I have decided I want to start my own business. Now what?

[CaptLouAlbano]

Too add to this thought, another thing you can consider doing is buying into a business that is small and stagnant. Always get controlling interest though for this. For example, in the mid 90's I had a guy who cut my lawn. He was a one man operation, but was at his peak of earnings. He just did not have the time to take on any new customers. I bought him out, which was good for him because it put a lot of cash in his pocket. Over the course of the winter, I hired a marketing firm to go door to door in neighborhoods that had mid-high price homes and we blanketed the region with fliers. The deal was that if you signed onto a full season contract you got a special price. The marketing firm secured the contracts and did all the work for a commission. By the end of the winter we had enough people signed up so that I could hire three more people to cut lawns full time. My outlay of cash was relatively small, and I made my money back by the end of the first year. Year two and forward was pure profit.

 

[Paul Or Nothing II]

I am reading & rereading all the responses in this thread & appreciate them all!

I am not sure what type of business I would like to have.

Capitalism means - what can I do for others whereby they will voluntarily pay me for it!

So maybe make a list of goods/services that people in your area may like to have more of. Then rank them according to your initial capital, your knowledge & aptitude, things & services that will be required to start & sustain the business & how you will procure them.

Like somebody said, it might be pretty helpful if you took a job at a business similar to the one you wish to start, even at a low pay, it will offer you a "view from the inside" first, without risking your capital, you'd be able to see first-hand, the kind of problems & challenges such a business is likely throw at you & the kind of solutions that are required & then you might be in a better position to make a calculated decision.

Again, just think about goods/services that people in your area would like to have more of.........that will show you a way

 

[VoluntaryAmerican]

@OP

I'm in the learning process too. I will share what I learned so far.

First off, some people have made some good comments in this thread about capitalism in general. I disagree with finding something you "love" to do. This works for people and is a reason why they are successful, but it also backfires for a lot of people. "Love" I would contend, is not a good business instinct.

Instead, think of yourself as an opportunist who is trying to make the most profit for the least risk and investment. I don't care what business I get in, so long as I make informed decisions that result in profit. Always be on the look out for potential areas in the economy where this risk vs reward ratio seems favorable.

I've looked at starting a pawn shop, cash for gold business, security company, and my most recent research is in owning laundromat.

Read the basic intro book: Small Business Manual

Once you get that out of the way and when you find a business area you think has profit, research trade magazines, online forums, and other specialized areas like this.

For example I'm a member of Laundry Planet, it's a laundromat owner forum... and some of the info I learned from those guys is priceless. They are true experts in their field and it amazes me how they cut costs and improve the business for their customers. You will learn the most about your field by the guys who are currently living it.

 

[CaptLouAlbano]

First off, some people have made some good comments in this thread about capitalism in general. I disagree with finding something you "love" to do. This works for people and is a reason why they are successful, but it also backfires for a lot of people. "Love" I would contend, is not a good business instinct.

I agree with this statement from a personal standpoint, but I would say it all depends what the individuals goals are with starting a business. For some people they want to start a business to be their own boss, and if that is the case they really should love what they are doing because they are going to be doing it 60-80 hours per week. If they choose to take the route that I did, which was acquiring businesses and hiring people for the day to day operations of the business, then it really does not matter if they love the work of that business or not. Like I mentioned, when I bought the pizza shops, I never once made a pizza or stood behind the counter of the shop. What I loved was generating wealth. I enjoyed researching new businesses, meeting with brokers, attorneys, accountants, sales reps, etc. I never had an emotional attachment to any of the businesses that I owned - if they made money then I would devote time to them, if they did not make money, then I would sell them.

So my best advice for anyone is do some self-examination and determine what your life's goals are. If all you want out of life is to be in control of your own schedule and not have to answer to a boss, then by all means start something that you love and run with it. But if your desire is to accumulate as many assets as possible, then go in that direction.

 

[pauljmccain]

The marketing firm secured the contracts and did all the work for a commission.

