Small business. Where you can get a fortune or go bust. What say you?

[breakingcontact]

Have you ever owned a small business or ran one? Increasingly im seeing thats the real game changer in trying to really build wealth. A guy can make a decent income working for the man, but to actually get rich rich you've got to be the man.

What was/is your experience with this? What would you do differently knowing what you know now?

My brother is always kicking around what I condemn as "get rich quick schemes" and small time "little man" businesses. Im trying to help him run what he is trying as a business not a junk collecting hobby.

I also have this in the back of my mind. Im moving up the ladder in my career but for what?

Lots of different types of businesses but most seem to come down to sales or service. If I were to start a business it would be service. The problem I see with that is there are only so many hours in the day to provide my services. The you have to hire and pay others to care as much as you do.

Sales has its downsides too.

Anyways, discuss small businessman! What is the key?

 

[bmnloader]

I own a business now. It's not a get rich,rich type of thing. I started in a small shop, worked up to foreman. My boss was very good of taking care of his good employees. After 23 years, he sold the place and the new owners where not anything like him and we knew they wouldn't be. Took away/lowered the benefits. Myself and two other top machinists left and started our own shop. It's modeled after the previous one and we take care of the people that take care of us. My point being, when you get big enough (and it won't take long if you find the right business/service) you have to take care of the people and customers. If you do, you'll get a reputation for it and they will come. Just remember, a bad reputation will ruin you. We make a decent living but we still have to work for it. Lots of beans & weenies and long days starting but it's worth it. Find you a business that's making it and talk to the people, most would be glad to give some pointer.

 

[kusai]

tag for comment later

Sent from the black hole

 

[deemus]

One thing I see small business owners doing wrong is getting too much debt. It can be the anchor that sinks the ship. Start small and grow slow.

Also, realize that when you own it, you have to wear all the hats. Marketing, product development, accounting, taxes, customer support, and the actual required work / sales: You friggin' do it all.

Plan to go from working 8-10 hrs a day to around 12 to do it right. In addition to the actual work, all the other stuff takes up time too.

 

[breakingcontact]

One thing I see small business owners doing wrong is getting too much debt. It can be the anchor that sinks the ship. Start small and grow slow.

Also, realize that when you own it, you have to wear all the hats. Marketing, product development, accounting, taxes, customer support, and the actual required work / sales: You friggin' do it all.

Plan to go from working 8-10 hrs a day to around 12 to do it right. In addition to the actual work, all the other stuff takes up time too.

I agree on starting without debt. On the other parts though, wouldn't it be best to hire out all the extra work such as accounting, to someone who can do it more efficiently so you can focus on the business part?

 

[southtexaspilot]

I went out on my own but not to make a fortune. I now enjoy having the same income as before but with a lot more time to enjoy it.

W

 

[diveRN]

After Ma-Bell was deregulated in the late '80s, I started my first business in pay telephones when I was just 20. The idea was to install a bunch of phones and get paid a little bit whenever people made calls. It was good while it lasted, but increasing cell phone use forced me to sell the company in the early '90s.

Over the next 15 years, I would start a pool service/landscaping business and an ISP with my techno-geek brother in law, both of which I/we sold to larger competitors. In addition to working in the healthcare industry where I earn a pretty good living, work 12 days a month, and get really cheap medical benefits, these days I continue to run a web server where clients can host high-end, highly-specialized web based applications.

I say all of that to highlight the allure of each of those endeavors, which is that I get paid over and over again for making a sale once. None of these provide a truly passive residual income (my grail), but recurring repeat sales is the next best thing. The point is, working a traditional 'job' will never allow you to leverage your efforts, time, or money, which is where wealth (read: freedom) comes from. In a job, you trade time for your paycheck and that's it. It's a 1:1 ratio of time to money, which isn't a good ratio in terms of earning potential.

My employment income currently feeds my retirement and savings and I'd miss that if I lost my job, but I wouldn't sweat it too much because I have other options. Further, I don't sweat it when I lose a customer because that person represents a pretty small portion of my overall income.

So yeah, I'm in business and would never not be.

 

[breakingcontact]

Good stuff. Thats an excellent point. Want income coming in even when you aren't "pulling" it in.

