What Is A Business Opportunity?

To a seeker, a business opportunity is a way to make money.  To a company offering an opportunity, it is a chance to leverage somebody else’s time, talent, or money to grow the business.  Often opportunities are “sold” as having a specific income or potential income, but the risk and reward belong to the seeker as an independent business person.  In other words, the success or failure of a business opportunity is ultimately up to the seeker, regardless of how much help the offering company gives.

A business opportunity typically isn’t employment because employment does not have a major risk or the potential reward of operating a business.  You can hire an employee to run a business subsidiary but you monitor it to make sure it’s operating properly and will have to decide to close it if it cannot turn a profit.  A business opportunity, on the other hand, is at the sole discretion of the independent business person.

A company offering a business opportunity has very little risk if the independent business person is not successful but gets a major reward if they are.  As a seeker, a company is not just going to hand you money with nothing expected in return.  You will have to perform.  You may have very little direction, you will just be expected to create sales however you do it.  In return you may get a brand to use or some other benefit from the company, but they aren’t just going to dole out a bunch of money.

A get rich quick scheme is a way for a seeker to make money quickly.  Actually, it’s a scheme because there’s no such thing as “get rich quick”.  It’s usually a guise to get you to part with your money for very little in return.  A valid business would be an investment of time and or money for a return.  That return may be 30% or more, but it will still take a while to become profitable.  Often businesses can be profitable right away if you don’t count the time you invest.  It might also be possible to earn a profit right away if the independent business person has an uncommon talent or skill.  But generally you’re not going to be profitable right away and it will take hard work.

Most people who join a multi-level marketing company sell business opportunities.  Often this is all they sell, except for the product they sell themselves.  Selling a business opportunity is technically recruiting, which requires a somewhat different skill set.  Still, it is so similar to selling that I personally would not tell people that there is “no selling involved”.  I mean, when you are in business you sell something to someone, that’s what a business is.  If you recruit, product must still be moved in order to make a profit, and the better you can sell yourself, your customer, and your downline on the product, the more money you’ll make.

Often the pitch “no selling involved” is used to refer to distasteful selling, such as door-to-door sales or cold telephone calling.  Using these methods are typically not effective, so I would not do or encourage distasteful selling techniques.  Advertising can be very effective to build a business if done properly and is usually a much more fun way to reach people.  Those you talk to are already interested before they call so you typically don’t encounter harsh rejection.

If you do get involved with a business opportunity, make sure you know what will be required of you and what you will get from the company you’re going into business with.  Make sure you get it spelled out in writing.

Work At Home

I work at home.  I work at home all the time.  I used to work at home when I was employed, for my employer.  With technology these days you can do many jobs for an employer at home.  Or you can work for yourself at home.  So the first question is: Are you looking for a job or for a business?  Personally, I have been self employed now for four months and am very happy being self employed.

My self employment is consulting mostly, which is still selling time for money.  So it’s kind of like employment.  I work three days at the client and two days at home per week typically, not counting the time I’m working on the weekend.  If I work after hours it is typically at home.  I also have quite a bit of administrative work to do since I don’t have employees.  So I am creating my time sheets and status reports, keeping track of expenses, and ordering office supplies I need.  Stuff like that.

You can start a business at home if you like, and long term this makes the most sense assuming you are successful.  The game you have to play in business is about getting the most from your initial investment.  So you constantly have to work at saving money or getting more for the money you do spend.  Still, you are most likely going to spend more than you’re taking in when you first start a business, and will perhaps lack profits for 2, 3, or 5 years.  So you need to be able to handle the losses as you start out.

Many people start out part time in their business pursuits and work a full time job so that they can have an income while they are starting out.  This creates a time crunch especially if you have a family, so you often have to sacrifice things like TV time.  The last couple of weeks I’ve had a hard time even working out, so it can get kind of busy.  And if you do it right, your business will make you more busy than you expect.  Note that your business should drive you not the other way around.  The trick is to generate buzz or somehow have a constant inflow of customers.  Advertising is a good way to do this (free is best).

If you want to go the other route and work from home for an employer, you have to be aware that you are only saving yourself drive time typically.  You will still have to do the work.  If you have distractions around the house you may find that really difficult.  You should look for employment with some flexibility as to when you will work, so you can work after the kids go to bed for example.

Good luck to you and let me know how it goes…

More About Being A Bean Counter

Last week we talked about calculating a return on investment (ROI) from your recruiting costs, whether you are recruiting customers for your product or resellers.  Of course our return on investment calculation is just an estimate based on less than all the facts.  It is still an important calculation, though, and worth the exercise even if ultimately it is way off.  Why?  Because ultimately you want to know what your real return on investment is and you can’t wait for all the facts to come in.  So, you make an estimate based on what you believe, then you revise your number as reality sets in.

