Tag Archives: starting a business

3 Ways Your Business Will Make Money

Throughout my business career I had a philosophy that sustained me whenever I made a stupid, read costly, mistake. My first year I lost out on about $20,000 because of a carelessly worded agreement. The client terminated it after I had solved his problem but before I reaped the benefits of my hard work.

How Your Business Will Make Money

So I told myself I had just bought a semester at the Wharton School. I don't know why I chose this eminent business school. But over two decades of entrepreneurship, I lost enough to pay for a MBA. Still, I gained practical knowledge that helped me become more successful in the future.

Like many new entrepreneurs, in the beginning, I was perpetually short on capital. I feared to ask for too high a fee thereby losing a client. Through experience, I learned that limits on my income were self-imposed.

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The 3 Business Models

Whether you want to be a solo-trepreneur, also known as a freelancer, or build a business, you can make money in three ways:

1. Fixed Fee: I started with this arrangement. It works a couple of ways. In real estate typically you get a percentage of the transaction price, whether a sales price or an amount of income generated by a lease or from managing a property. Numerous other businesses such as plumbing and auto repair operate on a fixed fee. Retail businesses and restaurants are also fixed fee enterprises. Whether a job takes you four hours or 40, the fee does not change.

To be successful you have to be good at estimating the amount of time it will take to handle a job. In the beginning when you have little experience you may have to charge a lower fee to undercut your competition while also learning how long different tasks take and gaining efficiency. Start counting the classes you could have bought at Wharton.

2. Hourly Fee: After a few years of paying my accountant and lawyer by the hour I realized they had something. If they misjudged how long a job would take I paid more. So I added consulting to the services I offered. If you are a solo-trepreneur this fee arrangement will eventually limit your income based on the number of hours you can work and the hourly rate above which you price yourself out of the market.

3. Passive Income: While most of my income came from the first two categories I had a few projects that generated passive income. In this arrangement, you make an initial investment of time and resources and the venture generates income thereafter with little additional work. Many types of investments fall into this category.

So does intellectual property. A training company asked me to do a video class on real estate appraising. The preparation and shoot took about 20 hours. Thereafter I received a royalty every time someone watched it. About every two or three months I had to answer a question from a student who had seen it. The checks came every three months until I joined the navy.

None of these is better than the others. Each has positive and negative aspects. The key: Understand the model into which your idea falls and the details of how to apply it.

Look for more on this topic over the next couple of months.

What other income models are you aware of?

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6 Things You Can Do Now to Become an Entrepreneur

Frustrating as it is to be unable to pursue your dream, you can still be preparing yourself to become an entrepreneur. Any big goal needs to be broken down into incremental steps. When starting a business you can do these basic things, all of which cost little or no money to accomplish.

6 Things You Can Do Now to Become an Entrepreneur

One vestige of my misspent youth was not practicing my clarinet more diligently. Had I done so I would be able to play swing and big band tunes reasonably well. Now I have the desire to routinely practice. One of the greatest clarinetists of all time, Benny Goodman, says it takes at least an hour a day to gain proficiency. For two years I would get into a regimen and make progress only to have to give it up. When I started blogging and building a platform there was no margin in my schedule.

Yet I feel extremely strongly about learning to play the clarinet well. I decided I would find some way to work toward my goal that would not take more than five minutes a day. A bit of thought and research later, I found some hand exercises for clarinet players that improve dexterity. After several months I have definitely made progress..

