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Business Opportunities – Why Pre-Packaged BizOpps Are Not Worth The Money

Pick up any “business opportunity” magazine at the local newsstand, and you’ll see a glossy attractive publication designed to attract people who are actively seeking ways to earn extra money, buy a franchise, or open a business of their own. After all, it’s the American Dream to own your own business and get rich, right?

You’ve probably heard the old saying, “Most people are too busy earning a living to make any money.” Common sense tells us that we’re not going to get rich working for someone else (with the possible exception of the lucky folks who started with Microsoft or Google in their early days and got rich through stock options). The average American employee lives from paycheck to paycheck, with barely enough income to cover living expenses, leaving nothing for investment toward building wealth for a comfortable retirement. Hence the allure of the “Business Opportunity.”

As you flip through one of these “BizOpp” magazines, you’ll see a wide variety of advertisements for different types of businesses, ranging from simple “starter kits” for around $29 all the way to sophisticated franchises costing $100,000 or more. For most people, it’s impossible to raise enough capital to consider opening a true franchise. The franchise fees alone are often prohibitive, running into tens of thousands of dollars even for the lesser known businesses, or several hundred thousand dollars for better known companies. And that’s not even including the outlay required to actually open the doors for business.

At the other end of the scale, most people are aware that the cheap starter kits and “business in a box” packages are basically junk. But that leaves a whole host of medium-priced business startup concepts, ranging in price from around $500 on the low end to $10,000 on the upper end. I refer to these as “pre-packaged business opportunities.”

To explain why pre-packaged businesses are usually a waste of time and money, I’ll use windshield repair as an example. As I write this, I’m looking at an ad for a training program that costs $3,000, including starter materials. In case you don’t know what I’m referring to here, the basic idea is that small chips, cracks, or holes in automobile windshields can be repaired using a special liquid material that seals and repairs defects. This is obviously much cheaper than replacing an entire windshield. Hence the “opportunity” to start a business that helps people save money on their windshield repairs.

Now, in case you’re thinking, “There’s no way I would want to be in that business,” please bear in mind that I’m just using this as an example out of hundreds of possible different business concepts advertised in the same fashion. And of course there are many people who would be attracted to such a “business opportunity” — people who really like cars, people who already know quite a bit about auto repair, and so on. Plenty of individuals are attracted to a business idea like this, which is why this particular “opportunity” has been around for decades.

Now, here’s the real question. Can you seriously expect to shell out $3,000 for some starter materials and training in the windshield repair business, then put a sign out, and expect to start earning money right away? Of course not! This is the #1 flaw with pre-packaged business opportunities: you still have to figure out how to market the product or service on your own.

Let’s take a closer look at the windshield repair business. Let’s say your goal is to make $50,000 per year in net income. If we assume that you can charge around $50 per windshield repair, at a material cost of around $10, then you have a gross profit (not counting your labor) of $40 per repair. To make $50,000 net, you’d need to find 1,250 windshields per year that required fixing. That translates to more than 100 repairs per month, and you’d need to keep this up month in and month out to meet your income goal. That works out to 3-5 repairs per day, depending on how many days per month you work.

Now, if you had 1,250 cars lined up down the road, all ready for the repair work, it would be nice easy money, right? But FINDING those 1,250 cars and then SELLING those 1,250 car owners on your service will be the real problem. In other words, you don’t really have a windshield repair job here. You have a SALES job, pure and simple. Most of your time will be spent finding business. Obviously, finding one car at a time will be totally impractical. Instead, you’ll need fleet accounts with major car dealerships, auto repair shops, car rental agencies, and so on. And you can bet that a number of other people (some of whom bought the same pre-packaged business that you did) have also solicited the same companies for their windshield repair business.

So again, what you really have here is a sales job. If this were a truly profitable business, then the company selling you the “opportunity” would not be making all their money selling pre-packaged businesses to people like yourself. Instead, they would be making their money by rolling out the service across the country and selling windshield repair directly to fleet accounts on a nationwide basis. But they know that there is actually more money to be made in the BizOpp world, preying on people who have the dream of starting their own business.