I find that incredibly hard to believe. What marketing firm is this?

 

[CaptLouAlbano]

I find that incredibly hard to believe. What marketing firm is this?

They were local to me at the time, this is when I was in NJ and this was about 15 years ago. I paid for the materials, and guaranteed them a minimum fee, but their compensation for this project came through commissions, since they closed a lot of deals for me. I had used the firm for many projects over the years (they handled almost all of my direct mail and advertising work for other businesses that I owned) so I had a solid relationship with them. It was easy for me to set up this deal with them.

 

[pauljmccain]

Well congrats on your story, but I still don't buy a dime of that nonsense. There's no way an effective or reputable marketing firm charged only a "small fee" plus commission. Marketing firms don't take a commission. Sales, maybe, but they still won't do anything without appropriate marketing support. Then again, lawnmowing isn't exactly a technical business. Meh.

 

[CaptLouAlbano]

Well congrats on your story, but I still don't buy a dime of that nonsense. There's no way an effective or reputable marketing firm charged only a "small fee" plus commission. Marketing firms don't take a commission. Sales, maybe, but they still won't do anything without appropriate marketing support. Then again, lawnmowing isn't exactly a technical business. Meh.

Like I said it was a firm I did a lot of business with over the years. If you read my earlier posts, I owned numerous businesses up and down the Jersey Shore. The firm I used for this project was the same one I used for all of my advertising, direct mail, etc throughout the years. When you give a company hundreds of thousands of dollars of business over the years, they are more than willing to be accommodating with you on special projects - such as this one was. Keep in mind that we are only talking about 1000 households at the most that the flier was passed out to. They designed the flier as part of my ongoing contract with them, they hired kids to put them throughout the targeted neighborhoods, the phone calls were directed to their office and they closed the sales.

And you are right, lawn mowing is not a technical business at all. This was simple customer acquisition, and like so many other things that I did throughout my career, I hired people to do the work for me. My expertise in business was in finding out new opportunities, evaluating their potential, negotiating deals, and hiring quality people to do the hands-on work.

 

[newbitech]

Get you a subscription to Entrepreneur Magazine.

 

[VoluntaryAmerican]

So my best advice for anyone is do some self-examination and determine what your life's goals are. If all you want out of life is to be in control of your own schedule and not have to answer to a boss, then by all means start something that you love and run with it. But if your desire is to accumulate as many assets as possible, then go in that direction.

Good posts Lou. I am also from South Jersey, perhaps I used one of your businesses!

Do you have any advice for someone who has already done that self-examination. For me, I like to manage things and create plans and then watch them come together. Money is of course another big motivator of course, money is productivity.

Any other useful information, books recommendations, or other tid bits of advice? Appreciate it.

 

[VoluntaryAmerican]

double post.

 

[TCE]

@CaptLou: When you purchased the pizza shops, were they already generating a good profit? I would imagine the original owner would not have sold them to you at a reasonable price if he was making loads of money already. I am assuming you made some changes to the businesses to increase their profitability?

 

[CaptLouAlbano]

Good posts Lou. I am also from South Jersey, perhaps I used one of your businesses!

Do you have any advice for someone who has already done that self-examination. For me, I like to manage things and create plans and then watch them come together. Money is of course another big motivator of course, money is productivity.

Any other useful information, books recommendations, or other tid bits of advice? Appreciate it.

Well if you walked the boardwalks of AC, OC or Wildwood at some point over the last 50 years then you probably have. Thanks for the business.

You sound similar to myself in that I was never a hands on guy, but played more of a CEO role than anything else. So it sounds to me like you are well suited for buying businesses and watching them earn money. I would say to you, like I did, don't quit your day job until you find your businesses are able to generate enough revenue to replace your full time income and provide you with enough income stream so that you have ready cash to invest in other businesses. That way you can experience a snowball effect and watch your portfolio grow.