Here are the things you can do now to prepare to start a business:

  1. Set the amount of time each day you will work on your business planning. Even if it is only 10 or 15 minutes, that is five to eight hours a month. If you focus even for such a small amount of time you can make progress. As a bonus, you will be building self-discipline.
  2. Decide what product or service you want your business to be about. Assess your skills, inventory your likes, read articles and blogs about likely industries, and talk to entrepreneurs.
  3. Name you business. No matter that you may change it, naming your business makes it more tangible. Play around with logo designs and design some business cards.
  4. Determine its start-up size. Are you going to have a microenterprise run from your home or a larger company? Will you need a workshop, office, or employees?
  5. Work out whether you can start your business while you still have a job. Can you scale what you are doing so that you can keep your “day” job and moonlight starting your business? If not, how much money will you need to set aside so you will not run out of cash during the start-up phase?
  6. Make a list of the things you will need to get going. What equipment will you need? What forms and records will you have to keep? Which skills you do not have can you get before you start-up or fill with an employee or virtual assistant?
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Note that none of these steps will cost you more than your time and perhaps a few dollars for printable business card blanks. And do not forget, you can always be learning more about the subject of your business. The Internet provides a wealth of free information and classes.

There is no reason to delay any longer. Start today, or no later than tonight, to plan for starting your company!

Question – What will be your first step in planning your business start-up?

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Right and Wrong Way to Be Disruptive – And How to Use It for Success

Follow the entrepreneurship press and blogs and you will read plenty about being disruptive. It seems that no matter how things were done in the past they are wrong. I have not seen the term used yet but sooner or later it seems entrepreneurs will be called disrupteneurs. Are radical business concepts the route to success? Are people going to turn their lives upside down to adopt a new way of living or doing business?Right and Wrong Way to Be Disruptive – And How to Use It for SuccessMy answer to both questions is no. Here is why:

Do you remember DOS (short for Disk Operating System)? Complex and hard to use it nonetheless sought to disrupt the way people lived their lives and how commerce functioned. Yet it was not until Microsoft copied the ease and intuitiveness of the Mac Operating System in a DOS overlay called Windows that the personal computing started to become more widely adopted. The Mac OS and Windows helped people move far enough out of their comfort zone that they would try something new. DOS was too disruptive.

The first cell phones hit the market 40 years ago. They were very similar to push button landline phones except you could carry them around. The first smartphone, the IBM Simon, came out in 1994. It allowed people to manage their entire lives on a mobile phone. For all intents and purposes, it was a flop, lasting only six months on the market. It was too disruptive. Almost another decade and several iterations passed before people embraced smartphones.

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Successful business ideas today are no more disruptive than they were in the past. MIT Technology Review shows that with the exception of tablets, new technologies take seven to 30 years to achieve 10% penetration and another five to 39 years to go from 10% to 40% penetration. People’s lives are bettered in an essentially evolutionary way. Calling new products and services disruptive is a marketing ploy.

But before you consign disruptiveness to the trash heap, there is a place for unconventionality in entrepreneurship: at the conceptual stage of your product or service. Visualize combinations of completely unrelated products and services. From such disruptive notions, imagine a radical way of helping people and make it your vision, the end game of your business.

Then, figure out the incremental steps that people can take as their lives are changed for the better.

Question – Are you an early or evolutionary adopter and why?

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Avoid This Basic Clash When Running Your Business

Perhaps the biggest challenge of being an entrepreneur, especially a service providing solotrepreneur, is the conflict that inevitably arises between keeping your marketing efforts going and serving the business that such efforts yield. Generally, in the beginning, everything is focused toward generating income-producing business. But once a sufficient amount comes in, the marketing efforts stop in order to take care of the clients. But once these jobs are completed marketing has to be ramped up again, often coinciding with a drop in income.

Avoid This Basic Clash When Running Your Business

For the first few years, I was in business I was caught in this seeming tug of war between marketing and serving clients. It was extremely frustrating especially since I felt I was always losing momentum while suffering through large swings in cash flow.

