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Tuesday, September 25, 2007

Starting a Business: Step 2

I changed the title of this tract from "Starting a Consultancy" to "Starting a Business" because the general principles are the same, and you might not want to be a consultant!

I have many friends with an IT background who have started everything from a flower shop to a cheerleader academy. Many of these entrepreneurs have more than one revenue stream, thus diversifying their incomes.

Step two in building your enterprise is to do your market research. This is the due diligence phase that requires you to step back from the intoxicating idea of your killer business and evaluate it from all angles. You need to know what your market saturation is, who your competition is and what they charge, how they source leads, where they get raw materials and so on. Ultimately, you need to know what you can charge for your products or services and be competitive while still earning a profit.

Creation of a business plan will be helpful, although it's a daunting exercise to go through, especially when using software to create it. I ran a consultancy for years without one; although in retrospect, it would have been helpful in understanding my business early on.

Friday, September 14, 2007

Starting a Consultancy: Step1

People often ask me how I started my consultancy (usually, because they want to step into contracting for themselves). My response is always "I prepared first, then took the first step". The first step is, of course, the hardest and is more of a leap of faith than a step. However, if properly prepared, anyone can thrive in their new endeavour.

Build a Network (of People, not Servers) :-)
I started networking years in advance before striking out on my own. I went to trade shows, joined users groups, volunteered time for organizations, and so on. My goal was to fill my palm pilot with contacts, and collect a binder full of business cards. I still have that same information to this day.

When starting my real estate LLC, I used the same formula because it worked for me the first time. Now I have a collection of painters, plumbers, carpenters, etc. to use on my real estate flips.

Thursday, September 6, 2007

It's a Buyer's Market for Home Investors

If you have been reluctant to buy an investment property but are really interested in doing so, now is the time. Folks who are risk averse tend to shy away from real estate, yet will fund their mutual funds, stocks, 401k plans, etc. with all their spare investment dollars because of a sense of security.

For this very reason, many people were not able to retire after the technology bubble burst around Y2K which hit tech heavy funds hard. A result of the correction that ensued caused many to shift their investment dollars to other areas, such as real estate, which itself is now correcting due to builder surplus and over zealous lending practices.

Everyone knows about the US real estate bubble, or market correction in the US housing sector. It is common knowledge that home foreclosures are through the roof (see
"Mortgages in foreclosure at record high") but the insightful see this as opportunity. If the market is flooded with a particular good, does it not become a buyer's market for that good? Economics 101.

While I believe that it is still possible to buy, renovate, and flip a property for a quick profit (even in this market), I personally feel that building a solid portfolio is wiser for many. After all, the properties I am acquiring now can be flipped for higher profit later when the pendulum swings the other way. The "trick" is buying at the right price so that a profit is made no matter when you sell.

A notable point:
the very first American millionaire, a German immigrant named John Jacob Astor, was a real estate investor (and landlord).

What's holding you back?

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