to try and get loans from.

In your business plan, you need to have what your start up costs are and what your monthly overhead will be for running the business.  This would be a good time to also take inventory of your monthly personal expenses because if you are planning eventually on quitting your dayjob (or making this new gig your new day job) you should know how much you need to live each month.

Whatever numbers you come up with figure anywhere between 10-35% extra padding should be added to account for emergencies, holiday expenditures and if all things go well, money for expansion of your business.

Let’s take one of my favorite examples of a small business, the remarkably fun and easy to get into business gig of running a portable hot dog cart.  You see them at Home Depots, in front of courthouses at lunch time and dinner, in fact, there is no place you may not have seen one except the inside of a prison but for all I know there are hot dog carts working in there as well.

So back to costs – I have no idea if these numbers are realistic but they are here to serve as an illustration of start up costs:

hot dog cart                           $3000

hot dogs                                 $200

buns                                      $200

condiments                               $75

business license                        $25

resale license                              $0

fliers                                      $100

sodas and chips                      $540

Total Start Up Costs:             $4140

and we will throw in 10% emergency cash of $414 to make our total start up costs a grand total of $4554.

Let’s say you need to replenish the hot dogs, buns, sodas and chips each month.  I know I forgot to add napkins so I can take some of that money from the emergency cash I allocated up front.

Our monthly overhead might include gasoline to drive to a location, say the front of the County Courthouse at lunch time – $300 a month.

Figure $1015 a month for expenses.

That is your monthly forecast for what you will need in the worse scenario cases if you don’t even sell one hot dog.  Are these acceptable costs for you and do you have the money to gut it out for 3-6 months till people see your cart and start realizing what a delicious hot dog really tastes like?  What if the weather is lousy and you are stuck with rain for three months?  How will you make expenses meet in the meantime since hot dogs won’t keep forever and you will have to re-buy new ones?

Again, please be sure to do your research in advance and make sure that the startup costs aren’t too high or that your expenses aren’t going to mushroom out of control and eat up all the profits that you will be making!

Let’s say that you have all the other elements for your imaginary hot dog cart business planned out.  The next thing you need to take into account that should be incorporated into your business plan as well is your competition.

What are you up against in your anticipated marketplace?  If you are selling hot dogs outside the city courthouse are there already three other hot dog vendors out there?  Are all of them swamped at lunch and it looks like that if they had a dozen hot dog carts that they all would still be swamped?

Just because there is a lot of competition that doesn’t mean that you should run away.  On the contrary, that could mean that there is a huge demand for the product or service that you are trying to sell.  You need to recognize though if the competition is seasonal or timely.

People won’t eat dogs (usually) at 7 am in the morning if they are going to work at the courthouse.  They might eat though between 11 am and 2 pm throughout the day.  Maybe between 4-6 pm you might get another bump in business. 

In the toy business, your seasonal sales in the United States are usually from October through December.  In India, you can sell gold for weddings generally before monsoon season.

Are you also different enough from the competition to draw business to you from your competitors?  Maybe you sell kosher hot dogs.  Maybe you have a cute girl in a bikini serving the hot dogs.  What is your edge that will differentiate you or your product from your competition?  Personally, cute bikini girls with good sanitary habits selling kosher hot dogs sounds like a win-win situation to me.  The problem is that I think a lot of people are already on that particular bandwagon and you may run into health ordinance laws about people being half-undressed when they are serving you food.  Health inspectors may not give you their stamp of approval.

By recognizing your competition and incorporating it in your business plan, you show potential investors that you know what you are doing or at least have researched your market enough so that they can see that you are taking yourself seriously and will be treating your job as a business!

Do you like to work long hours?  Can you deal well with aggravation and stress?  If you are planning on starting your own business you need to be able to deal with working ten to twelve hour work days initially.  It will be your business and it will grow or wither away depending on how much time and energy you put in.

If we go back to our hot dog cart example, you can figure that you will move your cart from place to place to try and maximize the amount of hot dogs you can sell in an 8-12 hour period of time.

Let’s say you need to open up your hot dog cart at the courthouse at 11 for the lunch hour rush.  You are there for two hours so plan on getting an additional two hours of preparation each day to get to your first destination.  From 2-4 you travel to some construction sites or to a stadium.  From 4:30-6 pm you go back to the courthouse or stay at the stadium.  Let us say that you move to an outdoor mall by the ocean to get the late night traffic.  You end up staying there till 10 pm.  You then take 1-2 hours to go home, clean up the cart and get ready for tomorrow’s day.

Ask most independent businessmen and you will find that they work up 10-15 hour days easily.  Most of them enjoy what they are doing so initially it isn’t a problem.

But if you want to have a social life and get back to your family, girl friend, boy friend or relative of choice, you need for them to understand that initially they won’t be seeing much of you because you are trying to start your own business.

Maybe that won’t be an issue as long as the income is streaming back in the house.  There are a lot of families that are split between states and some of their kids are living with relatives elsewhere just so they don’t get uprooted.  These are factors that have to be considered when trying to decide if you are going to start your own gig and even in working in general.

A great market for people looking to start businesses is to cater to the special needs community.  If you google “special needs” you will see there are all sorts of products, items for caring, devices to help to different types of blood testing, analysis, you name it, there is something out there for it.

That tells me that there is a large market for products for people with special needs or their caregivers.  A great example is a portable pulley that can carry a person from a bed, to a table or chair, and then lift that person to into a tub or shower.  As caregivers get older, they may not have the upper body strength to lift their charges – or themselves for that matter.  Anything that can make caregivers lives easier and is relatively inexpensive can be a gold mine.

These are the ways that I go about planning, researching and deciding whether I should start up a business or not and they are things you need to look into as well.

Please post your questions, comments, or any nifty devices for lifting people in the boxes down below. 

July 09, 2009

Hey, don’t go anywhere yet.  Having some tax issues or tax questions?  Any problems with trying to make it through the financial Depression we are in that is making you depressed?  Please read on.

I am expanding  my practice and taking on new tax clients.  If you are interested in having somebody who is a successful businessman and tax professional with integrity review your returns discretely and see if your tax guy or gal is doing a good or goofy job, please drop me an email or post a comment with your contact information and time.

I have experience in international business, small businesses, partnerships, multi-state tax returns (they can get complicated) and anything else you can probably think of.

I also do business consulting and have ran several businesses (still running a few) myself so you are in good hands.

If you are looking for a day job, part time work, suggestions for saving money or investing, please check out my book, Practical Money Making, that is listed right after his paragraph in this very post. There are some great suggestions and ways to survive the Depression we are in.

Practical Money Making-Surviving Recession, Layoffs, Credit Problems, Generating Passive Income Streams, Working Full Time or Part Time and Retirement

Interested in any of my books? You may want to make a stop over here. Please click through to purchase my books and some other interesting items that actually ARE on sale.

Have you read my book, “Bad Tax Idea, Good Tax Idea“? Please order it today. The tips inside can save you hundreds if not thousands of dollars! Tax planning should be done year round and not just two weeks into January or later.

Part of all the proceeds from the sales of that book go to Rett Syndrome research. One girl is born with Rett Syndrome worldwide every fifteen minutes. My daughter Arianna has Rett Syndrome and we are working to do all we can to make her life easier and find a cure in her lifetime. Boys born with the Rett gene generally die at birth.

Kim Isaac Greenblatt

Sound Business Advice  For  Our Financial Depression Part 2

Tags: Business, hot dog, plan, start up

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