Monday, May 3, 2010

Do you want to start a new business? Think about your options

Happy Monday, all!

I just started reading a new marketing book this weekend--I love getting new and old stuff into my thinking. This is a program I bought from someone else, so I'll finish the whole thing and use some of the ideas before going too far into the product results.

HOWEVER! The author reminded me of something I've known a long time and is still little talked about. If you're considering a new business, this an important idea to wrap yourself around.

Many people choose a network marketing opportunity as their entre into running their own business. You can get a lot of up-side from this kind of start-up. Unfortunately, you can also end up with a lot of downsides.

Here's the problem: retailers know that the minimum markup (stop, take a deep breath and really get this) for a decent product is 100%. If you're selling anything that you cannot mark up the price AT LEAST 100%, you're working way to hard to make money. I guarantee you that any store you shop in has this as their lowest bench mark.

My friend was a buyer for a large department store. Most of the things she selected for the store could be marked up 300%-400%. Furniture is marked up this much as a minimum. When you shop for groceries mark up is even more important. The percentage of money a store makes on produce is shockingly low (5% is not uncommon) so they HAVE to make it up on other products. Soda anyone? I worked a couple of fast-food gigs in high school--didn't we all? Back then the cost to make a soda for a customer was 5 cents.

My point here is that most network marketing opportunities don't hand you a 100% profit on what you sell. It goes to other people, other things, and other channels. Unless you are one of those people who can build a quality (aka producing) down-line fast you can easily end up in a loosing situation. Of course, lots of people know this lesson very well.

As you look at your product or service, factor in ALL of the expenses to offer it to clients (time to create, design expenses, web hosting, marketing, etc.) and then add a 100% increase to the cost of the product. You may think this is cruel and unnecessary. Even if you add this much increase, you won't end up taking home 100% of that number. Unexpected things happen. This minimum mark up protects you from loosing money, going out of business, or spending money you don't actually have on the business.

Check competitors prices: and figure out how to make your price work for your success, not just as a loss-leader (a giveaway to get a client). You, your family, and your employees will thank you.

Wishing you success & heart,
Heidi Sue

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