Why do you even care what return on investment is?  Return on investment is an important measurement for deciding if you time and money are being spent in the right way.  As a rule of thumb, a 20% return on investment is good for investments with substantial risks.  You can consider a business investment a substantial risk because there will be good times and bad times, and you might now be in a good time (in fact I think now is a great time).  So today your real ROI may be 20% and tomorrow it might be -5%.  So 20% is a good rule of thumb for ROI.

You might want to adjust this ROI for your risk level.  Let’s say that your ROI for new resellers is 18% but it’s likely their business will grow.  So 18% may be a very good ROI.  If your ROI is 8% instead, it might be a good ROI if your investment is US Treasuries that will always pay 8% (i.e. ultra safe).  But it would be an extremely poor ROI if your investment had any risk at all.  So risk is a factor in whether your ROI is a good number or not.

Your ROI is an important number to determine how much money you’ll need before your business begins making a profit.  For instance, you invest $100 per month for a year and your ROI is 20%, meaning you’ll make $20 per month or so.  It will take 5 years to begin making a profit if you never increase your investment.  If instead you sink your profits back into your business, you will earn $100 in revenue before hitting the 5 year mark but you’ll always lose $1200 per year.  You’ll need to back off on your investment to earn a profit.

If you do want to invest $100 per month in your business and reinvest the revenues for 5 years, how much money will you need?  $1200 per year X 5 years or $6000.  Do you have $6000 or can you get it over 5 years?  If not, you will need to borrow the money or find investors.  So the ROI is also important to determine if you’ll do it all by yourself or if you’ll need to seek help from others.  It’ll do this before you actually need the money, giving you time to work with your bank or pitching your relatives on your new business (to drum up investors).

So your return on investment number is important to estimate, then correct, as you initially grow your business.  What other calculations are important?

It’s All About The Product

When you go into business, it’s all about the product.  Because no matter which marketing method you use, ultimately the customer will either buy the product or not.  That’s why, if you are considering multi-level marketing, you must seriously consider the desirability of the product.  Would you buy the company’s product at retail?  If not, it may be too hard to sell your customer or sell yourself, and somebody has to buy the product in order for you to make money.

When you look at opportunities, you really need to do the math.  You are looking for a 20%+ rate of return for your time, materials, and cash investment.  For instance, if you spend $100 a month and at the end of the year have a $20 per month commission check, you are right on a 20% return.  So how do you do the math?  Try the following on for size:

cr / ci = ri

cr is what you expect for commission or profit for an individual customer in a year

ci is what you spend in dollars to get a customer.  You should include time, materials, advertising, and other expenses.

ri is your return on investment.  .20 would be a 20% return.

For your customer, you may sell to end consumers or other distributors.  You might want to figure out your return in both ways to see which gives you the most immediate return.  Traditionally this is going to be your customers.  Distributors get a break on the product so you get less of a profit on the volume.

The thing we are not figuring on is when your direct distributor gets another distributor.  You do get a cut on the sales to your second-level distributor, but it’s not usually as much as your first-level distributor.  What I would do about the multi-level aspect of your business is to ignore, for financial purposes, that you will ever get beyond your first level.  You might want to allow for a smaller initial return on investment to compensate for the multi-level effect, that’s up to you.

Again, product sales is the most important thing so you should always be selling the product, even when you’re recruiting.  In fact, sponsoring sales people, people who will sell the product to consumers, is usually the best way to go.  Some of you may say that selling the dream works best.  However, the dream gets people sponsored into the business, not selling product.  It also produces unrealistic expectations and unhappy distributors.  You may also get a look from the FTC.  So we sponsor sales people to get product volume, and we can generally bank on the fact that we’re only going to get first level distributors unless we train our great sales people to be good recruiters.

The downside to multi-level marketing is what the MLM company can do to you.  You are pretty much at their whim.  You advertise their way, you sell their way, and at a moment’s notice they could decide not to use distributors any more.  So be careful out there.

We are starting to be really active with a multi-level marketing company again.  We joined the company in 1992 and they have been very consistent. I believe they produce a very good return on investment for recruiting and have an exceptional product line that customers love.  Check them out.

Take Action

There is nothing wrong with a little analysis.  Until it becomes analysis paralysis.  Ultimately, in the end, you must take some sort of action.  A decision not made is a decision made for you.

This is especially important when you are trying to decide what direction your company should take.  If you have employees, they are looking to you for leadership.  You set the direction and communicate it to the troops.  They execute their job functions to push the company in that direction.  Lack of leadership usually means that nothing gets done.

If you are just starting your own business, you may have several different business options you are considering.  My advice?  Take action and set off in a direction.  If it is the wrong direction, you start over with a new opportunity.  Taking weeks, months, or years to make a decision means that you don’t start a business for that long and you could be spending the time learning.  Yes, there is some expense to making mistakes and setting off in the wrong direction, but indecision can be far more costly.

