It’s an old adage, a saying that goes back for decades, probably for centuries:
You have to spend money to make money.
But, is it true? Well, yes, I believe it is true, but it is a lot less true than it was a couple of decades ago.
Why is it less true now?
Because of the Internet.
The old way
Let’s say it is 1985, and you have an idea that you want to start selling baseball cards. You have good sources for the product, including some pretty rare cards, and you have researched and found that your local area does not have a store selling collectible baseball cards, or any type of sports cards for that matter. It seems like you have a pretty good chance at success! So, you decide to open up a store where you will sell cards.
You have a couple of choices, you can either buy or build a building for your shop, or you can rent space. Since you are a brand new business, it is most likely that you would rent the space, at least until you find out how successful your idea is. That location, though, may be quite expensive, especially if it is a commercially viable location. I mean, you want to get the best location that you can afford so that customers can easily find you. Such a location will likely set you back thousands of dollars per month. But, you have to stretch as much as you can, so that you have a chance at success. Still, you will have to sell a lot of baseball cards even to cover just the rent expenses. On top of that, you will need to spend thousands on fixtures and such just to get started. You will likely need to renovate the retail space that you rented. There are lots of expenses in getting a business off the ground. Frankly, it will probably take you a few years in business just to get your money back, before you even start making a profit.
The new way
Well, fast forward to 2012, and things have sure changed. Let’s keep the same scenario, you want to start selling baseball cards. You have a good source for cards that you can sell for a profit. You feel like you have a good shot at success. What are you going to do?
Likely, the first thing you will do is start selling on eBay or other online auction sites. After a few months of doing this, and seeing some profits and success on eBay, you decide to open that new store. Do you have 10 or 20,000 saved up to sink into that new store? No, you don’t need that anymore! Instead of a “bricks and mortar” store down at the mall or that new strip center down the highway, you are going to open a store on the Internet! If you are internet savvy and can do things yourself you can build your own website. If you have to hire somebody to do it for you, it will likely cost you only a few hundred dollars to have it done. First, you need to buy a domain name, and web hosting. Next, get that website up. Total cost for all of this would run between $50 to $500 (depending if you need to hire somebody to do the work or not).
Not only is the cost much lower in starting that online business compared to the one you would have had to open back in the ’80s, but you also have a larger potential customer base. How? Why? Because if you opened up a shop in your local mall without a website, you have a customer base which is mostly limited to local people. Yeah, a vacationer comes through and stops at your shop from time to time, but that is a small number. When you open up a shop on the web, your customer base is not limited at all, anybody in the world can shop on your site!
So, if you are savvy, and know how to play the game, things are now easier, cheaper and more profitable than ever! The question is, are you taking advantage of this new way of doing business? If not… why not?
Yep, the difference between capital requirements of a few years back versus today is pretty much up to the beginning businessman or woman.
I tell you something I have noticed with several people who have asked me for advice … or even to make an investment. For some reason many people seem tied up by the thought that a person can only work one job. They have an idea, like buying/selling baseball cards or something like that, and they have a conventional ‘regular’ job. They tell me they are searching for someone to loan them money so that they can quit their regular job, still have money to live on, and then start their ‘sideline’ business
they put off their ‘sideline’ idea until perhaps retirement becuase they a., don’t want to quit their real job to start their own business (which is understandable, and sound advice), but b., feel that since they have that regular 40 hour a week job, they have ‘no time’ to start a sideline business (which strikes me as a myopic view).
If you are planning to have your own business and _not_ work more than 40 hours a week at it, I’d suggest your plans are flawed. So keep the relative ‘safety’ of the regular job and start a sideline business in the (at least) 40 hours a week that anyone _can_ carve out of their time … if they want to.
Might mean less time on Facebook or watching ^TV, but it also could be the way to make yourself financially independent and “layoff” proof … if on eis ready to substitute ‘sweat’ for debt.
Hi Dave – You made a really good point there, and something I did not think about when writing the article. I get the same response from people who think they cannot work their “regular job” and also start up a new business. The two are certainly not mutually exclusive, in fact, I think they go hand in hand. I believe that people should keep their job while they establish a new business! That way, they can remain financially secure while their business matures and becomes profitable. In fact, I would consider it rather short sighted to quit your job and start a new business! Especially these days when you can use the Internet and do it during your free hours.
I would slightly disagree with you about cutting back on Facebook time, though. I know that in my case, I generate a lot of business through Facebook. But, if you are just using FB to rant and share your political thoughts… well, you are right on that.. give it up and get your butt to work instead! 😉
yup and you can go to work in your pajamas in your @ store. and so can your customers.
Or, Donna… you can even go to work without your pajamas! 😯