- Posted on February 1, 2011
- by Alan Blume
Perhaps you’re considering creating a business or expanding a current business. As with many businesses, investing in inventory, product development or warehouse space might seem requisite. And perhaps this appears to be a reasonable or even logical approach, borrowing the famous quote from Field of Dreams, “if you build it, they will come.” After all, your simple business plan projects profits after only a modest startup period. My advice is to think about this again. When creating a new business, it’s highly advantageous to operate in a way that is both conducive to a flexible lifestyle while mitigating downside risk, including ramp up time or significant upfront investment.
Then again, you might be thinking that you can alleviate the risk by securing a bank loan, tapping into your home equity or even attracting venture capital. My advice, once again, is to think about another path, preferably one revolving around the golden rules above. Yes, there are a select few who can beat the traditional small business odds which are often estimated at 5 to 1, where only 20% of new businesses succeeded in the first 3 years. Venture capital odds are surely the worst, where many experts maintain the odds that you will succeed (find VC funding, maintain control of your company and enjoy a positive liquidation event) are about 5,000 to 1. How difficult are these odds? At roughly 5,000 to 1, you would odds comparable to getting struck by lightning.
Bootstrapping your virtual business should be much easier than funding a traditional brick and mortar business. Before opening a traditional storefront, or investing in a physical office, ask yourself if you can work from a home office, or if you can adjust your operations to accommodate a virtual business model. Instead of getting on a plane or train, are you sure a “face to face” Skype conference call wouldn’t suffice? At a cost of about $5 per month, you can simultaneously video conference with multiple people, regardless of their location. Instead of investing up front in capital equipment, can your new business secure orders in advance, or even deposits in advance of delivery?
- A short path to the money (limited ramp-up or development time)
- No upfront capital
- Customer deposits in advance of delivery
- Contractor based assistance for delivery
- Niche marketing opportunity (it’s much easier to target a vertical than a horizontal)
When thinking about your next venture, think about the Top 5 virtual business startup tips and if possible, find a virtual business model that leverages these for your new or existing business. Try to follow some or all of these.
Posted in: emerging business, Home Office Business, Venture Capital, Virtual Business