Spend some time doing research about what your choices are, which ones have merrit, and any other information you find pertinent, but give yourself a deadline for making a decision.  Then take action!  Do your dream!  Go for it!

How To Have Courage

Courage is being able to do something in the face of obvious danger.  I have been discussing some politics the last couple of weeks and the main thing I wish is that politicians would have the courage to do the right thing in the face of political pressure to do the wrong thing.  Sometimes people get it wrong.  Especially masses of people who develop a mob mentality about a particular subject.  Unfortunately, we the people elect politicians.  It is a blessing and a curse to live a democratic society.  On the plus side, we help decide public policy so there is no taxation without representation.  On the minus side, we live in our own little worlds and often do not see the bigger picture.  That’s why the President and members of congress need to have the political will to set a particular direction and communicate the need for the direction to the people.  President Kennedy said that we need to go to the moon, not because it is easy, but because it is hard.  Political courage and leadership does not exist like that today.

There are three kinds of people when it comes to courage.  Those who lack courage, those who act knowing the dangers, and those who act because they have no clue or choose to have no clue.  The first group we call workers who trade their time for money because it seems like the safest way to go.  The third group is probably the most likely group to contain entrepreneurs because they act with no sense of danger.  The second group probably contains business manager types because they feel the danger and seek to understand it before acting.

As an entrepreneur, you want to try stuff knowing that you’re going to fail 90% of the time because there’s really not that much to lose.  But knowing that you’re going to fail means that you must be working with a net.  You must have a fallback position to take when everything goes to hell in a hand basket.  Even after you start succeeding, there is a danger that things will fall apart, so your fallback must be there probably for the first 5 years of a successful business.  After that, you must become a business manager.

Making the transition from an entrepreneur to a business manager is a tough one.  Often entrepreneurs will build their business to a certain point then sell it to a business manager, or hire a business manager to run it for them.  Very few non-manager entrepreneurs succeed at being a business manager… but personally I would try.  Of course I have my MBA so I do know what it takes to run a business… I am an entrepreneur because I try and try and try again, regardless of how many times I fail.  Not too many MBA’s are truly entrepreneurs, but I was an entrepreneur before I was an MBA, so I haven’t been tainted by the education.

Normal people do have things that they don’t want to lose.  You have your home and your family.  You drive a nice car.  You take vacations every spring.  Being an entrepreneur will take some sacrifice.  No doubt about it.  But you want to do things so that you don’t end up falling to rock bottom and losing everything you have.  You can start your business while you are still working.  You can separate your business from your personal finances (recommended).  You can set up an emergency account.  Or you can think of some other way to create a safety net to catch you when you fall.  Remember, you are going to fail, so be ready.

If you work a normal job, I applaud you.  You have much more courage than I do my friend.  You depend on one employer, who on a whim could wipe out your whole division and put you into the unemployment line.  Just like mine did last spring.  I was lucky enough to have a consulting business that caught me and has been supporting my family the last two months.  I didn’t think it would but I found out how many friends I had, and how much business I could really generate.  I depend on myself now, with the help of a few friends, and I see business into the forseeable future.

Are you still worried about when the pink slip will come?  I’m not.

Great Problems To Have

I know that a lot of you are struggling to get your business off the ground: get your first sales, get a little growth in revenue, perhaps hire your first employee.  It is always a struggle to get things going, but sometimes you will have a situation where you will get more business than you can possibly handle.  I have written about our experience with this kind of problem, where our business growth was somewhat out of control because of being listed on Yahoo, but I have also run across another business that had the same situation.  It was a one man shop that brokered logistics services.  The owner ran across some government business, wound up selling millions of dollars, and had a very hard time dealing with it all.  Last year the company grossed between 10 and 15 million dollars with probably half of that gross profit before salaries and such.

The company has only been in business 7 years, since 2003.  The owner is an exceptional sales person but in 2000 – 2001 was basically broke and penniless.  He sold used cars to try to earn enough to support his family.  He also waited tables.  This all happened because the great MLM business we were all doing had collapsed.  Where I went back to work, he had to start again from scratch.

Today the owner of this logistics company has 7 acres of property on a river in Florida, a boat, jet skis, a golf cart to get around his property, a 2006 corvette, a brand new Cadillac Escalade, and two other cars.  He also owns several investment properties.  All of what he has is fully paid for, no debt.  Plus he has enough in secure investments to provide him with income for the rest of his life.  In fact, he bought the Escalade with his American Express.