I need to keep that in mind. Have you found clients want to sign contracts to both control costs and ensure steady service or they want to pay just month to month or otherwise short term?

 

[diveRN]

Good stuff. Thats an excellent point. Want income coming in even when you aren't "pulling" it in.

I need to keep that in mind. Have you found clients want to sign contracts to both control costs and ensure steady service or they want to pay just month to month or otherwise short term?

It varies. With my current customers, I promote my services at a very competitive monthly rate, but getting that rate is contingent on them for paying a year in advance. If they pay month-to-month, the cost-per goes up, but no contract is required other than agreement to a "terms of sale" that basically says that there are no refunds after 60 days and they get the services exactly as listed. Anything else is a premium and customers are charged accordingly. For the most part, this goes over well.

When I was in the pool/landscape business, commercial services were ALWAYS done under contract because margins were a LOT lower and profit was projected based on the length of the contract. Residentially, I offered two plans: a month-to-month and an annual plan. If they paid annually, I'd give them some perks and extra service at a slight discount. My month-to-month service was more expensive than most of my competitors, but I made sure the clients were getting what they paid for.

The ISP business was a different animal. In the early days, the Internet and ISPs were a relatively new thing so the cut-throating that eventually became the norm hadn't happened yet. As such, customers who wanted a paper invoice every month were charged a premium over and above the regular price. The only contracts we signed were large scale jobs where we installed goods or used services that involved third-parties. I didn't want to buy a dozen servers from Dell or commit to a year-long circuit lease from SBC and then get stuck with them if the customer got cold feet. For the bread and butter recurring monthly sales, we required no contract, but just like most tech things today, we required a credit card that we'd charge at regular intervals or until the customer said stop.

I've never run a business that focused on heavily discounted products or services because margins are thin enough as they are and it doesn't take that much more effort (or money) to offer a higher quality good/service at a premium price. There is a downside... offering high end goods or higher levels of service at premium prices forces a company into servicing niche customers, which can make sales more difficult and is somewhat self-limiting. The upside though, is that you generally get a more loyal customer who will stay with you through good times and bad. I think of it as the "Jerry McGuire" approach.

In short, I used contracts where contracts were needed and didn't when I could avoid them.

 

[benenglish]

... offering high end goods or higher levels of service at premium prices forces a company into servicing niche customers, which can make sales more difficult and is somewhat self-limiting.

In a macro sense, that's becoming less and less of a problem in our economy. As the middle class continues to shrink, the number of the very wealthy continues to rise. Selling something (anything: goods, services, whatever) that only rich people can afford has become a valid business model in itself.

 

[diveRN]

In a macro sense, that's becoming less and less of a problem in our economy. As the middle class continues to shrink, the number of the very wealthy continues to rise. Selling something (anything: goods, services, whatever) that only rich people can afford has become a valid business model in itself.

I won't dispute the increasing disparity between the middle class and uber-wealthy, but rich and niche are not mutually inclusive. To my intended meaning: a client with a specific need and my company's unique ability to fill it.

 

[deemus]

I agree on starting without debt. On the other parts though, wouldn't it be best to hire out all the extra work such as accounting, to someone who can do it more efficiently so you can focus on the business part?

In many cases, yes. But there are parts that you have to be part of to know how you are doing. For instance, I know of several businesses who had hundreds of thousands stolen from them. In every case, it could have been avoided if they have just reviewed the bank statements, and looked at the actual checks that were being written. There is no replacement for understanding what is happening in your business.

 

[deemus]

: a client with a specific need and my company's unique ability to fill it.

That hit the nail on the head. To be successful, you have to find a need that people or other businesses have, and make a way to fill that need. They come back, often with their friends. My little piddly business has added about 100 new customers in the last two years, which in my field is borderline amazing growth.

 

[benenglish]

...rich and niche are not mutually inclusive.

I apologize for not being clear. I didn't mean to imply they were mutually inclusive in all cases. I only meant that businesses that market to high end customers have a larger pool of potential customers these days, large enough that it's possible to build a business that concentrates exclusively on them. Finding clients with specific needs and having a unique ability to meet those needs is still a prerequisite for success, like always.

