Lifestyle
Publishing's
Home Business Course
Lesson 3
Welcome to part 3 of our home business mini-course. Today, we will discuss some of the typical challenges in starting a business.
Depending on the business you select, you can run into numerous “challenges” you may not want. Some of these challenges are listed below:
Large start-up costs:
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Most businesses require start-up investments over $10,000 to cover expenses such as building lease security deposit and rent, equipment, materials, supplies, utility deposits, advertising, lighted signs, etc. If you select a franchise, you will also pay money up front just to get the name (e.g., you might pay $5,000 to start a Merry Maids franchise, $100,000 to start a Subway franchise, or $1,000,000 to start a McDonalds).
Operating Costs:
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Most businesses require some kind of operating costs. Even if you are already paying for them for personal use (e.g., your phone service, Internet access, etc.), you will have to pay something. For a franchise, you will likely be required to buy a certain amount of goods every month and you can bet you will only be allowed to buy it from the franchiser.
In a network marketing business, you may be required to buy a certain amount of goods every month to qualify for various commission levels or to keep your business active (which, as explained in lesson #2, is tax deductible). If you open an independent business location (i.e., not in your home), you will have to pay rent, utilities, maintenance, snow removal, repairs, etc. every month. The higher the operating costs, the greater your risk. How long can you afford to carry your business operating expenses until your business begins to prosper?
Inventory and Capital Equipment:
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You may have to invest in large inventories to adequately service your customers. You may have to invest in capital equipment to manufacture or process goods.
Legal & Accounting Fees:
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The more complex or susceptible to liabilities your business is, the more you will have to spend on lawyers to keep or get you out of trouble and accountants to track your accounts.
Long Hours:
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For the typical business, estimate how long it will take you to do the part of the business you like (e.g., development, servicing customers, writing, sales, etc.), and double it. Then add in at least 50% more time to cover stuff like paperwork, taxes, accounting, cleaning, consoling employees, etc.
Employees:
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Employees can be your biggest Problem, your greatest Asset, and they WILL be your biggest Expense! … if you have them. Depending on the business you select, you may not need employees. In general, the fewer the better. Of course, you can get more done with more employees, but you have to pay employees first (you get a piece of what’s left. Plus, employees cost a lot more than 100% of their salary because you have to pay for retirement benefits, Social Security taxes, vacation time, sick leave, etc., and you are always at risk with employees.
For example, if your business grows too fast, you can’t hire fast enough. If business slacks off, you have to carry them financially or fire them. They expect raises every year. And if you don’t do everything exactly right and legal, you’ll get sued … or they may just embezzle your funds. Robert Allen, 3-time New York Times best-selling author, refuses to have employees anymore. He used to have a business with hundreds of employees; now he has one … himself. Want some very interesting reading, check out Robert Allen’s book “Multiple Streams of Income” or try the audio version; you can get it at your local library.
Order taking and fulfillment:
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When your company offers products, you have to take orders, pick up the orders (or pay for shipping), and deliver the goods to your customers (or store them until your customer returns or pay for shipping). Order taking and fulfillment is a pain, but you have to do in almost all product-oriented businesses excluding “consumer direct marketing” companies.
Selling:
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We already talked about this one in lesson #1. You’re going to have to “sell” something in one form or another.
Conclusion:
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Now, you are aware of most of the biggest challenges encountered in most businesses. It’s not a very positive list, is it? I’m not presenting this to depress you or discourage you. I want you to recognize the reality of starting your own business, and how critical it is to pick the right business to meet your objectives.
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Dr. R. Bryan Stoker
President, Lifestyle Publishing