Do you remember when you had to have enough start up costs to cover a building, supplies, and merchandise? Well, now entrepreneurs can start an online business with very little cash. E-commerce has opened up a wide world of opportunities and ventures for making money. We will explore the pros and cons of e-commerce so you can decide if it is right for you.
The loss of the physical, "brick and mortar", store transforms the way an entrepreneur does business. First of all, the cost of a web based business typically costs less than a physical store, which translates into more profitability. Web based businesses have the ability to draw more traffic and require less employees. When it comes to target marketing the process is more precise because you are able to gather a vast amount of information about your customer. Your customer's interests, location, gender, etc. can assist you in sustaining them as customers and marketing to new ones. Advertising online is also more precise with online businesses. Since you know more about your customers you can create ads and pop-ups that pertain to them in places that they visit frequently. Another great advantage is the ease in the transfer of funds. When you use a company like PayPal it makes transferring funds instant and less expensive. Also, customer based financing may become possible because the customer pays you first and then you have the money to buy the product.
There are some cons to having an e-commerce site. First, there are always the issues with technology. Technology continues to become more and more friendly to the everyday individual. You do not have to be a big tech geek to set up a website and keep it maintained. There are many companies that offer website development and maintenance at fair costs. Even if you do not set up your own website I suggest you learn everything you possibly can about the operation and navigation of it. A successful entrepreneur always tries to learn about every aspect of their business; technology included. Another disadvantage of e-commerce is the loss of the tangible object. Your customer cannot see or feel the actual merchandise. The product may look a different size, color, or texture on the web then it does in person. This increases the likelihood of the item being sent back. The last con is the fact that the social aspect of shopping is lost. There is no physical interaction between your customer, other customers, and you. This can be remedied by having message boards, blogs, or an online community attached to your site. This will bring about connection amongst customers and their opinions about your products.
Online businesses are an amazing success and it is important that you get on board if you have not already. Your customer will never have to worry about your store being closed, waiting in line, parking, finding items, or feeling overwhelmed by the size of the store. It eliminates so much of what people hate about going to a physical store. Sometimes an entire business online is not feasible, but if that is the case then you should still have a website. The web will help you grow your business more quickly, because of higher visibility and access for your customers.
Wednesday, February 25, 2009
Wednesday, February 18, 2009
The Problem with "Goodwill"
Is there "goodwill" when it comes to buying a business? You might be wondering what in the world I am talking about. Well, let me explain. Goodwill is defined as a sustainable competitive advantage. You might wonder how one would be able to prove that goodwill exists in a venture. Sure everyone wants to claim that they have it, but few can prove it.
The first problem with "goodwill" is being able to figure out what the competitive advantage is exactly. If you are lucky enough to find it then how do you prove it and if you can prove it then how do you measure it. You have to find some way of measuring the value of this so-called "goodwill" before a price can be applied to it.
I personally do not doubt that some companies do have "goodwill." The existence of "goodwill" many times is contingent on the entrepreneurial team rather the the venture itself. It is important that the potential buyer of the venture keeps this in mind. The question is can the "goodwill" be transferred to the new ownership?
For example, lets say a coffeehouse located in a college town is owned by a young, popular twenty something year old. There really is nothing special about this coffeehouse. It has the typical lounge feel and mediocre coffee, but it is always packed with college students. Many of the customers know the owner and really like supporting one of their peers. This owner decides that they want to put the coffeehouse up for sale. The interested party understands that there is something that this coffeehouse has that the others do not. There is obviously a competitive advantage present in this venture. The coffeehouse sells for a more expensive price due to this "goodwill" factor. The new owner takes over the coffeehouse and continues to operate it exactly as it was before. However, the customers slowly become scarce. The reason for the lack of customers is due to the fact that the new owner is middle aged and is not interested in making friends with the clientele. This is an example of the fact that even if "goodwill" exists it may not be transferable.