 

[London]

I am not a small business owner; it is just something I have been doing a LOT of research into lately. Here's the gist of what I learned from guys who have been there:

Constant 12-hour days, years without a vacation, unavoidable IRS issues, regulations from dozens of three-letter agencies, the fact most small businesses fold in under two years... There's a saying amongst business owners: "You don't own the business. The business owns you." Working for yourself sounds nice, but a lot of people who do it actually wish they could go back to their old jobs. there's also another saying: "What's the best way to make a million dollars in small business? Start with two million."

Being a millionaire isn't all it's cracked up to be. That's a LOT of money to have to earn the hard way.

 

[breakingcontact]

Definitely easier to work for the man than to be the man. Thats why I hate when socialists resent the rich. They are unwilling to make those sacrifices even if they were able.

 

[diveRN]

I am not a small business owner; it is just something I have been doing a LOT of research into lately. Here's the gist of what I learned from guys who have been there:

Constant 12-hour days, years without a vacation, unavoidable IRS issues, regulations from dozens of three-letter agencies, the fact most small businesses fold in under two years... There's a saying amongst business owners: "You don't own the business. The business owns you." Working for yourself sounds nice, but a lot of people who do it actually wish they could go back to their old jobs. there's also another saying: "What's the best way to make a million dollars in small business? Start with two million."

Being a millionaire isn't all it's cracked up to be. That's a LOT of money to have to earn the hard way.

I mean no disrespect, but I propose that you're not listening to the right people. You might consider taking the advice of people who have been successful in business, not just those who simply traded employment for self-employment, or others who've failed all together.

As a member of various local clubs and community civic organizations where I live, I run into and meet a lot of business people. In light of the recent economy, I've talked with many about the very thing being discussed here. One common thread among them: Every successful person that I've ever met and talked with about the subject has said that going into business was the best thing they ever did. Why would I want the advice or counsel of those who are failing?

And who says you have to be a millionaire? Sure, it'd be nice, but securing my freedom was a lot cheaper than that.

There's opportunity everywhere, you just have to look for it. That said, if you're happy where you're at and where you're going, more power to you. Business is not for everyone.

Just my .02

 

[breakingcontact]

I mean no disrespect, but I propose that you're not listening to the right people. You might consider taking the advice of people who have been successful in business, not just those who simply traded employment for self-employment, or others who've failed all together.

As a member of various local clubs and community civic organizations where I live, I run into and meet a lot of business people. In light of the recent economy, I've talked with many about the very thing being discussed here. One common thread among them: Every successful person that I've ever met and talked with about the subject has said that going into business was the best thing they ever did. Why would I want the advice or counsel of those who are failing?

And who says you have to be a millionaire? Sure, it'd be nice, but securing my freedom was a lot cheaper than that.

There's opportunity everywhere, you just have to look for it. That said, if you're happy where you're at and where you're going, more power to you. Business is not for everyone.

Just my .02

I have known this to be true for some hillbilly friends of mine. They aren't good employees, always have a problem with the boss, so they think they know better and try to start their own businesses. They're doing it in the wrong way for the wrong reasons.

 

[diveRN]

I have known this to be true for some hillbilly friends of mine. They aren't good employees, always have a problem with the boss, so they think they know better and try to start their own businesses. They're doing it in the wrong way for the wrong reasons.

Yep, known a few like that myself.

And personally, I would MUCH rather be self-employed and put up with all that goes along with it (IRS, long days, regulations, etc) than be forced to work under someone else's thumb. I can tell you from experience that a person's outlook on work is entirely different when they don't have to be there just to earn a paycheck.

I've been let-go twice in my life. After the second time, I decided I would never let an involuntary job loss put me in a financial pickle. I'm just not OK with my finances being dependent on someone else. Sure, people work government jobs for the security and cush retirement, but that whole mess is likely to change in the near future, too.

 

[Mexican_Hippie]

I'd say you need to have a clear business plan whether you're large or small. You need to build it all out, understand the risks and what youre going to do about them. Gut is fine, but gut doesnt pay the bills. You need to understand the numbers, whether its expenses, revenue drivers, etc.