As far as books, I have to be honest, I haven't read any business books in years. With the exception of some rental properties, I am pretty much out of the game now for many years. But what would be helpful for you is to take some classes at a community college or online school. Go cheap, you just want to learn the basics. Take a course in economics, accounting, finance, business law, etc - sort of the core requirements for a Business Admin degree. This should get you acquainted with all the jargon, and give you a basic understanding of how things work.

When looking at businesses to buy the formula is pretty simple. First is that obviously you want to buy a profitable business. I never would buy a loser thinking I could turn around a sinking ship - there was simply too much risk. You want to buy into something that will generate immediate income, and something that you can forecast being able to recover your initial investment in a relatively small number of years. You also want something that you feel you can add some value to, and will be able to grow in some respect.

Lastly, and I cannot stress this enough, hire quality people and pay them well. Your life will be a lot easier if you pay someone handsomely and they are a trusted employee rather than paying them the going rate and having to hire someone new all the time. A lot of the people on my payroll were low wage employees, but because I treated them well, I would have many of the same people coming back year after year. It was really nice having a game attendant working for us for 4 or 5 seasons in a row as a summer job through college rather than having to find someone new each year.

Good luck to you.

 

[CaptLouAlbano]

@CaptLou: When you purchased the pizza shops, were they already generating a good profit? I would imagine the original owner would not have sold them to you at a reasonable price if he was making loads of money already. I am assuming you made some changes to the businesses to increase their profitability?

The shops were doing very well when I purchased them. The owner was getting up in age and was retiring to Florida. He had kids in the area, but none of them were interested in the business, so that gave me my golden opportunity. Over the years there were some subtle changes made, but basically I kept things the same. Why fix something that isn't broken, was my thinking. Profitability did increase over the years though as I acquired a few more food service businesses, which lowered my cost of supplies by a small amount. The only major change was in the mid 70's we started offering delivery during the non-summer months, but to be honest, I cannot recall that being a windfall of business for us - the increase in business was pretty much offset by the cost of delivery.

 

[MoneyWhereMyMouthIs2]

In my view, the most important thing is knowing how the business is going to get revenue. You have to be effective in reaching your target market, and converting interest in the product / service into buyers.

As long as you have a revenue stream, you have something to manage and grow. You can't manage the number 0, no matter how talented you are.

Agree.

The most important thing is knowing what it is you enjoy doing.

I'd call that a hobby.

My 2c - find a partner who is passionate for business as you are.

1 + 1 = 10

That is not easy, but possible. In my case, I need a partner as lazy as me so we both make the maximum amount of money with the least amount of actual work. To put that in economic terms, I have a very backward bending labor supply curve. Sometimes there are reasons why everyone needs to be busting ass, and sometimes there will be reasons partners need to make major decisions without consultation (you need to trust their capabilities), and sometimes you will just need to defer decisions to someone you believe has a better grasp on the issue at hand. You do need to have a partner with the same mindset. If one wants to work 60 hours per week, and one wants to work 10, you'll obviously have problems. You should probably either be complementing each other or mirroring each other and everyone needs to be happy.

What you truly want to shoot for is a business that generates income for yourself and your family without you having to work. That is the difference between the self employed and the wealthy. The self employed own a job, the wealthy own businesses.

Yep, and then you can spend all kinds of time on hobbies.

You will not make money selling things made in China. Almost everything is made in China. You need to offer a service.

I know people who could sell chinese cowshit, and it's probably lower quality and more expensive than the same thing they can find locally. You're going to have to sell something to someone. If you're offering a service, you still have to sell it, and it will quite possibly be the difference between success and failure.


Find some real life mentors who are extremely successful. You can get a lot of advice on message boards, but there are a lot of things that are better discussed on a phone. Be careful about taking advice from people (especially family members) who aren't successful, themselves. It won't hurt to listen to them. (They may have good ideas, or explain to you why they they have previously failed, etc - whether they know it or not.) If something is working, do more of it. If something isn't working, stop it unless you have a plan to make it work.

