Starting a Business

 Starting a Business

Have you ever thought or dreamed about having your own business? The benefits of running your own business range from monetary gain to personal passion and fulfillment for the industry or business you are in. You might have a passion for cutting hair, or for gardening, when you are involved in your business it doesn’t feel like work, it feels like your hobby and interest making you more successful at it. Also having a sense of ownership and control over your business can let you run your business the way that benefits you and your team.

Do you have the option of starting your own business from scratch or even buying a pre-existing business? When you buy a pre-existing business from a seller who is looking to retire or just has other plans, you might have to pay a bit extra. This is because everything you need for the business to operate is already on the premises and the business already has establish customers. These customers come and go daily and are necessary for you to keep operating and turn a profit, sometimes the customers don’t even realize there’s a new owner to the business because the ownership transition was smooth. Sometimes you might even be able to get a business for the low because the current owner is not able to run the business well. The business owner is desperate to sell and you might get an opportunity where you can take this business to greater heights and success. When you have your own business it could be more time-consuming than having a 9-to-5 because of the commitment to the well-being of your business. However you are rewarded in the form of money, having the ability to hire help, employ others or family members.

1. Product Based Business

In this day and age we have the luxury of being able to buy pretty much any type of product. Whether it be hygiene, clothing, jewelry, tools, electronics online or at a store. Everything we need to operate on a daily basis can be bought at a store like Walmart. We even have the option to go online and view products and get them delivered to our doors, just with a click or tap you can order a product. You don’t even need to get up and drive to the store anymore. Taking advantage of this phenomenon are all the big retailers, also including some newcomers who slowly do business online. Buying products online has become so much easier for consumers and businesses are able to reach more consumers and make them into customers.

Selling products online has also taken off with websites such as eBay and Amazon. You even have the option of starting your own website and giving the option for customers to shop your products from their homes. This is not only convenient for consumers, it saves a business owner the money and struggles of opening up a store front. With a physical location you might only be limiting your customer base to people who can come to your store in person. With online sales you can ship across town, to a different state or even country.

Some retailers have an online and physical store as well, this could be because they originally started as a physical storefront and with the development of technology have adapted to the new norm.

You can start a product-based business online or with a storefront and you will most likely want to use social media to promote your business and products. You will be able to reach more customers for your business whether it be food, clothing, electronics.

2. Service Based Business

There are also numerous service-based businesses that you can start, ranging from food restaurant dining, fitness, financial services, property management, cleaning, welding, handyman services. You have the option of buying an already established service business or you can start from scratch. Depending on the amount of money you have will determine the choice you go with. Buying an already established business will require a lot more capital and saved money. Having access to the proper financing will also help.

Starting a business from scratch you have the option of buying the essential basic to what you need and when you start making money you can invest your money back into the business to open a store front or make more purchases such as efficient machines and tools to help you get more customers. Most of the service based businesses do not require you to have a physical location because the service you provide might be done at the customers residence. I have noticed more and more businesses adopting this mobile system, so they can be flexible and go to customers. I’ve seen barbers, tax agents, medical businesses, car wash businesses meeting their clients at the customers residence for business. It seems like everyone is getting lazy or just lacking the willingness to go get what they need and want. People have the option of ordering through app services and have the ability to get service provided to them at their convenience. This usually comes at a additional higher price but the folks love the option to have their barber see them at their home and not have to wait in line for a car wash on a hot sunny day especially on a Friday night for the weekend.

3. Mixed Based Business

I have even seen business that a product-based and service-based business. This usually includes the consumer buying a physical product they use in their daily lives and then paying a monthly or per use fee to use the product to its full potential.

One business I have seen do this is the peloton fitness machine, where you would buy the gym equipment and then you have the option to buy a subscription to a service where you have a social experience to working out from your home. The product is a fitness bike where you can connect online and work out with a live trainer and other subscribers to the service. Giving you the social feeling of being in a spin cycle class from your home.

Your cell phones have adapted a similar system, not only do you pay for the phones, you then buy apps on the phone to allow you to do more. Video game systems are sold separately from the games. You might have cable but you still have the option of pay for special programming via the pay-per-view option.

Many businesses have adopted this model, it has been around for a while but this advancement in technology has caused an increase in this type of business. People happen to be dependent on the services and products so they happen to be very profitable.

