You can make money by doing just about anything. However, you won’t make a good living unless you are smart about it. The details are extremely hard to get because the best information is proprietary. You can order company financials to get an idea of profit margins and how companies are doing.

Most small businesses owners make less than 50k per year and are in the service sector. Service businesses have poor underlying economics and will generate poor returns. However, it could still be a good starting point for someone or be a secondary income source.

Template Creation Is Key

You need to create a template that is reproducible. The template should create intellectual and/or financial barriers for your competition. It’s what separates the goats from the sheep. Tell me what to do and I’ll do it (sheep). I’ve come up with this template for you to follow (goat). You have to think for yourself, trust your own ideas, and execute. A common business for sheep is the franchise. Goats create a lot of leverage by bringing in the sheep.

Microsoft : Intellectual Business With Leverage

The ultimate template. They create something that has a high need in society. Once it is created, it can be reproduced for almost nothing. The cost can be high because nobody can make it themselves.

Leverage : You Need It

Without leverage you don’t stand a chance. Leverage is the single most important factor. You can leverage your money through borrowing and you can leverage people through franchising. There are a lot of other ways to leverage. These are just a few. Highly leveraged businesses are real estate, stock market, software, manufacturing, and media (to name a few). The main point is that after you build up your business it should take little effort to keep it going. Billionaire, Dexter Yaeger, admits he forgot about a huge company he owned for several years.

Intellectual Capacity

Do you know any rich ditch diggers or janitors? It’s an important job in society, but it will never pay well. Every business that pays well uses the power of the mind. Mans greatest asset over other animals is his/her ability to think. Mans greatest asset over other humans is his/her ability to think; as well. To find a good niche to work in, find an industry that has already produced billionaires. Then, analyze where a niche is needed in the market. Pick a small enough niche that you can compete in. Don’t think too big unless you have a lot of cash to fall back on. Most people get too excited and think too big. You think about getting big only after learning how to dominate smaller niches.

Follow People That Are Rich

Billionaires have all made their money from a select few ways. It’s surprising how few of ways their businesses are concentrated. Billionaire businesses are most heavily concentrated in real estate, banking, insurance, investing (stock market related), retailing, manufacturing, computers, media, and leveraged buyouts. There are still a lot of other ways to become a billionaire. For a complete list, go to www.forbes.com

The Wrong Businesses : Commodities and Most Franchises

To help you understand the right businesses, it is useful to look at the wrong businesses. Warren Buffet spent years trying to run a commodity business (Berkshire Hathaway). No matter what he did, he couldn’t make much money. It was an insurance company, Geico, that got him his real start in making a lot of money. Warren states that, “The underlying economics just weren’t good. Even a brilliant manager can’t make a company with bad economics be a great business. Likewise, a poor manager in a company with good underlying economics will look like a genius.” Jack Welch, the C.E.O. of GE stated, “We are all just one stroke away from commodity hell.”

What is a commodity?

A commodity is a business with low barriers to entry. One example, is a cleaning company. You can clean your neighbors house, but so can your neighbor or even your grandma. In Warren Buffets case, his company Berkshire Hathaway produced textiles (clothing). A true commodity can be produced easily by many people. The commodity product will never get a good return because there will always be an excess supply of labor to produce it. People without skills are in abundance. To get an edge on competition, you need to be in a business with intellectual barriers and/or large financial barriers.

Intellectual and Financial Barriers

Find the largest barrier that you think you can overcome that other people can’t. Since most of us aren’t wealthy, it’s more realistic to overcome an intellectual barrier. For example, if you wanted to manufacture hammocks you could pay an artisan to teach you how to do it. After you learn how to build it well, you could start a manufacturing plant. Building a good hammock requires enough skill that most people can’t make a good one on their own.

Intellectual Business With No Leverage

Doctors and lawyers fit into this category. They get paid a lot because of their huge intellectual investment. However, they can’t readily assign people to do their jobs for them. And, since there are only so many hours in a day their work is “capped”.

Check Profit Margins

Finally, check profit margins on products. In many cases, it is virtually impossible because companies hold the information as proprietary. In any case, look for products with high margins. It will be difficult starting out with a low margin product. Find a product that will have a 50% profit margin, or greater.

Franchises

The franchise creator has all the leverage. Most franchise owners don’t make much. I knew of one woman with three Subway franchises who was just making it and waiting for the day the buildings were paid off. There are some good franchise opportunities, but the really good ones require huge capital outlays and don’t come along very often.

Historically, the best franchises have been cleaning companies and restaurants. Both of which, have poor economics. If you pick carefully, you can make a good living, but you’ll never be rich. Most non franchise operators actually do better than franchises because they have less overhead and can more readily adapt to local markets. As a rule of thumb, you are going to need 7-10 locations to do well.

Business Picking Strategy

You will never have all the information you need. Good entrepreneurs try lots of things before they find something that works. Imagine that you have a big basket of apples and lemons. You want the apples, but can’t tell the difference between apples and lemons. How do you find the apples? Take a bite and see. Businesses are the same. You try them out to see. If you quickly pick up apples and quickly throw out lemons you’ll do much better.

Failure Strategy : How Some People Think

Many people try to make the perfect apple. They spend tons of time on a product before knowing if it is a lemon or an apple. Then, if they discover they have a lemon, they stick with it too long because they are too heavily invested.

You best option is to throw out lemons as soon as they are discovered. Try things out with the least amount of capital and time. Once you know you have an apple, invest further.

Stay The Course

Once you know you have an apple, develop policies to keep it sweet and make it work. Don’t deviate from principles you have learned. Companies, in the beginning, need to be really flexible while more mature companies will do better sticking to what they have learned works.

Good Luck In Your Business!

For further information, please visit Credit Reports