For any wealth making business you need to have some guidelines. Whether it’s stock trading, property investing or starting a home based business, it’s important to have set criteria and guidelines from which you make the all important go/no go decisions.
It’s no different for small or home based businesses. Diving head first into any venture without a clear strategy could end in disaster. So, minimize your risks, maximise your potential and put some guidelines in place. Here’s the criteria I use to evaluate any potential new business:
1. What profit margin is acceptable?
There are lots of online businesses (such as affiliate marketing and selling on ebay) that are volume businesses. You can make a certain income from them but the profit margins aren’t huge. Set a profit margin level and stick with it.
2. Is the business easy to automate or outsource?
If your aim is to generate passive income (mine is!) then you need a business model that will generate income whether you work or not, and even when you’re on holiday or asleep. Make sure your business can be automated or outsourced so that it can run without you.
3. Is the business scalable?
Does your business have the capacity to be scaled up (preferably in conjunction with being automated and/or outsourced as in #2). If your plan is to make $10,000pcm you would be sensible to start a business making $1,000pcm and then scale it up, rather than trying to make $10,000pcm from a cold start.
Once momentum builds in your business the scaling up will take on a life of its own, but make sure that potential is there or you may miss out on some great opportunities to create wealth.
4. What’s your exit strategy?
In the property world we don’t buy property as an investment unless there’s at least two or three potential exit strategies. What does that actually mean?
For example, if buying a large house in a run area, what are your options if you’re not able to rent it out (Plan A)? Do you have a Plan B and Plan C in place too?
The same applies in business. What is the endpoint you’re working towards?
Are you building a business you can sell on in ten years time, or creating an asset that you’ll pass on to your grand-kids?
Factor these guidelines in to your planning and you’ll have a wealth making business to be proud of.
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