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Home Business Costs: $120,000 Hindsight Part 5 of 8

Mar 15, 2008
Is there a correlation between home business costs and rewards? I have seen no correlation between the amount you spend and profit. No amount of start-up money can guarantee a profit with any home business. It could all be lost - IS always lost in at least 91% of cases. Common sense dictates the more you spend the higher the total risk. However impulsive right-brained individuals have less logical common sense than others.

The same adage as for building a house is a good start - double the cost and triple the time.

How Much Do I Need To Start?

So what budget should be allowed for to cover home business costs? This is one of the most commonly asked questions. The answer varies according to the business category and each individual person. The lowest I have seen is a person starting with nothing but an idea. Yet this requires leverage and a particularly talented or motivated person - not the run-of-the-mill entrepreneur. Other costs varied from $30,000 or 15,000 GBP for sports arbitrage - where it is legal - or a minimum of $10,000 or 5,000 GBP for most forms of trading the markets.

A real estate or property business can be started for free using nothing down techniques such as option agreements. Again you don't get something for nothing. These techniques require talent and particular personalities - these abilities are not common to everyone. Otherwise you can spend thousands for seminars and courses, and tens of thousands of running capital if using conventional buy-to-let, flipping etc.

Internet marketing has courses, manuals, software, eTools and eBooks going for $5,000 plus. Yet you can start for next to nothing or pay a modest amount, say $300, for decent tools, hosting and guidance etc.

Direct response marketing can be started for free on the internet. Although anywhere a free technique is being used be prepared to find a lot of other horses at the trough. Offline - especially in the UK - we are talking in the thousands, and you may not see anything back at all.

Although a positive approach to any business is an asset, with marketing, place optimism in a tightly locked box and anticipate any results with the following maxim:

'Treat every marketing venture with extreme pessimism, topped by gloom'.

Educational & Time Costs

There is an entire industry selling aids, eBooks and services that sound like good investments but which soon start to drain your account. Beware free or very cheap material is often just a lead-in product for later up-selling and back-end sales. Seminars, manuals and course are often sold in context of a potential reward and hence promoters are able to charge way over the top prices.

Wasted time - most people do not include this but they should. Work out how much you could earn using the same time as you input to your business. This is guaranteed money that is being missed.

The Cost Of Getting It Wrong

Practical training and business mistakes - both are necessary and both cost. The cost of learning can be the LARGEST potential loss.

Any form of trading - especially on margin or forgetting to place stop losses - can lose a fortune in a few hours! People also get carried away with marketing expenditure, thinking about potential returns which never materialise.

Dead Money

A safe strategy is to start any home business with dead money. That is by selling something you do not use, or saving money by cutting an existing expense. Or you could lever someone else's money - you risk your time, they risk their money - and you split any profits.

The Bottom Line

Anyone in the developed world, and indeed many in the developing world, can start a home business for less than $500. This figure would not be considered an investment by any serious business person. It is small change - though for many people it will seem like a serious amount. They may not even need this nominal capital if they can joint venture or partner with someone else. Thus a lack of money should be no barrier to starting a home business. Indeed the financial pressure may well be an advantage over the more financially comfortable.
About the Author
Charles Challis is the managing director of Applied Serendipity Ltd. He has spent the last 3 years and over $120,000/66,000 GBP researching and testing home businesses. The company website: http://www.home-business-consultant.com is a must-read for prospective home business entrepreneurs. Visit http://www.home-business-consultant.com to save your time and money.
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