Sound Business Advice For Out Financial Depression Part I
Question from a reader:”You have made some pretty good comments lately about saving money, Kim. I want to hear more though about making money. What are the number one issues that you see that are things that cause problems when we start up a business (especially in this lousy economy where people aren’t spending)? Thanks!”
My answer is that it is important to save money and enter a business with the the same business rules that you have in your own daily lives. I realized over the years that most business people (or at least the ones I’ve dealt with their taxes) spend too much money on things that don’t need for their business. They also in bizarre moves treat their business differently than their own finances and that has always been a source of sadness and amusement to me. More on this later in the entry.
Let me give you an example from back when I was starting up my comic book delivery business. I had saved money and was ready to buy a cash register for a swap meet, a credit card acceptance machine and the wiring for it, stock up an inventory of every comic book, poster and pog (pogs were basically tiddly winks with cool, trendy designs or licensed characters on them-cheap to make and you could get a high mark-up on them) I could think of. After calming down and realizing that I would go broke in trying to get everything – not to mention to pay monthly fees for the credit card processing service AND a service charge for each transaction, I settled on the following:
1. Preorder of comic books of about $600 of merchandise, trading cards and posters at the retail level so my initial cost with a 50% discount (if it was that high) would be $300.
2. Licenses for selling comic books and working swap meets (my initial source of looking for clients who wanted me to deliver comic books to) – free.
3. Site fees to set up at each week at either Pierce College or the old Winnetka Drive-In swap meets – $10-20 a week for a table so in a month maybe $80.
4. A cash register – $250.
I mentioned this to a family friend and he said, “Why do you need a cash register? What’s wrong with a metal box or even a cigar box?”
He was right! I ended up saving another $250 which I could turn into trading cards which I ended up selling.
I ended up getting clients from the swap meets. Unlike a lot of other people who had jumped into the comic book business to make money, I did not go broke from over-spending with my start-up costs.
In your business, do you really need a plush office? Is image important to what you are selling? If you are an attorney or in marketing, you might need something for potential clients to see that you are serious. You don’t have to go overboard like some Century City attorneys use to and have marble flown in from Italy and placed in your building!
Think of ways to start up or continue your business that don’t cost money. Be creative. There are plenty of one dollar, 99 cents and inexpensive stores where you can find goods to fill the gap that expensive stores sell. A lot of times the products are the same and you are just paying more for the name recognition from buying it from that particular store.
Little things like that may sound cheap but if you are starting up from scratch, trying to take care of a family of four, have a special needs daughter or any or all of the above, you want to make every penny count. It will pay off down the line as well because other business people will respect you for watching your money. Potential investors will see that you can be trusted with money and won’t blow it all for things that won’t help your business.
Another important point that business people tend to forget: Nothing beats natural “word of mouth” advertising. The Internet allows people to voice their opinion and tell you about goods and services. Sometimes some of the feedback systems can be manipulated but if you read between the lines, take the time to e-mail people or just ask your friends, you will see that honesty in business is rewarded with repeat business!
If you make a good product or offer a good service, people will come back (if they have the money). Not only is it a great and profitable idea (like the great and powerful Oz?), it will happen without you spending a cent (or euro, etc)! For something that costs more than free, please check out one of my books from my site!
Earlier on in the post I mentioned that there was sadness and humor when I looked at people’s business management and their home finances. People would be brilliant in their business finances and when it came to their home finances they would be in debt to the tune of thousands in credit card debt and they would be living way beyond their means if their income stream dried up. I’ve talked about this before with girl friends, boyfriends, husbands, or wives who drain the life from the business in the form of draining the income stream. You can take all the advice I suggest, use your own knowledge and still have a lot of problems if you don’t get everybody on board in your household to cut back on spending and watch their expenses.
Look through some of my previous entries and you can see not only some of the celebrity mishaps (like with Michael Jackson and his finances) but with “normal” (whatever that means) people like you and me who buy into the hype and don’t believe in saving or wealth creation.
Wealth creation is setting up income streams, savings and enough money that you can have so much money that you can benefit communities, cities, states, nations and even the world because you have saved up so much money. I hope all of us get to the point where we are wealthy and not just rich.
