Forums: Discussions for entrepreneurs and small business.

I like the idea. I think there is a market.

However, the challenge is how much you can charge for it vs how much time you spend on it. It is a mathmatical questions about profit.

For example (I made the numbers up since I have no idea what the real numbers are), if the material costs $20 and you can sell it for $40, but it takes 1 hour to make, you are only making $20/hour, without even considering the time to market the product. Even though you are making money, I won`t say the business is profitable because your oppotunity cost is higher than the income (you can get a job somewhere else which pays you much more than $20/hour).

On the other hand, if the material is $20 and it still takes you one hour to make, but you can sell it for $70, you will make $50/hour. Now, that will be much more interesting.

This is when business plan becomes valuable. When I say "business plan", I am talking about concrete calculations on how to make the business profit, not something with big numbers to fool investors. Be honest and concrete in your calculations and projections.

Of course, if you outsource the manufacturering, you can make a profit even with low margins. That involves a whole new set of calculations.

My suggestion is, make it yourself in small quantities and start selling. Use eBay or local faires. Price high first and then gradually lower the price until you find the range when people start buyings. Then you have some real numbers to use in your calculation.

Excellent advice given so far. The concept of reaching only 1% of the market is an interesting concept and you have to start somewhere. You can`t get to 2% unless you go through 1% first. As a long term idea, I`m not sure the idea of cornerning 1% of a market has any validity - I am not sure there is a valid percentage. While market share is an important measure of success, it`s just not as important as profitability. ( Which is the ultimate measure, financially speaking. ) You also have to address other factors such as quality of life and so forth. You know... what`s important to you? I think if you really love making dog beds and can find a way to do so at a good profit ... as JohnQH advised ... then by all means ... go for it. However if the best you can do is $20/hour - and keep in mind that you bear all the risk - then you might want to refactor your plan until you can get to $50/hour profit. But again... what`s important to you?

I am going to expand on Craig`s post even more.

When people say "I have my own business", sometimes it only means "I own my own job". If you are doing the manufacturing (or service) yourself, you are really "self-employed". Yes, you have a profit, but that`s before you consider your own time.

When you have employees and have someone else`s work make money for you, that`s when you have a real business. However, soon you realize that you have to pay labor cost and there is probably little left.

Your oppotunity cost is the salary you can make by getting a job. There is no point of having a "self-employed" job if your income is less than the oppotunity cost. When you are self-employed, it is still a job because your income depends on how much time you put into it. You will find it is much less satisfactory than you expected.

However, if you have a real business, as long as you are in positive margin and have some savings to last you a while (and it helps if you are not married and have no kids), I would say go for it, because once the business is in motion, you will find new oppotunities - new ideas, new products, new customers. That`s the freedom we enjoy.

If I look at this loosely, I think I have a sense of what the intent of the post was meant to be. Presumably, it`s that if the money you earn with no employees is more than you would earn if you were doing the same work for an employee, then....what? What you`re doing is a real job? I`m confused.

On the other hand, taking the post at face value, it`s no wonder nobody is concerned that the Hollywood writers are on strike. Since they have no employees, they`re not really in business---they don`t have a real business. It`s just a pretend business, so it`s not a real problem.

I`m also wondering if I can send the IRS a letter this year, explaining to them that although I`m moving money in and out of my bank account, it`s not really income. Nor is it business revenue or profit. It`s just pretend money, so let`s just pretend I give them their share? ;-D

What about, say, a psychiatrist who practices out of the house? Aside from the old joke that he`s not really a psychiatrist---he`s only practicing to be one---he`s also apparently not running a real business. Nor is any artist, writer, crafter, consultant, or anyone who gets handed a 1099 form.

Anyone who runs a store on their own, or a street vendor, or a pushcart owner is also pretending? What about a lawyer, private detective, fisherman, gypsy taxi driver, or window washer? Is that all pretend business as well?

:-) I guess I`m wondering if perhaps the above generalization is a bit too broad, or whether I`m not understanding the idea of opportunity money.