4. Franchise Business

There are literally thousands of franchises in all different types of industries that are looking for individuals to buy into their already full proof systems to promote and run the business in the new franchise region. There are franchises all across the United States that are national and even international brands such as McDonald’s. Someone other franchises are more local and might only be in the north east or south west region of the country, this could be by choice or just because they have not yet expanded and have not found individuals that are willing to partner up with them yet.

Franchises benefit newcomers into businesses because they supply the knowledge, experience and systems that are well developed already. The franchise wants you to succeed so they will work hard to train you for success. This is great for someone new to business, however being a franchisee is not attractive to other folks because it is costly. The initial fees to be a part of a franchise are usually steep, when you are a part of a franchise you have limited options on the choices you can make as a business owner.

As a franchisee you may notice that you are making lots of money but majority of it is going to the franchise and less is left over for you. You may also notice that you can’t make many choices as everything is already set up a certain way. So there is less freedom and control over the business. This could be for the better though because the franchises have done most of the hard work and research and they know what works and what doesn’t work.

Investing Your Money

 Investing your Money

There are many ways you can invest your money, there are riskier options that provide higher returns and less risky investments which also bring in returns, however they will be less profitable. The greatest benefit in investing your money is to earn extra money while you are doing other things with your time. Your investments will keep earning you money while you are sleeping or at your day job or even on vacation, spending time with your family and love ones.

Investments can earn you passive income and unlike a salary there is no limit to how much you can grow your passive income to be and you don’t have to be stuck in an office or certain location at any given time. 

After you factor in your expenses you’ll be left with a positive cash flow, that you can use in anyway you see fit, to improve the quality of life for you or others. There are also investments suggest starting a business which can be passive but initially they might require you to be there as a manager to hire and supervise operations until you can hire someone more efficient and experienced than you at managing the business.

The reason I prefer passive income is because there are only 24 hours in the day so working an hourly job or working for a salary are limited with a ceiling point. These types of incomes create a ceiling or a box around the possibilities and opportunities. With passive income I don’t need to spend my time in front of a computer or a chair making others money. I am free to sleep in, or spend time with my family, go to religious gatherings, or help volunteer. Investing money has risk to it but depending on your knowledge and experience you can limit your risk. You can also improve the quality of your life and get the things you want get conpleted.

1. Cd’s, Savings Account, Bonds

With all the saved money you have, you can invest in CDs and savings accounts and bonds. These types of investments are the most secure because most banks have FDIC which means your accounts are insured up to $250,000. You can never lose your money, what you put in can always be redeemed back including some interest. The interest with these options are usually very low because they are so secure. Usually nowadays an interest rates on savings accounts are less than 1%. The highest I’ve seen being offered by savings account is 2.5%. This is on a yearly basis so a savings account of $100,000 can provide you with a $2500 income.

CDs and bonds usually provide a 3 to 5% interest return on investment annually. Unlike savings account your money cannot be taken out of a CD or bond without paying a fee. Once you commit to a CD or bond investment you are locked into the investment which could be a one year or five year or 10 year investment. The interest and profit is collectible annually however the original investment is not refundable until the end of the term, if you decide to take the money back there will be a fee or penalty involved.

These investments are just a few of the options available. They are the securest because they have the least risk involved, however the returns on these investments are also little. If you are considering these investments, I suggest you take into consideration the inflation rates that are currently going on, at this time the inflation rate is about 4% so savings accounts are truly bringing you a -3% return on investment, if you keep the money under your mattress or is cash form it is -4% return on investment.

2. Mutual Funds, Stock

Stocks and mutual funds are a very attractive investment because of the high rates of return on investments. The average rate of return for stocks and mutual funds are 10 to 18%. Stock is a piece of ownership in a company, so you are essentially given the opportunity to own a portion of the company so you get a piece of the risk and loss and expense along with the profit of the company. Most companies usually go up in value overtime causing the stock prices to rise, there is also risk that the company could fail and go bankrupt and you are left with nothing.

Mutual funds are usually companies or funds that invest in multiple stocks in different industries.So if one of the stocks part of the mutual fund fails and at the same time another stock goes up the value could remain the same. For this reason people who do not know much about stocks and do not have the time to follow the stock market feel safe investing with mutual funds because the two parties are trying to have a fund that does great, thats growing and will provide high returns on investments.

