January 31, 2012

Starting a Business 101

People are always asking me how do they evaluate a business investment. I was recently given an idea. When you are looking at potential investments, decide what the worst case scenario is and if you can live with this scenario you should do the deal. The problem with this this line of thought is how bad can worst case be. For example, if you are looking at a 20 unit building, do you assume worst case is 100% vacant? And how do you project the worst case maintenance expenses? They could be almost unlimited. The other part of this idea is to not look at the upside when you are looking at potential investments, the upside will take care of itself so long as you can live with the down side.

Another thought I wanted to share is something my 12 year old son said to me last night. I am encouraging my children to be self employed when they graduate from college and my son said, " But dad, many people cannot own their own business because they do not have the money to start one." I went on to tell him this is absolutely not true. Although a lot of businesses require an equity investment, countless do not. Some examples, any kind of contracting, security or cleaning business where your time as the business owner is what you are selling.

Have you given any thoughts to owning your own business?

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