How to assess a business opportunity, part 3 – Money

The third part of this series is a very important part of ‘how to assess a business opportunity’ and it’s all to do with money.

You see, despite what many people say, money is incredibly important. In fact, some folks even go so far as to say that it’s almost as important as oxygen in that it’s very difficult to live without it.

Most people know that any business needs money to start off with and should ultimately make more money than what was invested. However, what many people overlook is the fact that businesses also need money to run its normal day to day operations, this usually known as working capital.

You see, many have business opportunities, such as network marketing, require a start-up investment of a few hundred dollars or pounds just to join the scheme. In the UK this is capped at £200.

But you’ll also need money to keep the business going before you start to see any kind of return on your investment. Your business has ongoing costs such as travel (fuel), telephone, postage, networking meetings, premises, professional memberships (maybe), subscriptions to journals, your own self-education and various others. And all this before you even get to turning over into profit.

When I was involved in a network marketing business in the mid-90s, the business Kit cost me have just under £100. There was also an ongoing education system which cost me an additional £30 a month, I had telephone costs of around £10 a month, travel costs of anywhere up to £40 a month, as well as the cost of marketing and promotion materials. So before I even started the business was costing me around £100 a month. This means I would have needed to make a profit or £1100 or more in the first year just to make back my investment.

To many people this can seem like a bit of a tall order. If you are on a low income or don’t have spare cash or spare ongoing income to cover this then you would need to examine very carefully how much the business will really cost you month in month out until you start turning a profit.

However, many people use money as an excuse for not succeeding. Let me tell you a story which will help you understand what I mean by this.

Imagine I came to you one day and said I have a Ferrari which is worth £100,000 but because I’m desperate for cash I will sell it to you for £20,000 if you can get the money by lunchtime tomorrow.

In most cases most people would instantly see the profit potential in this deal, even if you didn’t keep the car you could certainly sell it on for an almost instant (and substantial) profit.

So, ask yourself this question, would you do what ever it took and work all night just to get your hands on £20,000 by tomorrow lunchtime? I know I certainly would.

But herein lies a bit of a problem; many business opportunities take much less money than buying a used Ferrari but the return on investment takes a lot longer to materialise. In other words it’s going to take you longer than to the following day to make some money. But at least you’re not going to have two scramble to raise tens of thousands of pounds.

So, the main thing to consider is whether you not only have the start-up cash required to get the business off the ground but also can find enough money to keep the business going. Very few businesses have the situation where you just put money in right at the start to buy into the opportunity and then don’t have to put more money into the operation of the ongoing business.

I know I’ve talked a lot about network marketing in this particular post thus far, obviously that’s not the only type of business available to you if you’re looking for a spare time business opportunity.

There are some businesses where buying a little bit of stock and selling it on will quickly turn around a small profit. You can also make your own goods, I know a handful of people who make their own jewellery and sell them online through websites such as eBay and Amazon.

You could also set up a part-time writing business where you take on freelance writing projects for organisations that don’t have the capacity to write for themselves. A good example of this are those who write blog posts for corporate websites. The benefit of this kind of business is that you can get a free website set up to offer your service, you can use your mobile phone as your contact phone, and the financial cost of producing the goods is nearly nil.

So, hopefully you’ve learned a little about the money involved in starting and running a business when you come to assess a business opportunity.

If you have any thoughts or experience (good or bad) on the money side of ‘how to assess a business opportunity’ then please feel free to write them in the comments section below, I’d love to hear from you.

4 thoughts on “How to assess a business opportunity, part 3 – Money”

  1. It seems so obvious that it takes money to make money, but it definitely doesn’t occur to everyone who is starting their own business. It is nice to see that starting a business via the internet can reduce the initial startup investment as well as the ongoing expenses, but even with a virtual business some money is needed to carry on. Thanks for an interesting a truthful article.

    1. Thanks for the comment Mary. Yes, many of the ‘business opportunity’ folks overlook ongoing business costs and, in some ways, it’s a little less than honest (even if unintentional).

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