A Profitable Business

This is the first in a series of seven articles that tell you how to sift through all the home business opportunities you hear about every day, and find the PERFECT home based business for you.

Are you ready to start making some real money in your own home business without working 60 hours per week? Are you ready to stop throwing your money down the “home business opportunity rat hole”?

Read on and I’ll show you how to test every home based business opportunity to make sure it fits the definition of The PERFECT Home Business, before you invest your time and money. Then, focus on the one that fits the best, and make it a success.

Each letter in the word “P.E.R.F.E.C.T.” stands for one of the 7 keys to finding the perfect home based business. Each key is something your home based business opportunity MUST have in order for you to enjoy the financial freedom and lifestyle you want.

What makes an opportunity P.E.R.F.E.C.T.? The “P” in PERFECT stands for “Profitable”. If your business isn’t profitable, why do it? If it isn’t highly profitable, you won’t be able to earn enough to make it worth your time, or you won’t be able to grow your business by reinvesting your profits back into the business.

“Profitable” means:

• High gross profit margin (preferably greater than 65%) and net profits of 20% of sales or better before taxes.

If you sell something for $1.00 and it costs you $.50, your gross profit margin is 50%. That’s about the profit margin most retail stores get. You need to do better than that to survive and thrive in your home business.

All of your other expenses such as advertising, overhead, and so on, have to come out of your gross profit before you have any “net profit”. If you sell something for $1.00 and the costs of your product, including all of your other expenses, add up to $.90, you only have ten cents per dollar in net profit (that’s a 10% net profit).

So, for example, if you want to earn $50,000 per year from home with a 10% net profit, you would have to sell $500,000 worth of your product. Wow, that’s a lot of product. Wouldn’t it be better to only have to sell $250,000 worth of product, or even less, to earn your $50,000 income goal?

That’s why you need a business with at least 20% net profit. And, if you really could sell $500,000 worth of products, wouldn’t it be better to have 20% net profit and earn $100,000 per year on that $500,000 in sales? The PERFECT home based business may even enable you to earn up to 40%-60% or more (sometimes more than 90%) in net profit. Yes, really.

At 90% net profit you would only have to sell $55,556 worth of product to earn your $50,000 income. That’s my kind of home business!

• “Profitable” also means a net profit (your “salary”) before taxes of at least $50,000 per year. And $100,000 or more per year would be more like it (unless your goal is to supplement your income to the tune of $500 to $1,000 per month. But, would you turn down $50,000 per year if you didn’t have to work any harder than you did to earn $10,000 per year?).

Your goals may be different than mine and you may be satisfied with lower profits. But, I believe you need to set your goals high, yet at a reasonable level. Then, even if you fall a little short, you will still be very successful.

• Low overhead (less than 5% of sales). Overhead is all the “fixed expenses” of running your business such as computers, printers, other equipment, furniture, office supplies, and office space rental costs.

A home based business is ideal for keeping overhead low, but you still have to be careful to minimize the space needed, the cost for utilities, and the equipment needed to run your business. Don’t go hog wild buying an expensive desk and file cabinets with your first profits. Instead, reinvest those profits in your business and keep your overhead low. You’ll be glad you did.

• Low labor content for manufacturing, assembly, or shipment of the product(s).

You don’t want to spend all of your time assembling and shipping something you sell. Most of your time should be spent on marketing and growing your sales and profits. The PERFECT home business enables you to sell products that involve little or no labor cost to make them or ship them.

• A high average order. Believe it or not, it takes as much effort to sell a $5.00 product as it does to sell a $50.00 product or a $500.00 product, maybe even more effort. So, the PERFECT home based business offers products with a high perceived value and a price well above $20.00. The exception is when you want to sell a low priced product, or even give something away, just to get customers added to your e-mail list so you can sell them other more expensive items later.

• Low initial investment required (less than $1,000 preferred). I don’t know about you, but business opportunities that require $5,000, or $25,000, or more to start scare me a little, unless the return is well worth the risk. There aren’t too many people that even have that kind of money to invest in a business. Why not find the PERFECT home based business that only requires $1,000 or less to get started, perhaps even a few hundred dollars?

• Small inventory with rapid turnover, or no inventory required. Imagine your garage or basement stacked from floor to ceiling with products waiting for someone to buy them. Yuk! Much better to fill each order as it is received without having any inventory in your home, or at least a very small inventory. The PERFECT home based business will allow you to do that.

• Repeat or backend sales potential. One of the highest marketing costs is the cost of getting a new customer. If that customer buys your product over and over from you (repeat sales of a consumable product or a monthly membership fee, for example), or if the new customer buys other products from you later (backend sales), you can dramatically increase your sales and profit. This is a very important ingredient in the recipe for a successful home based business.