The first problem with "goodwill" is being able to figure out what the competitive advantage is exactly. If you are lucky enough to find it then how do you prove it and if you can prove it then how do you measure it. You have to find some way of measuring the value of this so-called "goodwill" before a price can be applied to it.
I personally do not doubt that some companies do have "goodwill." The existence of "goodwill" many times is contingent on the entrepreneurial team rather the the venture itself. It is important that the potential buyer of the venture keeps this in mind. The question is can the "goodwill" be transferred to the new ownership?
For example, lets say a coffeehouse located in a college town is owned by a young, popular twenty something year old. There really is nothing special about this coffeehouse. It has the typical lounge feel and mediocre coffee, but it is always packed with college students. Many of the customers know the owner and really like supporting one of their peers. This owner decides that they want to put the coffeehouse up for sale. The interested party understands that there is something that this coffeehouse has that the others do not. There is obviously a competitive advantage present in this venture. The coffeehouse sells for a more expensive price due to this "goodwill" factor. The new owner takes over the coffeehouse and continues to operate it exactly as it was before. However, the customers slowly become scarce. The reason for the lack of customers is due to the fact that the new owner is middle aged and is not interested in making friends with the clientele. This is an example of the fact that even if "goodwill" exists it may not be transferable.
Two Avenues of Buying a Venture
You might have thought about buying a business rather than starting one from the ground up. There are many preconceived notions of which route is the better way to go. The truth in the matter is that both ways of starting a business has its advantages and disadvantages. This post is about buying a business and things you should consider before you take the leap.
First of all, what reasons have brought you to the notion of buying a business. Many times buying a business is beneficial because there is an established customer base and stability in a market area. An established business is often seen as less risky, because it has survived the start up stage. The next question to ask is, why are the current owners looking to sell their business? It is important that they are not selling due to poor revenue or bankruptcy. Even if they profess to be selling for legitimate reasons, it is important that you investigate further to make sure they are telling the truth.
You might also have to buy a business for necessary purposes. These could include obtaining assets, a license, or franchise. Sometimes the only way that you can start a certain type of business is to buy one that already exists. An example of this can be seen in the restaurant business and the obtaining of a liquor license. Some towns have a limit on the number of licenses issued and therefore one business must sell or close down before another business can possess a liquor license.
The best reason to buy a business is if you see potential in it that the current owner does not see. Many new owners of a bought business take the business to new heights. The concept of entrepreneurship is the ability to see what is not there. Buying a previously owned business hangs on this concept. You have the ability to bring a fresh new approach and innovate new ways of growth. Sometimes you see more when you are looking in from the outside rather than being engulfed in the present business. You possess that amazing viewpoint!
There are two different ways in which a business can be purchased. The assets can be bought or the business can be bought as a going concern. Buying a business as a going concern means that the business operates as it was but with a new owner. This means that legally it is seen as the same venture. This presents liability concerns, because there might be legal issues from the previous owner that will pass to the new owner. This is why the asset buying of a business is much more preferable. When only the assets are bought there is no legal responsibilities that can be continued to the new business. That is why you should always go the route of buying only the assets of a business. I know that this is not always feasible, but if you do have a choice then buy the assets only.
First of all, what reasons have brought you to the notion of buying a business. Many times buying a business is beneficial because there is an established customer base and stability in a market area. An established business is often seen as less risky, because it has survived the start up stage. The next question to ask is, why are the current owners looking to sell their business? It is important that they are not selling due to poor revenue or bankruptcy. Even if they profess to be selling for legitimate reasons, it is important that you investigate further to make sure they are telling the truth.
You might also have to buy a business for necessary purposes. These could include obtaining assets, a license, or franchise. Sometimes the only way that you can start a certain type of business is to buy one that already exists. An example of this can be seen in the restaurant business and the obtaining of a liquor license. Some towns have a limit on the number of licenses issued and therefore one business must sell or close down before another business can possess a liquor license.
