The Advantage of
Low Cost Business Ideas

Why do we recommend low cost business ideas for most people who are looking to build a successful home based business? When you start a home business low start up costs bring a number of advantages.

LESS NEED FOR START UP FUNDING

Money for starting a business is not easy to come by after the credit crunch. If you have savings then of course you can invest without taking a loan. However, if your start up costs are higher than the money you have available, you will have to obtain a grant, find an investor or borrow to make up the shortfall.

In our interview with experienced bank manager Rob Warlow, he says, "My advice would be to do whatever you can to avoid bank debt when you are starting up." If you do need to borrow, he suggests going first to family or friends.

Ideally it's better to look at low cost start up businesses where you do not need a loan - even if you look at this as a short term measure. If you can start making some money and build your savings, you will be in a better position to expand into a higher cost business if that is what you really want to do.

POSITIVE CASH FLOW

It's not only about looking for low cost start up businesses. It's important to keep costs down month by month. The lower overheads possible with homebased business give big cash flow advantage compared to traditional small businesses.

Even if the figures are low, positive cash flow is an excellent aim for most small businesses. Let's say that you start a part time home business and in the first few months you make a $50 cash surplus. In other words, your actual cash received is $50 higher than your cash expenditure. That's extra money you can save or spend as you choose. On the other hand if your expenditure is $50 more than your cash received each month, there's a danger of your finances going into reverse.

Once you have established a way of making an extra $50 a month, you can gradually expand to make $100, $200, $500 and so on - gradually strengthening your financial position. Many business experts have written about the importance of positive cash flow. For example, this is one of Robert Kiyosaki's key teachings in his various books such as Rich Dad Poor Dad and Cash Flow Quadrant.

THE LEARNING CURVE

Another advantage of low cost business ideas is that you have time to make experiments and find out the most effective ways to find customers and carry out your day to day business activities. Naturally you should have carried out research before you started to assess whether there is a gap in the market - a profitable niche - for your small business idea.

However, you will be under much more pressure to succeed quickly if you have invested heavily in your new business - for example by taking a bank loan to buy a high cost franchise. Of course the extra pressure might be just what some people need to motivate themselves to put in 100% effort to succeed. But this is certainly a high risk option. And with higher risk comes more pressure.

Finally, you may encounter some pressure from others who don't like the idea of low cost business ideas. Shouldn't a good small business idea be expensive? Wouldn't it look better to rent an expensive office? Only you can make that decision. However, remember that most small businesses fail. Low cost start up businesses should help reduce your risk of losing money - while at the same time providing a chance to build a successful home based business.


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LEARN FROM THE EXPERTS

You can read some great advice on real home based businesses in our series of expert interviews


SELLING on eBAY

Skip McGrath eBay

Skip McGrath, author of many books including The Complete eBay Marketing System talks about how a novice can get started selling on eBay.

HOME STAGING

Debra Gould

Debra Gould, the 'Staging Diva' provides great tips for a business focused on improving the internal decor of homes making them easier to sell.

FREELANCE BOOKKEEPING

Sylvia Jaumann

Sylvia Jaumann, author of Starting & Running Your Own Bookkeeping Business, advises on starting a bookkeeping business from home.

RESUME WRITING

Teena Rose

Teena Rose, author of The Ultimate Resource to Building a $100,000 Resume-Writing Business, explains why resume writing is in demand in tough economic times.

FREELANCE TUTORING

Dr Alicia Holland-Johnson

Dr Alicia Holland-Johnson, author of Becoming a Better Tutor, explains what subject areas are in demand and how to find customers.

HOME BASED COURIER

Sam Knowlton

Sam Knowlton, who runs the CourierPros web site with Bob Lavendusky, advises how a freelance courier can compete against national courier companies.

SELLING USED BOOKS

Joe Waynick

Joe Waynick, author of Internet Bookselling Made Easy! How to Earn a Living Selling Used Books Online, advises how to get started by selling books you already own.


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