Things to Know Before I Decide to Franchise My Business

Just have a look around the franchise industry and you will be amazed to find that most of the top franchise companies have humble beginnings. Many of the brands that are popular all over the world started as a small family business and through franchising have turned out to be popular. To franchise your business you need to have knowledge about how to franchise in the right manner to ensure success. Thus, if you dream of making your business big and successful, you can consider franchising your business.

There are many business owners who get confused as how to “franchise my business”. Well, before taking the decision to franchise your business, you need to go through a lot of preparations. It is not just a decision that can be implied within a day. Give some time to research and analyze the market before coming to a conclusion as how to franchise my business. Take help of a franchising consulting firm or some experts to help you make the right decision.

The very first thing that you need to understand is whether your business or company is good enough to undergo such a big a step. You can know if you can franchise your business if it possesses the following qualities:

Business Longevity: Franchise experts say that it is a good idea to franchise your business if it has been in operation for at least three consecutive years and generating profit. Also the size of your business should be good enough to attract other investors. Franchising will be successful only if the company possesses a proven track record of success.

Unique Business Concept: The competition in the franchising industry is quite high, so before deciding on how to franchise, make sure your business concept is unique and easy to duplicate. Organize your business system and concept before thinking of franchising it. Success in franchising industry is very much depended on how well investors are able to replicate your system and concept.

Profitable Business: Your business concept must have the ability to make money. Your business must have a consistent record of financial success so that investors can show their trust in your franchise business. Ultimately, it is the motive of everyone to earn and make money. If your business is profitable, it is just the right time to franchise your business.

Affordable Business Format: Most of the investors look at the initial investment while searching for the right franchise business opportunity. If the initial investment is very high then very limited people will be interested in buying your franchise. Along with cost of the franchise, investors also inquire about the return on investment. If your business format can promise high ROI, many will be interested in your business concept.

Marketability Factor: Before you franchise your business, make sure your business idea is easily marketable. Many companies franchise their business when many investors are asking them to franchise their business. This ensures that the business concept is very unique and that is the reason why potential business partners are ready to invest.

To conclude, if your business has that above mentioned qualities or attributes, you can plan ahead to franchise your business.

Core Small Business Skills – Operational Management

As a business owner and entrepreneur it is important to develop a set of key management skills upon which you can build your business. Even more so when you consider research into Australian small business failures, has identified that in 90% of cases, a lack of management skills has been a key reason for small business failure. Operational Management skills have been identified as one of the core skills required for small business success, and I would go so far as to say that they could be a deal breaker. So let’s look at the operational management skills you need to run a successful small business.

You need to build operational management skills in order to develop the systems and processes by which you deliver your products and services. The more efficient and effective they are the more ‘productive’ your business will be. Core operational skills include planning, management, communication as well as effective systems design.

Operational and Project Planning Skills

The ability to develop operational plans which focus on the day-to-day running of your small business and to develop and manage project plans for specific bodies of work are essential skills for business success. The best operational and project managers ensure that have identified,in as much detail as possible, what is required when and allocating appropriate resources to get the job done. They are also fanatical about identifying risks and issues upfront and managing them so that they have little or no impact on the task at hand.

Monitoring and Reporting Skills

Small business owners need to be able to assess their small business’s performance against its objectives and to develop and distribute a series of reports that indicate the level of that performance to key stakeholders on a weekly basis. Keeping an eye on your progress highlights any emerging issues and allows you to effectively manage the situation. This ensures that the reins of business are always in your hands and in your control. You need to be able to create a set of operational key performance indicators (KPI’s) that drive the behaviours and values you want your business to embody, create a set of operational performance ‘dashboards’ and develop a system that captures the information that feeds into the operational dashboard.

Effective Business Communications Skills

Strong communication skills are vital. In many respects, it is the oil that keeps your systems’ gears meshing nicely. You need to be able to inspire your troops to act in concert with your strategic intent, whilst delivering the communication to the troops about what needs to be done, when, where and why in an effort to keep your operations running like a well oiled machine. Strong written, verbal and non-verbal communication can be the difference that can take your small business from good to great.

Systems Design, Development and Implementation Skills

Every entrepreneur should be aiming to build an effective small business that operates without them. After all, most entrepreneurs build their business with the hopes of working only when they want to, not because they have to! The only way this can be done is to design, develop and implement systems that replace the business owner. Systems design requires the ability to observe, analyse and design solutions to systems problems. Having the ability to design systems is vital throughout the life of the business because all successful businesses will be in a constant state of re-design in order to keep abreast of the ever-changing demands of your customers and the context within which your business operates.

Developing strong Operational Management skills are essential to the day-to-day running of your business. Continuing to hone them is important as these particular skills will be required throughout the entire business life cycle, but the effort you put into developing these skills will pay handsome dividends when it comes to your day-to-day small business success.

Karen L. Paiyo is an Australian Small Business Counsellor, supporting and nurturing the spirit of entrepreneurship in the Asia Pacific Region. Karen empowers small business owners by transferring to them the skills and expertise needed to help them take their business ideas from creative concept to profitable reality, faster and with less risk.