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I finally learned several lessons that helped me conquer this predicament:

  1. Marketing must never stop. Whether you are working alone or have a staff to service clients, your number one priority is to keep the marketing effort, and thus the flow of business going.
  2. The longer the lag time between acquiring a new client and getting paid, the more important consistent marketing is. Real estate agents have to constantly keep their pipeline filled because often there are several months between getting a client and closing a transaction. Also, many transactions are time consuming. It is tempting to be fooled into thinking that as long as you are busy working on deals you need not worry about marketing, But once all the escrows close, if you are starting essentially from scratch the commissions from the prior deals may not carry you through to the next batch of closings.
  3. Only a mature business can consider relying solely on referrals. Once you develop a reputation for quality work you will receive a lot of referrals. But changes in your industry may necessitate your still marketing for new business since mergers and clients going out of business often mean that referral sources wane or have to be courted again.
  4. Make your marketing efforts scalable. Whatever techniques you are using, be it networking groups, cold-calling, or social media, make sure that you can easily increase or reduce your time commitment so that you are consistently doing the same things while adjusting the volume. For example, early in your business, you might devote two or three hours a day to cold-calling. But as more of your time must be devoted to serving clients, rather than stopping just scale back your calling plan.
  5. Delegate your least productive servicing and marketing efforts. Determine which activities need to be sustained but generate the lowest return on investment, then, rather than stopping them, turn them over to an assistant. Interaction with clients, existing and potential, is probably the most fruitful use of your time. Once you thoroughly understand the less profitable tasks you can train someone to handle them.

Rather than being disheartened by the constant roller coaster of no business/ramp up marketing effort and too much business/stop all marketing, devise a plan that from the start has you consistently pursuing new business while providing excellent service to clients.

Question – What ideas do you have that would allow you to constantly pursue new business while giving the kind of service that will engender client loyalty?

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The Oldest New Concept in Entrepreneurship

Still looking for that brilliant idea that will guarantee your success in business? They are out there. And when someone unearths one and makes it successful they achieve tremendous wealth and fame. If this is your goal, by all means, keep looking.

But if you want greater flexibility to run your life, the ability to support your family, and less bureaucracy in your work environment read on.

The Oldest New Concept in EntrepreneurshipAfter 10 years running a small management company I found that numerous businesses like mine were being bought up because running them the way they had always been run was no longer profitable. Frankly, I had never had a great passion for property management. I was keen about eating, having a roof over my head, and many other things. I had two choices: innovate or sell.

Another 10 years later I did sell. By that time I was handling $25 million worth of property from my laptop. Wherever I had Internet access, be it a hotel room or Coffee Bean, I could take care of business. In these days of personal hotspots, I could have run it from the beach. My company was highly profitable because I substantially streamlined an administration-intensive business and made it virtually paperless.

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Dr. Samuel Johnson and Christopher Booker maintain there are only seven plots for literature and movies. To a large extent, that same can be said of businesses. Consider the following:

  • An online store is only today’s version of the Montgomery Ward catalog.
  • Blogging is just the latest means of pamphleteering and Twitter an even more up to date way.
  • Facebook is an asynchronous party line where you, instead of the telephone company, choose who listens to your calls.

The Internet is called a revolution. In reality, it allowed old ideas to be modernized.

Flourishing as an entrepreneur does not take genius or a unique idea. You need only find a way to do or make something better than your competition. Real estate agents at Century 21 The Masters are tops in the country because they are trained to concentrate intensely on the needs of people buying and selling homes.

Most successful entrepreneurs take a proven business and change something about it to gain a competitive edge such as:

  • Make a service more consumer-friendly. Mike Diamond plumbers show up at a specific time and are clean and well groomed. They get a premium over plumbers that only give a window during which they will show up and wear dirty clothes.
  • Handle business more efficiently. I leveraged off-the-shelf technology to save time, office supplies, postage, and many other resources. As a result, I could focus on my clients.
  • Offer greater choice. When you buy an iPhone you get a white charger and cable. But at Los Angeles Air Force Base there is a kiosk that has them in a rainbow of colors. At least two people are making money offering more choices than Apple does: the manufacturer and the vendor.

My success in property management came because I am very good at organization and efficiency not because I was brilliant at real estate. You can succeed by applying the skills at which you excel to a proven business. This is the surest path to entrepreneurial triumph.

Question – Where can you apply your expertise to improve the way a business is done?

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