The best reason to buy a business is if you see potential in it that the current owner does not see. Many new owners of a bought business take the business to new heights. The concept of entrepreneurship is the ability to see what is not there. Buying a previously owned business hangs on this concept. You have the ability to bring a fresh new approach and innovate new ways of growth. Sometimes you see more when you are looking in from the outside rather than being engulfed in the present business. You possess that amazing viewpoint!
There are two different ways in which a business can be purchased. The assets can be bought or the business can be bought as a going concern. Buying a business as a going concern means that the business operates as it was but with a new owner. This means that legally it is seen as the same venture. This presents liability concerns, because there might be legal issues from the previous owner that will pass to the new owner. This is why the asset buying of a business is much more preferable. When only the assets are bought there is no legal responsibilities that can be continued to the new business. That is why you should always go the route of buying only the assets of a business. I know that this is not always feasible, but if you do have a choice then buy the assets only.
Friday, February 6, 2009
To Franchise or Not To Franchise
Franchising can be a great alternative to starting a business on your own from scratch. Many entrepreneurs choose to purchase a franchise, because it offers a proven business concept, support, visibility, and instant credibility. If a franchise offers all of this then why isn't everyone doing it? Well, there are also some drawbacks to a franchise which I will discuss later in this post.
Let us first discuss what the franchisor provides to its franchisees. A franchise means that the franchisor grants the franchisee a license to use its business structure, services or products, trademarks, and brand identity. The franchisee cannot have all these goodies until they pay up. This involves an initial franchise fee and royalty fees thereafter. Also, don’t forget about the minimum startup capital required to start the franchise.
It is reported that there is a lower failure rate for franchisees than independent businesses. This is overall true, but it does not mean that if you own a franchise it will not fail. There are several reasons why a franchisee will be more inclined to succeed. The first reason and main reason is the requirement of startup capital. Most independent businesses fail, because they started their business with insufficient funds. There is no way an entrepreneur can start a franchise with little capital, because the franchisor will simply not allow that to happen. Another benefit for success is the fact that a franchise is usually based on a successful business model. Somewhere there is at least one business flourishing from this business structure. That is why it is appealing to potential entrepreneurs. The third reason why franchises are more successful is because of the training and support provided by the franchisor. Knowledge is the key here, because many new entrepreneurs have little to no knowledge about running a business.
Even though there are many benefits to owning a franchise there are also some things to remember. Starting a franchise means that you will have instant visibility which can be a double edged sword. Most customers do not think of a franchise as independently owned. They expect the same service or product that they received from another franchisee. This means that there will be a steep learning curve from the very beginning to ensure your customers are getting consistent service or products across the board. Another aspect of a franchise is the fact that there is not as much freedom when operating under a franchisor. You have to abide by the rules and regulations that the franchisor has set in place. Some entrepreneurs also get tired of paying the royalty fees. They do not think that having the franchise is worth having to pay fees so frequently.
To own or not to own a franchise is a personal preference. If you are interested in the franchise concept than here are some resources to gain more knowledge.
http://www.franchise.com/
http://www.entrepreneur.com/franchise500/
http://www.franchise.org/
Let us first discuss what the franchisor provides to its franchisees. A franchise means that the franchisor grants the franchisee a license to use its business structure, services or products, trademarks, and brand identity. The franchisee cannot have all these goodies until they pay up. This involves an initial franchise fee and royalty fees thereafter. Also, don’t forget about the minimum startup capital required to start the franchise.
It is reported that there is a lower failure rate for franchisees than independent businesses. This is overall true, but it does not mean that if you own a franchise it will not fail. There are several reasons why a franchisee will be more inclined to succeed. The first reason and main reason is the requirement of startup capital. Most independent businesses fail, because they started their business with insufficient funds. There is no way an entrepreneur can start a franchise with little capital, because the franchisor will simply not allow that to happen. Another benefit for success is the fact that a franchise is usually based on a successful business model. Somewhere there is at least one business flourishing from this business structure. That is why it is appealing to potential entrepreneurs. The third reason why franchises are more successful is because of the training and support provided by the franchisor. Knowledge is the key here, because many new entrepreneurs have little to no knowledge about running a business.
