What Type of Business is for You?

Which type to choose??


I started my tax practice in 1976 and since then have been ask a million times (I may be exaggerating slightly) what is the best business model.

Even though I had my own business at 14, I started working a traditional job as directed by my parents. This enabled me to get to college and start my “normal” career. I worked for a few CPA firms and to notes on many types of businesses and business models. Over the years, there has been so many debates on which is better. My feeling is that each one has it’s advantages and disadvantages. It all depends on what you like and how much money (or time) you want to have.

This certainly is not the list of all lists. These are just a few that I have had personal experience with. As always, feel free to write any comments you may have!

The Franchise Model

A very popular model is the franchise. I am sure most everyone reading this hub has eaten in a McDonalds, Burger King, and the like. Most have taken their car to a Jiffy Lube or Midas muffler shop. (A funny aside is that the hamburgers at McDonalds in Australia taste just as bad as the one’s in the USA!) This model usually requires a large sum of money to start. The high end extreme is the McDonalds. At last glance it was $250,000 to start with at least $1,000,000 in unencumbered assets. The low end is a no name coffee shop you can start with about $1,000. Once you have acquired this franchise, you attend extensive training and then off you go.

What I noticed over the years is this:

1.) Most people do not have the money to buy one

2.) When they do, they use up all of their money

3.) They end up working there constantly

4.) The biggest cost is usually labor and they make very small return on their investment.

I did a financial analysis of a popular car repair franchise when I was at a CPA firm. I figured out that just to break even, ALL bays had to be full ALL day, and EVERY day of the year! Just to break even. This was before the owner put one penny in his pocket. Don’t get me wrong, there are plenty of franchises making money. The real question is how much and at what cost.

If you have deep pockets and do not mind still having a job, this one may be for you.

The Retail Shop

Take a drive through any major city, and you will quickly see how this will turn out. Way long ago, before malls and the internet, it was a dream of many business people to have a shop on main street USA.

The essence of this model was to buy products at a wholesale price and distribute them through a shop at “retail” price. This model worked well 30 years ago when there was not much competition and the internet was not around with sites like Ebay, Craigs list, etc.

The distribution of products, and even services, have moved away from this model. There are, however, still specialty shops that survive, but most cities have only the big box stores anymore.

Network Marketing

This is probably one of the most controversial models. Most people would say it started in the 50’s with Amway, but I would have to disagree. I believe network marketing existed as long as people were paying for goods and services. They only started getting paid for it in the 50’s!

No matter what the product, people have always been referring friends and family if they had a good experience with it. I can almost guarantee that even if you are not formally in network marketing, you are participating on a non-paying level. Think about the last movie you saw and liked. I am sure you told someone about it. Did the movie theatre send you a check? Probably not. Only because they do not know the power of networking.

Over the years, larger companies have been participating in this model because they have discovered the power of networks. Just look at Facebook and twitter. Search for big companies like AT&T, Coke, and Dell. They are out there building networks and eventually, they will be able to monetize their networks.

In fact, I have built what many would consider to be a large tax practice based on this model. I started when I was 14 years old. I really did not have a big advertising budget, so I relied on word of mouth. I would reward the person giving the referral a percentage off their tax return. After all my corporate stints, I started again with no advertising budget. I went back to the same model and was able to ad over 100 clients that year. I would pay the referral bonus as long as the client came back. So, the person referring the client go a percentage off every year. This could be considered a residual income. My practice still thrives after 34 years because of this model.

The attraction to this model is mostly due to the fact that you can build a residual income. This is a big buzzword people use to sponsor (or recruit) people into network marketing. It takes us back to the old time vs. money dilemma that most everyone faces in their lifetime. Over 90% of the population end up with no time AND no money. They work long hours (and sometimes a 2nd job) just to get by.

Most people still have a sour taste in their mouths about this model. They got in with all the hype only to make no money and have a garage full of products. I, personally, have been in about 20 companies over the years and never made but $6. However, I was going about it all wrong. When I finally got a proper perspective on it, I worked pretty hard (still part-time) over a year and built a team of over 500 and a residual check for that is still going on for over 4 years.

The key is not to get into all the hype and drama around it. Search for only those people that “want” to have the product you have and the opportunity that you offer. I know several good coaches (including me) that can mentor you in network marketing.

This model works, no doubt. I have personal experience and also many clients that have been successful in it.