One of the ways people think they can get into instant wealth is looking for the next big thing. I applaud the fact that there is a lot of ingenuity going on and Americans are leaders in the world of invention. I don’t know though what is going to turn out to be hot or not. One of the regular questions I get asked is, “Kim, what kind of business should I get into? What is the next ‘big thing’?”
If I could predict the next big thing I wouldn’t be consulting, doing taxes, writing, publishing, managing or coding. I would be doing the next ‘big thing’.
Take a look at the television shows that are showcasing inventors who are coming up with their take on million dollar ideas or things that are labor saving or downright fun and “must have” products.
The cliché answer is unless you really have an innate ability for correctly guessing the fickle public’s taste, don’t bother trying to guess what the public wants next unless you have a lot of money to burn. The number one thing you should be looking at is whether or not you like the business you are wanting to get into. It is a lot easier to do something you love than something you hate. Millions of people around the world are doing jobs just to get by. Here is a chance to do the one thing that you love.
You like to design rooms? If you think you can make a living with it in the market you are in, go for it. Bear in mind that you will have to figure out a business plan before you can actually start your business but make sure it is something that you love doing.
You may be pleasantly surprised that your business may turn into the next “big thing” and you will be there waiting to take advantage of it. The number two thing you should consider is what is your realistic income potential.
You may like to design rooms but if everybody else in Trenton, New Jersey or Ankara, Turkey is also interested in designing rooms the chances are that you will have a lot of people offering to design rooms for free. You will have a hard time paying the bills. Keep in mind that jobs (full or part-time) that are glamorous, exciting or fun have a lot of people wanting to do them. Competition is fierce and the market reflects the income you can potentially make accordingly.
If you are starting something brand new, or something yucky (cleaning out people’s sewer lines), you will have less people (depending on the market in your area) in competition so you can forecast a better income stream.
Whatever you decide to do, take the time to make a business plan. A business plan is a blueprint for what you are planning to do. It should serve as a written document you can show others, potential bankers or people with money to invest (if you go that route) that you know what you are doing and know the direction that you will be going towards.
Continuing on from where we left off, let’s say that you’ve decided to do the job of your dreams. You really enjoy baking things at home. You think you would make a great baker. Maybe you love to fix things around the house. You’ve sat down and you have worked out that you think you could make a pretty good living doing this. The next question you need to ask yourself is, how easy is for me to get started in the business? This is called the ease of entry into the business or initial starting requirements.
You need to know or be able to research what the requirements are for doing business in the particular field that you want to work in. A good place to start is to strike up conversations with people who are doing what you are doing and don’t live near your geographical location. If you want to be a plumber, for example, you may want to talk to one that isn’t close to you so the person won’t feel threatened. In the case of being a plumber, he (or she) probably won’t feel threatened because there is a specific path of entry into being a plumber – you need to apprentice with an experienced plumber, take classes, etc.
This is the type of information you need to figure out before getting into your business. Do you have to have any specific licensing requirements for the city, county, state or national level in order to demonstrate competency for what you are planning on doing? You don’t want a doctor who has had one year of junior college making a diagnosis on you and it is to be expected that different careers or businesses have different requirements.
If you don’t have the requirements now, your mission is to determine what do you need to do to get the skills,how long will it take and will it be worth my while to go through the process to learn the skill or trade or get the street credentials that you might need.
That dovetails nicely into the next factor for consideration:
Is there a market demand for what you want to do?
You very well may want to be a plumber but if there are already ten plumbers in your area and there aren’t a lot of people, there may not be a lot of work to go around. On the other hand in a large city like New York, Los Angeles, Chicago, Houston or Miami, you may not have to worry about finding work since there are enough people with broken sinks, toilets and water pipes to go around.
Here is where you take stock of your existing skill sets. If you have always been handy since you were a kid and have read up on how to change pipes, love working with pvc, and already have connections in the industry – you are on your way. The remaining aspect to this would be to demonstrate reliable work habits – are you on time for your jobs, are you honest, do you go the extra mile for your customers, things like that.
If on the other hand you hate working with your hands, hate getting dirty and have a fear of dirty water, maybe plumbing isn’t the career choice for you.
Hopefully this answered the question we started with and then some!
July 06 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.
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 I