The business now has 5 total employees: all of the labor, trucking, and other work is brokered out to other companies.  It is still a lot of work and the business has challenges.  After several years, the business may be losing the government work that made them so incredibly busy.  Since they started getting the government logistics work, they had not sold any additional work because they were so incredibly busy.  Now they must devise a strategy and build a sales team and sell again, but motivation to rebuild is definitely an issue.

If you find yourself in this kind of situation, there are people who can help.  I know that you may be an entrepreneur and a sales person, but not a business manager.  You may have a hard time trusting people because you’ve been burned.  I understand.  There are people who can help and I can definitely put you in touch with the right people to help you with your problems.  People who are trustworthy and who will really help, and will help you feel comfortable that you are really going to be helped and not leached upon.

Business consulting is not cheap but will pay dividends.  It will help you get control of your business, your personnel issues, and your business problems.  You will sleep better at night and have the time to think for 5 minutes.  The right business consultant can help you get your business growing again.  And consultants are like temps, they take no benefits and go away once the project is complete.  No need to fire them.

Selling Time For Money

In a job, you typically sell your time for money.  The employer really wants the product of your labor, but pays you on an hourly basis.  Now some people are lucky enough to also be bonused or commissioned based on the results of their efforts, but most people just trade their time for a paycheck.  In multi-level marketing, we called a job Just Over Broke, because you can never really rise above your circumstances by working harder or doing more, and you can’t multiply your “profits” by using technology or brokering the efforts of others.

In my current business, I am actually selling my time for money, but because I am more like a temporary worker, I can get a higher hourly rate and hold back money for when I am not working.  I have also sold more work than I can possibly do, so I am brokering my work out to others in exchange for a small portion of their hourly rate.  I can also get excellent people that are extremely specialized, so ultimately the client will be happier than if I had done the work myself.  It is not always easy finding the right people, but doing this kind of business means that I earn some amount of residual income from my efforts.  Residual income means that I might earn for a month, year, or five years from my efforts today.

My focus is helping my client do what they want to do and I go above and beyond the call of duty to make that happen.  But ultimately the work is performed by others.  So I can spend my time selling work and putting together deals, building my business to an unlimited size, rather than selling my own time where there is a limited amount I can sell.  Selling time for money is a great way to start a business, don’t get me wrong, but ultimately it is a dead end that you need to move away from.

Do you still sell your time for money?

Three Weeks On My Own

I was laid off from my job of three years three weeks ago.  I really thought it was going to be a hardship for my family but it has turned into something else completely.  I’ve actually been able to consult daily, although I’ve still been taking interviews and have to still be available to work.  Finding another job has not really been working very well, but I did sell two projects and have a third that another consultant is doing for me.  So while the job front is not doing so well, consulting has been booming.

Consulting is still selling time for money, which is what you don’t really want to do when you’re in business, unless you sell other people’s time.  And mostly what I’m doing is selling my own time.  Still, I am making more as a consultant than I would be an employee, which has helped me to create a cash surplus.  On the downside, I am allowing my clients 30 days to pay their invoices, so I have slow cash flow.  Still it does beat working at a regular job.

I continue to work at building income streams that don’t require a ton of my time but it is slow going.  Maybe in a year or two these efforts will pay off.  But right now, consulting is paying the bills… and it is giving me the freedom to play a little.  It’s not a bad life.  I work hard and play hard, and have a little cash available.

Are your business efforts paying off for you?

Have The Courage To Do Something Dumb

This is a line from a Montgomery Gentry song that’s pretty popular right now, check out http://www.ourcountryroad.com/montgomery-gentrys-new-single-while-youre-still-young/.  It says to have the courage to do something dumb, while you’re still young.  And, oh, by the way, we’re all still young.  But the thing is, as we get older we build walls because we create our own little reality.  Anything that falls outside of that reality is in error.  Younger people in their teens and 20’s tend to accept that there are many realities out there and might be willing to go out on a limb to find a better one.  But their good-meaning parents tend to want to protect them from the pain of falling on their face, and help them build walls.

Not everyone that goes for a dream is going to be successful.  That is true.  But some will.  And it’s worth taking the chance at the risk of falling on your face because you don’t get a second shot at life.  What if you could be a famous singer?  An A list actor?  CEO of a major corporation?  President of the United States?  What if you try your hardest for a dream and don’t make it?  At least you had the adventure of trying.  You have something to talk to your kids and grandkids about.  It’s worth it to try if just for the adventure.

Now we do have responsibilities and if you have kids and a mortgage, you probably want to really think about your risks in setting out on an adventure… That’s why it’s tougher later in life, and why it’s better to take your chance at a younger age.  But that doesn’t mean you can’t go for a dream as an older person, it just means that your sacrifice is going to be much greater… and you are going to have to consider that.

So have the courage to do something dumb.  Something that breaks down the walls you have built.  Pursue your dream.  Dreams can become realities!

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