Even though there are many benefits to owning a franchise there are also some things to remember. Starting a franchise means that you will have instant visibility which can be a double edged sword. Most customers do not think of a franchise as independently owned. They expect the same service or product that they received from another franchisee. This means that there will be a steep learning curve from the very beginning to ensure your customers are getting consistent service or products across the board. Another aspect of a franchise is the fact that there is not as much freedom when operating under a franchisor. You have to abide by the rules and regulations that the franchisor has set in place. Some entrepreneurs also get tired of paying the royalty fees. They do not think that having the franchise is worth having to pay fees so frequently.
To own or not to own a franchise is a personal preference. If you are interested in the franchise concept than here are some resources to gain more knowledge.
http://www.franchise.com/
http://www.entrepreneur.com/franchise500/
http://www.franchise.org/
Thursday, February 5, 2009
What Influences You?
Entrepreneurs are driven by their passion. Some are driven by the shear act of entrepreneurship while others are driven by the field or business in which they are entrepreneurs. What is behind this passion? Let’s take a closer look at the factors that influence a person to become an entrepreneur. Is it life experiences, education, career displacement, parental influence, or maybe all of the above?
There is nothing more powerful than the wisdom gained from life experiences. Our past determines our beliefs and reactions toward our present and future. You might have had struggles or obstacles that you have overcome to make you the entrepreneur you are today. One very powerful characteristic of an entrepreneur is the fact that they build from their mistakes. Many entrepreneurs are not successful the first time or first few times around the block. They learn from their failures. It is rare that an entrepreneur hits it out of the park on their first swing. They have to get a feel for it before they know the force and technique needed to make a home run. Not all life experiences comprise of struggles and obstacles. Some experiences can pertain to your life passion. For example, it could be a hobby that you had since you were younger that you have made into your business venture. Maybe you have been touched by somebody or something that has fueled you to opening up your own non-profit to help others. Life experiences are the very foundation of who we are and what our business is built on.
The topic of education is quite controversial when it comes to entrepreneurship. Some theorists believe that entrepreneurship cannot be taught, because it is inherent in nature. I would have to disagree here. Maybe there are certain people that are predisposed to being good entrepreneurs. For example, a person who is outgoing and confident that makes a great salesman. The truth in the matter is that there is an entire spectrum of people who are successful in their own right when it comes to running a business. Many people who are entrepreneurs do have some level of secondary education under their belt. These degrees are not just in business and entrepreneurship, but also degrees in specific fields. For example, an individual with their counseling degree wants to open up their own wilderness therapy camp. I believe education can be beneficial to an entrepreneur, because it brings credibility and wisdom to their venture. However, I know several businesses that have been started by people who do not have any additional education and they are extremely successful. I believe it depends on the person and situation.
Another aspect that can influence a person to become an entrepreneur is career displacement. This means that a change takes place in a person’s career or life that makes them consider becoming an entrepreneur. This could mean losing a job or being dissatisfied with the current career path. This is seen all too frequently especially in today’s economic crisis. It is unfortunate to say that many negative situations lead to the making of an entrepreneur. They feel that the grass will be greener on the entrepreneurial side. Sometimes the business will be successful and many times it will fail. Problems will occur when a person rushes into opening up a small business without any venture planning.