The message here is that any pre-packaged business opportunity that sells in the $500 to $10,000 range is typically worthless and a complete waste of your time and money. Please bear in mind that these numbers are just a guideline, and you must always exercise good judgment when evaluating any business opportunity. Just because a “hot” pre-packaged opportunity is selling for more than $10,000 does not mean that it is necessarily legitimate. Many rip-offs cost a lot more than that. But generally speaking, the promoters of these schemes realize they are aiming at people who can’t pay a lot of money to get started in business. So the packages are marketed in a way that will maximize the number of people that can afford to buy in.

If you are serious about starting your own business, then a pre-packaged opportunity is not the way to go. It might seem like an easy answer to your problem, but the very fact that it’s being sold as a packaged business probably means that there’s no real money to be made without a long hard sales grind. You’re much better off doing your own research, coming up with your own business ideas, and then testing your ideas with small advertisements to see if your concepts have any real potential. That’s how many businesses get their start. You’ll have a much better chance of making it in the world of business or self-employment if you ignore those BizOpp magazines entirely!

The House Cleaning Business Startup Manual – Part V (Final Chapter)

By now you are pretty much up and running with your new house cleaning business. Of course starting a business is not as easy in real life as it sounds when reading our series of articles. But overall the articles help you to go into the right direction. They are pretty much a framework that you can follow to be successful.

The mind of a business owner

Starting and running a business is not something that you can do just like this. Put your heart into the business. Live and breath business and you will be successful. Remember – running a business is a little more than the normal 9-5 job. Expect 10-12 hour work days 6-7 days a week – especially in the beginning.
Many new business owners make mistakes that cannot be corrected easily and the business is setup for failure. But if you follow a few easy rules you will be able to avoid common mistakes.
Don’t spend money that you do not have. Do not go onto a shopping spree and buy a new car for your business unless you can a) fully justify the expense and b) have the income to support it. Just because you are now self-employed means that you are rich and have to show everyone that being self-employed means that you have money to spend. Be frugal and act responsible.

The check you receive from a customer is not your income. It is your revenue. You have to deduct business expenses, tax, and other cost factors first. Whatever is left is your profit. I know this is only a very simple and vague description, but it shows the point.

Be frugal and live below your means. If you follow this generic rule with how you do business you are on your way to success. Spend less than what you make. Re-invest money into your business and build value. Outsource work where needed if it saves you time and brings better results (example: web design for your website; accounting;). Educate yourself about running a business and about your industry on a recurring base.

Join your local chamber of commerce as well as you should try to join local lead or networking groups. Building a network of contacts and staying in touch with other business owners can have many advantages. You might gain new clients or made aware of issues affecting your local economy. Knowledge is king.
Think like a business owner and stop being an employee. Stop whining about how hard it is to get customers. If you are looking for an easy way to make money, running a business might not be for you. It is hard work. And when employees leave for the weekend they do not worry about the business (work) until Monday comes along. As a business owner your worries are with you 24/7. You better get used to it.

Good Luck.

Series A Round, Financing and Convertible Preferred Shares in a Venture Capital Investment

What is a Series A round or Series A financing?

A Series A round, or Series A financing refers to the first round of venture capital or private equity investment where certain investors (e.g., private equity funds and/or individuals) invest in a company and the company issues certain (convertible preferred) shares to the investors in return. The shares issued are called Series A shares.

What are Series A convertible preferred shares?

Series A – Shares are called Series A if they are the first batch of a series of convertible preferred shares issued by the company. Future rounds of financing will usually be called Series B, Series C, and so on.

Convertible – Preferred shares are convertible into common stock. At an (qualified) IPO of the company, venture capitalists may convert their preferred stock into common stock (subject to any lock-up period), which may then be sold to the general public on the stock exchange. Huge profits can be realized in this move.

The lock-up period may be a restriction specified in the share subscription agreement and a restriction imposed by the stock exchange (e.g., the Hong Kong stock exchange or the New York stock exchange).

Preferred – Shares are preferred if they give the shareholders certain rights and privileges over the common stockholders. Preferred rights usually include preemptive rights, right of first refusal, co-sale rights, protective rights, registration rights, etc. Issuance of securities with such rights may affect the company’s ability to issue securities in future rounds of financing.