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What business should I choose?
Usually, the best business for you is the one in which you are most
skilled and interested. Secondly and most importantly, others must perceive
a real need for your product or service. For example, if you grew up in
Owensboro, Kentucky you would love barbequed mutton since you probably ate
it almost every day. However, if you moved elsewhere, you might be an expert
on how to barbeque mutton but it would be difficult to find a customer that
cared. As you review your options, you may wish to consult local experts and
business people about the growth potential of various businesses in your
area. Matching your background and willingness to adapt to the business's
requirements will increase your chance of success.
What are some of the characteristics of the different types of
businesses that I should consider?
A business might target it's primary customers at the retail (individual
consumers) market or wholesale (other businesses), it may be primarily a
service business or sell a product, if it sells a product then it might make
the product or simply resell someone else's product, and the market might be
high volume with low value or low volume with high value:
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Retail vs Wholesale
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Retail
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Corporate
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Clients:
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Individuals
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Businesses
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Hours of Operation:
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Extended
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9-5, 5 days per week
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Geography:
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Anywhere
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Large Metropolitan Prefered
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The retail market is made of individual consumers. It generally has extended
hours from early morning until late at night for six to seven days per week.
Whereas, selling to other business is generally from 9:00 am until 5:00 pm.
The location of the retail establishment is very important and must be where
the customer lives or works. Generally, the location of your business to
serve other business customers is not as important and can more consider the
convenience and cost to the entrepreneur.
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Product vs Service
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Products
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Services
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Capital Required:
Inventory:
Theft/ Loss:
Growth's Impact:
On Profit Margins
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Mod. - High
Space, Count & Track
Probable
"Decreases"
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Low - Mod.
None
Unlikely
Increases
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Selling a product vs a service has many advantages and disadvantages to
consider. Unless your supplier is willing to extend credit, significant
capital is required to buy products. When you do, you will need a place to
put it. You will need to count it, track it, and provide enough security to
ensure that it doesn't get stolen. A significant advantage is that if sales
are going beyond expectations, you can easily and quickly get more. However,
in order to compete in the very high volume market (for example Wal-Mart)
generally the profit margin is under severe constraints.
Make vs Buy (Technology vs Deal Maker):
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Technology
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Deal Maker
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Obsolescence Risk:
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High
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Low to Moderate
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If you decide to sell a product, the next choice may be of whether to make
it or buy it from someone else. If you manufacture it then profit may be
greater by lowering the cost of acquiring the product but you are always at
risk that, in this global economy, someone may technologically obsolete your
manufacturing process or, worse yet, your product. Even if you own the
patent rights to the product, you may still consider having someone else
make the product that has the facilities and equipment to do so. This will
minimizes your initial capital requirements.
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Volume vs Value
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Volume
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Value
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Profitability:
Sell:
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Cost- Plus
1,000,000 @ $1
(e.g. Mustard Sauce)
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Value Pricing
1 @ $1,000,000
(e.g. building)
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Another consideration is whether your business will involve selling lots of
low value things (such as jars of family's secret recipe of mustard sauce)
or a few large items at high value (such as an office building or
airplanes). If you decide that your product is the high-volume-low-cost item
then you should determine how many must be sold in order to make it worth
your while. Envision the physical requirements that such a volume would
require. For example, if you've decided to make your family's secret recipe
of mustard sauce and have determined that you must sell 100,000 pints per
month (21 weekdays) to make a decent living then you should ask yourself if
kitchen can produce 4,762 pints of mustard sauce in one day. If not, then
you're either not done with the plan or the plan should end before you waste
a lot of money on a false start.
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Global vs Local
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Global
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Local
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Competition:
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Global
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Eye-to-Eye
(Home-field Advantage)
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Every entrepreneur wants his/her business to be world-wide. However, be
careful of what you wish for. Global competition means that you need an
awareness of what your competition is doing, on the other side of the globe,
while you sleep. Staying local, such as a doctor or lawyer or shoe shine
stand, keeps the worry of competition to a minimum. You will be able to more
easily learn what they are doing and they're probably sleeping when you are.
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