Introduction to Entrepreneurship
Introduction to Entrepreneurship would not be complete if it didn’t include the basic premises that follow:
(Now, these apply to one person’s own business operation, so not everything may be applicable for you. To read a textbook on the subject – Go Here.)
Step One: choosing the business
When thinking about starting an internet business there were a few things that were must-have requirements. In this introduction to entrepreneurship, you will see how one person wanted the business structured…
The first thing was that the owner needed to be able to get the business to profitability for less than $1600. In practice each site has cost more than that when you figure in the marketing costs needed to get it off the ground quickly. The silk tie retailing site was set up for less than $300 but when you factor in marketing spend, then he spent almost $800 per month on marketing, mostly Google Adwords and Overture. It is only after month three that the owner got close to breaking even. Anyway, near enough and if you are more patient and make less costly mistakes than this owner then you should be able to do it for less.
Step Two: little manual labor
Secondly. The business had to need as little manual work as possible. I am after a business that can be worked part time, for him, as a consultant, time really is money. He is also not keen on hiring people if it can be avoided. The internet has the potential to offer some virtual businesses and he wanted to realize this. For this reason, as well as start-up costs, this means that he did not want to stock or handle any products. He does a lot of supply chain consulting work so it was obvious to him that he could have a business that used other companies to buy, store and deliver the products. The easiest way to do this is by using drop shipping. Drop shippers are wholesalers that ship individual customer orders direct to your customers. In any introduction to entrepreneurship, the drop-shipping model will be presented.
There is a lot of information on drop-shipping online, however it has to be said that there are some terrible drop-shipping companies where prices are too high or products too common to successful. Typical of these is a platform which charges a fee to join, but once you join you find that the prices are often higher than they are being sold for on eBay and are widely sold with lots of competition. It is very hard to make good money from these sort of drop-shippers. There are however some good companies out there with niche products where achievable margins are good. so, use caution if you buy into one of these….
Step Three: at least 1K in monthly profit
The third requirement was that the business needed to have the potential to generate at least $1,000 per month in profit. That way with a few web businesses it could become my full time job. I decided that I was not trying to start the next Amazon, instead I was after a good profitable niche. Something not too competitive and with no household names as competitors. This means that he has not gone into electronics even though it is the area he knew the best, it is a very competitive market online and competition includes Amazon, among others. To be successful in electronics you either need to find a niche not served by the big boys or spend serious money to get established. (It’s important when reading through anyone’s introduction to entrepreneurship, you figure out if it’s the direction you really want to go…)
He then started searching for business ideas. He read the get rich quick newsletters, internet marketing newsletters, internet business forums and drop shipping websites. He searched for drop-ship suppliers then when he found a product that he thought might be promising, did a search for it and checked out the competition. If after that it still looked interesting then he did a keyword search on Google AdWords to find out how many clicks he could get and at what cost.
While doing this he came across some sites selling ready-made business websites. Essentially they provide a shop template, a catalog and a supplier of stock and off you go. These sell for between $80 and $800. He wasted a fair bit of money with a couple of false starts. He bid on a lingerie web business template on eBay with a starting price of $99; his wife was a lingerie merchandiser for Marks & Spencers and so he thought she could help, then he saw a gadgets website from the same people and thought he would get that and see if he could find a gadgets niche and bid for that too.
Trouble was he then did some more research and found that lingerie was very competitive online and that the supplier he would be getting had a limited selection of very tarty undies at rather high prices. He also found that the gadget supplier was the drop-shipping platform previously mentioned, therefore, they are overpriced. He then found the tie web business and decided this was a better niche where margins really are 60% and bought that one from a supplier who has been very good.
Unfortunately no one else bid on the two on eBay and I ended up winning them although I no longer wanted them. $300 wasted. Oops. So do your homework carefully before buying; look carefully at the sample sites and try and find some clues to the suppliers, check the competition out and make sure the margins are high enough.
It’s important to note that this is one person’s map to getting started – other than Step One – the other steps may not apply to you at all. Later on this month, I will have a post showing how my entrance into Amazon FBA was relatively painless and on the third product I was turning profit. So, watch for that post later this month.
To read a great textbook on Entrepreneurship – Go Here