What 11 Characteristics Make The Ideal Business To Own?
by Richard Hampton
I own two small businesses that give me huge satisfaction. One is a technology-based franchise. The other one is in e-commerce. They meet my ideal.
Investment writer Richard Russell, famous for his DOW Theory Letters publication once outlined what might make an ideal business.
His points are brilliant and totally valid, and you should evaluate them to see how many of them correspond to your list of ideal characteristics to consider when starting your own business.
The Ideal Business Must...
- ...sell to the world instead of selling to a single neighbourhood, city or state. In other words, it has an unlimited global market.
- ...offer a product that enjoys an "inelastic" demand. Inelastic refers to a product that people consistently want in the same amount regardless of price. Soap, salt, toothpaste are examples. Products whose quantity people will continue to buy no matter what condition the economy is in are inelastic.
- ...sell a product that cannot be easily substituted or imitated. This means that the product is an original or at least it's something that can be protected by copyright or patent.
- ...have minimal labour requirements. The less people working to produce it, the better.
- ...enjoy low overheads, meaning that to run it, the business does not require having an expensive office, lots of electricity, advertising, legal advice, high-priced consultants, inventory, etc.
- ...not require big cash outlays or major investments that tie up your capital. Lack of capital is often the main cause of new business failures.
- ...enjoy cash billings so that your capital is not tied up in lengthy or complex credit terms, where you have to spend time chasing for payments from customers or waiting for people to pay what they owe you.
- ...be relatively free of all kinds of government and industry regulations and strictures. 'Nuff said there.
- ...be portable or easily moveable. This means that you can take your business with you anywhere you want . Want to do business from Nevada or New Zealand? No problem. Move there while your customers stay put and still buy from you.
- ...satisfy your intellectual (and often emotional) needs. There's nothing like being fascinated with what you're doing. When that happens, you're not working, you're having a blast!
- ...leave you with time to do what you'd like to do. What's the point of a business if it never frees up time for you to do the things that you want to do?
The really important final point here is that your income ought not be limited by your personal output. In other words, the business should be centred around you. Professionals, such as doctors, lawyers, consultants as well as plumbers, carpenters and deliverymen, are people who face this problem.
If they personally don't meet with a client one day, they don't get paid for a day! As Richard Russell put it,
"Know that in the ideal business you can sell 10,000 customers as easily as you sell one."
I hope that these points help you when evaluating a commercial opportunity to determine how much of it matches the ideal business scenario.
Richard Hampton is an experienced fundraiser and aspiring filmmaker, screenwriter and director in South Africa, and publisher of Rewarding Fundraising Ideas.com
, where he shares insights on how to secure financial sponsorships for schools, sports teams and charities.