It is very possible that the way we were brought up influences our business today. Many times entrepreneurs are who they are, because their parents were also business owners. Now this usually pertains to positive experiences that occurred based on the parent’s business. For example, I have had a positive outlook on business ownership because my father owns a business. He bought the business over four years ago when I was just graduating from undergrad. The business flourished quickly and my family saw great profits and success. The business continues to grow rapidly with an ever expanding customer base. My experience was positive about parental business owning, but for others it does not always result in a positive attitude. Some children grow up in a home with an absentee mother or father and actually resent their parents for the lost time. All the money in the world cannot bring back their childhood. These children have seen the negative aspects of business owning and therefore usually run in the opposite direction. I wonder if I would have thought differently about business ownership if my dad owned a business when I was younger.
When it comes to being an entrepreneur, there is a plethora of reasons we are the way we are. These influences affect the business we choose, how we run it, and how we make it successful. I know personally that my life experiences and parental influences affected me the most. I also believe my education helped prepare me to be a better entrepreneur. What influences affected you the most to become an entrepreneur?
There is nothing more powerful than the wisdom gained from life experiences. Our past determines our beliefs and reactions toward our present and future. You might have had struggles or obstacles that you have overcome to make you the entrepreneur you are today. One very powerful characteristic of an entrepreneur is the fact that they build from their mistakes. Many entrepreneurs are not successful the first time or first few times around the block. They learn from their failures. It is rare that an entrepreneur hits it out of the park on their first swing. They have to get a feel for it before they know the force and technique needed to make a home run. Not all life experiences comprise of struggles and obstacles. Some experiences can pertain to your life passion. For example, it could be a hobby that you had since you were younger that you have made into your business venture. Maybe you have been touched by somebody or something that has fueled you to opening up your own non-profit to help others. Life experiences are the very foundation of who we are and what our business is built on.
The topic of education is quite controversial when it comes to entrepreneurship. Some theorists believe that entrepreneurship cannot be taught, because it is inherent in nature. I would have to disagree here. Maybe there are certain people that are predisposed to being good entrepreneurs. For example, a person who is outgoing and confident that makes a great salesman. The truth in the matter is that there is an entire spectrum of people who are successful in their own right when it comes to running a business. Many people who are entrepreneurs do have some level of secondary education under their belt. These degrees are not just in business and entrepreneurship, but also degrees in specific fields. For example, an individual with their counseling degree wants to open up their own wilderness therapy camp. I believe education can be beneficial to an entrepreneur, because it brings credibility and wisdom to their venture. However, I know several businesses that have been started by people who do not have any additional education and they are extremely successful. I believe it depends on the person and situation.
Another aspect that can influence a person to become an entrepreneur is career displacement. This means that a change takes place in a person’s career or life that makes them consider becoming an entrepreneur. This could mean losing a job or being dissatisfied with the current career path. This is seen all too frequently especially in today’s economic crisis. It is unfortunate to say that many negative situations lead to the making of an entrepreneur. They feel that the grass will be greener on the entrepreneurial side. Sometimes the business will be successful and many times it will fail. Problems will occur when a person rushes into opening up a small business without any venture planning.
It is very possible that the way we were brought up influences our business today. Many times entrepreneurs are who they are, because their parents were also business owners. Now this usually pertains to positive experiences that occurred based on the parent’s business. For example, I have had a positive outlook on business ownership because my father owns a business. He bought the business over four years ago when I was just graduating from undergrad. The business flourished quickly and my family saw great profits and success. The business continues to grow rapidly with an ever expanding customer base. My experience was positive about parental business owning, but for others it does not always result in a positive attitude. Some children grow up in a home with an absentee mother or father and actually resent their parents for the lost time. All the money in the world cannot bring back their childhood. These children have seen the negative aspects of business owning and therefore usually run in the opposite direction. I wonder if I would have thought differently about business ownership if my dad owned a business when I was younger.
When it comes to being an entrepreneur, there is a plethora of reasons we are the way we are. These influences affect the business we choose, how we run it, and how we make it successful. I know personally that my life experiences and parental influences affected me the most. I also believe my education helped prepare me to be a better entrepreneur. What influences affected you the most to become an entrepreneur?
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