Lastly, and I cannot stress this enough, hire quality people and pay them well. Your life will be a lot easier if you pay someone handsomely and they are a trusted employee rather than paying them the going rate and having to hire someone new all the time.

I have a friend who made millions doing that. He would pretty much hire people at 50% more than they could make anywhere else. If they were slackers, they'd be gone in a week and everyone knew that up front. The other employees wouldn't put up with slackers, either. They worked hard, and expected others to do the same.

 

[Elwar]

I know people who could sell chinese cowshit, and it's probably lower quality and more expensive than the same thing they can find locally. You're going to have to sell something to someone. If you're offering a service, you still have to sell it, and it will quite possibly be the difference between success and failure.

I agree, that is the service part. The selling.

My wife's clothing store did ok based solely upon her ability to sell and her passion. She had a couch and coffee and cookies in her shop to make people feel welcome and give it that boutique atmosphere. She was providing a service. Sure it was retail, but the money she made was based solely upon her abilities.

We had a temp girl work there and sit behind the desk. She never made a sale (or she did and we suspect she was stealing from us). I filled in a few days and I hardly ever sold squat and everyone was always asking to see my wife.

We put her same clothing online and her competition has it for close to wholesale. Then we ran across a few Chinese sites selling for less than she was paying. By then it was too late, otherwise we would be buying from those sites.

 

[CaptLouAlbano]

I have a friend who made millions doing that. He would pretty much hire people at 50% more than they could make anywhere else. If they were slackers, they'd be gone in a week and everyone knew that up front. The other employees wouldn't put up with slackers, either. They worked hard, and expected others to do the same.

I pretty much did the same, though not at 50% more. There's a lot that can be gained by being a good employer, and doing things like sending Christmas & Birthday gifts goes a long way to building that relationship. I always viewed my employees similar to how I would view a customer - they were providing me with a service and I was compensating them for that service. In many ways, I needed them more than they needed me, since jobs were plenty in those days. So by paying them a buck an hour more than the rest of the places did (keep in mind minimum wage was 1 to 4 bucks an hour during most of my years in business), tossing them a small gift on special occasions and having an end of the season party with open bar and lots of food kept my people happy which made life a whole lot easier when it came time to staff my businesses the following year.

 

[jbauer]

It might be said later in the 6 pages but you're starting a business but you're not sure which one? You don't have experience in your field yet? You don't know the profit margins/ratios? The competitors? Your target market, advertising cost, leads/sale, profit/loss On and On and On.

Maybe I'm in the minority here but my wife and I didn't start our own businesses because we woke up one day and decided to. It kinda just happened over time. Good luck though.

 

[CaptLouAlbano]

It might be said later in the 6 pages but you're starting a business but you're not sure which one? You don't have experience in your field yet? You don't know the profit margins/ratios? The competitors? Your target market, advertising cost, leads/sale, profit/loss On and On and On.

Maybe I'm in the minority here but my wife and I didn't start our own businesses because we woke up one day and decided to. It kinda just happened over time. Good luck though.

Good point. And I think a lot of people automatically have the idea that if they start a business, they have to work in that business - which isn't always the case. I hate seeing people leave the comfort of a full time income to open up a shop and then realize a year or two later that they are making less per hour working at their business than they were working at their job. We seem to have this mentality today that if I want to open up an ice cream shop that I have to scoop ice cream all day and night - that really isn't the case if you have a good understanding of business and how to make money by owning one.

 

[Pericles]

Lastly, and I cannot stress this enough, hire quality people and pay them well. Your life will be a lot easier if you pay someone handsomely and they are a trusted employee rather than paying them the going rate and having to hire someone new all the time. A lot of the people on my payroll were low wage employees, but because I treated them well, I would have many of the same people coming back year after year. It was really nice having a game attendant working for us for 4 or 5 seasons in a row as a summer job through college rather than having to find someone new each year.

Good luck to you.

Repeat this until it sinks in. Especially in the technology business - not matter what you think the product is, you are selling the brainpower of your company.