Investing in the stock market can be a long term or short term investment. Some trade the market actively and are looking to trade every day they are known as the day traders, trading in the profits from their stocks daily. Some investors also like to invest in companies and collect the dividends, and hold onto their stock interest for long-term appreciation.

3. Real Estate- Passive Income & Appriciation Cash Flow

My favorite all-time investment is real estate. There is residential real estate which includes single-family homes and multi family homes and bigger apartment complexes which can also include condos and co-ops. Although some consider bigger apartment complex units to be commercial because they’re mainly for collecting rental incomes and profits. 

Commercial properties are usually storefronts warehouse gas stations strip malls, office buildings and medical centers usually where business is conducted and usually no one lives and sleeps overnight. You could also find mixed use property where the first floor is usually a business and upper levels are used for residential purposes.

Real estate investments can be used to accumulate money in the form of cash flow from rental income and also from appreciation of the properties values. Some individuals like to fix and flip properties. Buying them on foreclosure or short sales, they take the distressed and lower price properties, fix them up either with cosmetic repairs or full renovations and then they relist them and sell them as soon as a month or even six months for a profit. 

Some investors hold onto properties long-term they buy properties priced below market value and collect the rent to pay down the mortgage and still have an extra flow of money. These investors also increase their net worth because property values increase causing their assets to increase, causing it to increase their net worth. These investors usually hire property management companies to manage their investments so that they can truly be passive income because owning property comes with maintenance and responsibilities.

4. Buying and Selling Items, Automobiles, Houses, Collectables

In economics class, I learned that price is determined by supply over demand. Meaning if the demand is high and supplies low, the price for the product or service is going to be higher than usual or high in general. It is this basic equation or formula that causes entrepreneurs to provide products and services, they are problem-solving to fulfill the demand and supply the product or service needed to consumers.

Entrepreneur sell products or services that all differ and vary. These individuals buy items such as automobiles, houses, electronics, clothing, jewelry and resell them to turn a profit. Some items provide a small margin while they are small items that are in high demand leading to higher sales in volume and turnover. Another way is to sell higher priced items where a bigger margin can be made. Buyers and sellers trade new products or even used items usually whatever they know is in demand. With access to Internet sites, an entrepreneurs can virtually sell products all over the globe, if they can’t find a buyer in one market they might find one in another state or country. There are even individuals who are willing to go through door to door sales in their neighborhood or in another neighborhood providing products or services that might be in high demand.

Some individuals also buy electronics that they pre-order such as new phones, or gaming consoles that you know will be hard for buyers to get when they are released due to a short supply of them. These individuals buy these items and sell them for a hefty margin to others who did not anticipate or plan for this product and are usually buying off impulse and instant gratification.

Building Your Credit

 Building your Credit

Having access to credit lines and loans will only be possible if your credit score is at a healthy range. Credit scores range from 300 to 850 depending on the individuals credit history. The major contributing factors to credit score are the individuals length of history, loan debt ratio, amount of accounts you have open and the number of credit inquiries you have recently had in the past 24 months greatly impact your credit score.

The length of credit history will be determined by the first account you opened and still have active today. The longer you have had a credit card or loan open with on-time payments will increase your credit score and strengthen your credit portfolio. The loan ratio is the total amount of debt or balances you have compared to the total credit limits you have available to you. It is recommended to not use more than 30% of your credit limit if you are trying to increase your credit score and if you don’t want to see it drop. Having a loan ratio of more than 30% over long periods of time will weaken your credit portfolio.

Other factors that affect your credit portfolio are the recent credit inquiries on your portfolio. There are hard inquiries and soft inquiries, hard inquiries are usually recorded and reported on your credit portfolio when you apply for loans or credit cards. The amount of credit card accounts also determines your credit score and ability to get new loans, if you have many cards maxed out more than 30% on them you will not be offered more credit cards or loans.

1. Use or Lose your Credit & Increase your Credit Limit

In order to keep your credit score in good health you have to use your credit card. This is not an excuse to spend more money. Many of your necessary purchases in your budget, can be payed with your credit card. The goal here is to show activity and credit card usage, creating a bill and then paying it off before the due date of the bill. It doesn’t matter how much your bill is for and it can be just $10, the goal is to create a bill and pay it off before the due date. This creates credit history records of bills being paid on time on your credit profile.