Membership Sites

How many membership sites do you belong to? Chances are, at least one. This model is excellent leverage and will free up a lot of your time. The oldest recollection I have is the Book of the Month Club. You paid a set price and every month they shipped you a book. My mom has a whole house full of books! This concept has been used with cassette tapes, Cds, DVDs, recipes, and many other products in very effective ways.

Over time, information has been the product. This really maximizes leverage. Personal development membership sites are growing every year. If you have a system that gives value to people, they will pay good dollars to belong. I had enrolled in the Millionaire Mindset Club with Pat Mesiti. It was $39.95 per month and I got a CD with a small book every month. Knowing what I know about producing Cds, his cost, including postage, was probably about $8 per person. Let’s just say $9.95 to make the math easy for me! So, his profit was $30 per person, per month.

With 100 members, he would be making $3,000 per month or $36,000 per year. This is above the average wage in the USA!

With 500 members, profit would be $15,000 per month, or $180,000 per year. Could you provide value to 500 people to make that? Just imagine how much time (or how little!!) he would have to work after building up the membership. In this age of social media, people are building lists of over 5,000 people within a year.

What value can you bring to the market? There are even membership sites that charge only $5/month. One in particular is a weight loss sight. You pay $5/month to log on and check out how many calories are in foods!

Google your way around and find out what people want and fill the need!

Affiliate Programs

This type is for a person who wants to have maximum leverage and has no interest in developing their own product or service.

It also requires no personal contact with your market! Very good for people who want to work from home via the internet.

Clickbank is probably the biggest online affiliate marketplace today. You can be a seller and/or a buyer. There are literally thousands of products to chose from and they are all downloadable. Your customer gets instant satisfaction! I had sold a few info products on click bank and it was a good experience. Commissions range from 5%-95%, with most sellers hovering around 50%.

The great thing about affiliate programs is you can build a website one time and just continually promote it. Once you have that going on auto pilot, build another and keep going.

Other popular affiliate programs include:

Amazon

Google Adsense

The Science of Getting Rich

Ebay

The strength, in my mind, in this model is that once you do one thing (find a promotion method) that works, you can duplicate it over and over again.

For example, I have created a web site that pulls videos from Youtube on a certain subject. This site contains google ad sense ads. I will promote the site until it reaches a certain dollar amount in affiliate ad revenue and then put the promotion on auto pilot and build a new one. It took about 1 hour to build this site, so if I build one a day for a year and each one averages $10/month in revenue, that equals $3,650/month in residual (passive) income!



If you want more info on types of business, you can get my book

"Money Does Grow on Trees"

Click Here to buy the ebook


Summary

Summary:

I did not write this Hub to say what is the best business model. Everybody has different goals and dreams. Some people actually love working in a 9-5 job! You can make money in any business model. The key for anybody is to figure out what that looks like, develop a plan to get it, and implement the plan for total happiness. Take the poll below and let me know your thoughts!

My passion is to assist people in creating their own economy, whatever that looks like. As always, if you want assistance, my email is

loweryourtaxes@soon.com

Have a great day!

Steve

 

 

Readers Poll

What type of business model do you use?

  • Franchise
  • Network Marketing
  • Retail Store
  • Affiliate Marketing
  • Membership Site
  • Other
  • A mixture
See results without voting

More by this Author


Comments 6 comments

KimAlyse profile image

KimAlyse 6 years ago from Pennsylvania

Interesting article, Steve.

I will have to look into the idea of a Membership Site.

Talk to you soon.

KimAlyse


writermarion profile image

writermarion 6 years ago

very educative.


jainismus profile image

jainismus 4 years ago from Pune, India

Great Hub. Thank you for sharing this useful information.


rahul0324 profile image

rahul0324 4 years ago from Gurgaon, India

Great hub! Useful information and very precise on the details!

Thanks for the share

A great write indeed!


Denise Handlon profile image

Denise Handlon 4 years ago from North Carolina

I'll add my vote-interesting info here and quite beneficial. Awareness is one of the keys to change and you've presented useful information that is intriguing. Thanks for sharing. How long have you lived in Australia? Voted up/U/I


createmyeconomy profile image

createmyeconomy 4 years ago from USA, Australia Author

Been living in Australia nearly 3 years. Spend 25% of my time back in the states and I am assisting people in promoting their businesses. Thx for the feedback!

    Sign in or sign up and post using a HubPages Network account.

    0 of 8192 characters used
    Post Comment

    No HTML is allowed in comments, but URLs will be hyperlinked. Comments are not for promoting your articles or other sites.


    Click to Rate This Article
    working