Forums: Discussions for entrepreneurs and small business.

Hello,

I have wanted to start a business for a while and Have a great idea.  I have been doing research alot and found that buy doing the work in house (literally in my house) on my own equipment, my profit margin will increase by probably over 100%.

If I outsource, it saves me the trouble of actually doing the work which means I have much more time on my hands to do something else, but I have a much smaller profit? Also, by doing the work myself, I can set my own prices and still have a  large profit as I will not be obligated to pay the given amount to the outsourced company. This way I can also have discounts and sales. By outsourcing, my discounts will probably be no more than 5% off due to keeping up with price demand and competitors and still making a profit (probably a few dollars on a $100 purchase).

It costs between 5-10k to buy the machine.  I can lease the machine for a little over $200 a month but in the end I pay a over $1000 more than if I were to buy it.

What do you think I should do?  SHould I buy/lease and get much more profit? or should I outsource to another company and make very little profit.

Thanks Very Much!

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Without knowing what type of business you are in or the machine that you are considering, I will speak from experience.  My husband I have owned several businesses the first of which was a franchise.  We had both been comercial bankers for years and did not know the ins and outs of business ownership.  We were blessed enough to choose a great franchise and learned a great deal from our experience.  My gut tells me that until you are sure that your business venture is going to work out, lease the machine.  On the other hand, by purchasing the machine you may tend to be more determined to make your business a success.  Does the manufacturer offer a lease program?  What are your options if you lease and decide later to go in another direction? 

My husband and I own Sallys Famous Gourmet Food and operate from an inspected, approved facility in our home.  There is no comparison to what we have now and the expenses and stresses associated with a retail location.  So it seems like your are on the correct path.  Expenses can bury your business.  Being previous bankers my husband and I did not learn all of the things to do to make a business succesful.  However by observing the mistakes that many of our customers committed, we learned of many things not to do.

Continue to seek advice from the great folks here on startupnation and you will be supprised at the level of success that you are able achieve.  

I have set up several companies from scratch and honestly this one is a no brainer, you just need to ask yourself if this new business is giving you a revenue stream you can count on long term or not. You are not going to spend 10K on a machine if 2 months down the line the work has dried up.

Better to rent to start with or outsource, but not buy.

I would continue a few months like this. One step at a time, test the water first before you dive in at the deep end.