Saturday, April 18, 2009

The $2 Cup of Coffee Delivered to You. Not Going to Happen!

At some point in your business dealings you will hear a fantastic idea...that you will later have to throw away.


Because it is not possible to make money at it no matter what.

Recently my spouse said, "Wouldn't it be great to just have Tim Hortons deliver a coffee when you crave it?"

Yes it would. It is even possible to do (by possible I mean physically possible, that technology is here to do it). But it is not even remotely financially feasable. Can you imagine the vehicle expenses alone?

It may be possible once a certain technology exists or if somehow someone figures out, "Tim Hortons Coffee on demand" just like they figured out TV on Demand. But not likely anytime soon.

My recent business is a more realistic example. We thought it was possible to show renters a series of apartments and houses and let them make a decision on which to take. But because of economic, marketing, fuel, and a million other factors, it is not possible to do so. The average cost to send a rental agent out is $75/hr and the turn over rate is not yet high enough to support those costs let alone make a profit. A Landlord will not pay the amount required to offset this cost (at least not yet). Each agent could be spending that same hour making much more money at practically anything.

It is possible to pick one aspect of the business, be the best at it and be able to make a profit at it.

Property management is another very very good example. You would think that you could start a business managing people's rental houses no problem. Every Landlord I talk to wants this service. I can definitely tell you, people will not (cannot) pay you enough to make a living at it. The service level that is required is NOT possible for a small venture.

On a large scale, both of my personal business examples would work. However, they would need way more capital then I have access to.

What I am learning is the simpler the service, the more likely you will make money at it. I make more telling people how to advertise on Kijiji than actually doing the business they are in. In other words, I can show people how to rent their houses and even manage their homes and MAKE MONEY AT IT.

So when developing your business systems, keep in mind that at some point you have to turn a profit. If there is not enough of a market, the materials cost too much, people will not pay enough for your service, either give it up or find a way for it to be profitable. Maybe go even smaller, service a niche with the service.

Eventually you will find the money making business and know how to operate it. I have confidence in you.

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