If you have a credit card and you don’t use it your credit score will suffer. Non-activity over longer periods of time will make your credit profile look unattractive to creditors and lenders. 

Eventually after building up your credit for sometime you have some reputation and your credit score is at a healthy level. At this time you can contact your credit card company and let them know you are looking for credit limit increase. Let them know that you plan on making a big purchase such as a new TV or appliance or plan on starting a business and you will use your credit card to make the necessary purchases. They will ask you a few personal questions for the credit limit increase request which include information about your assets and your income mostly. Depending on your answers and credit profile you will either be approved or denied. This process includes a hard inquiry on your credit profile so don’t do this too often. Rather time it as a yearly or wait about six months to improve your credit portfolio some more. The credit card companies need to see that you have used your credit responsibly for your increased limit request to be approved.

2)Automatic Payments for Bills & Utilities- No late payments

A great way to keep using your credit card without making extra unnecessary expenses is to use your credit card to pay utilities or to pay for necessities only. Instead of paying for groceries or utilities with your debit card, you can pay it with your credit card.

One of the benefits of paying your bills on credit card is it gives you additional time to pay your bills. For example if you get your phone bill and have 30 days to pay it and you pay it on day 29 with your credit card, now you have another 30 days to pay your credit card balance. Just be careful to not be late for either of the payments because you will incur extra interest and fees for late payments. You will also incur a late payment record on your credit profile which is one of the worst.

In order to make sure you don’t incur late fees you can set up automatic payments for your bills to a credit card. Many utility companies let you set this auto pay service by contacting the customer support number or through the online portal. The benefit of doing this is to make sure you never forget to pay your bill, payments would be made automatically.

Make sure to continue monitoring your invoices and make sure the automatic payments go through successfully. It is also a good habit to confirm the amounts of the bills to be accurate. You can easily forget to confirm the expenses because everything is happening by itself as you swipe your card everyday. Monitoring your expenses should be more organized on your credit card statements rather than paying things cash and losing track of change. You will be able to record your expenses and also be building your credit as you use.

3) Using Financing, Low Cost Financing 0% Loans from Retailers and Credit Cards

Using financing when you purchase big ticket items such as furniture, a new TV, appliances and electronics can help break down the payment into smaller monthly amounts that you can pay off in the near future. Many retailers nowadays offer 0% financing over a year or three on certain products you buy from them. If you need one of these items and it would absolutely help to improve your quality of life, help you save time and if you need it rather than want the item it is safe to use financing rather than paying cash.

Don’t buy anything with your credit card or use financing to buy items you can’t afford. Only use financing as a way to conserve your cash, so if you don’t have the cash to buy the new TV or cell phone, just don’t buy it. I understand buying things using financing involves purchase items you don’t have the money for but this is truly insane because using financing to buy things you don’t have money for you will trap yourself into making payments and you are essentially committing to something you might fail to commit to. 

Life is unexpected so you don’t know if you will continue to have your income to pay that $1000 balance a few months down the road. Not being able to pay that payment will lead you to incur late fees and extra interest. So only finance items you have the cash to pay off at any time, store the cash in your savings account or checking account. You could even use the cash to spend on investments however this is risky depending on the place you invest your money because that money might not be easily Liquidable or accessible if you need it to pay bills.

4) Monitor your Credit Reports, Expenses and Budget

Building your credit will take some time and to maintain your credit score will be an ongoing process. Being disciplined to only use your credit for necessary purchases and items that are in your budget which you can afford is responsible. Before you buy the new phone, have the cash set aside and take advantage of credit and financing. Building this disciplined habit will prevent unnecessary expenses from your life. You will begin to see your assets grow and liabilities reduced. If you save your cash and use your credit, you are increasing your assets and liabilities which balance out. Rather than buying items you don’t have the cash for and now you are in the negative.

In order to continue building your credit and maintaining a great credit score continue to reduce your expenses by reviewing your net worth and the income. Always review your expenses with your budgets because you will find places you can save money on by implementing changes in your life. Your budget today might not be the same six months from now so spend a day in the month reviewing. instead of making this tedious and annoying process, make it a vital opportunity with your family members or loved ones. Use it as a time to educate your family about finances and give them more understanding about the families goals. Finances can be made fun and made into a group effort, a team building activity with your loved ones.