Go Where The Money Is
The American economy is firing on all cylinders right now. Unemployment is at its’ lowest rate, ever. Now is the perfect time to start your own business, but what should you do? In this article, we’ll look at B2C business opportunities.
The graphic shows the spending breakdown for the Average American Household. The categories on the right are the areas you should focus on. You can visit the full article at VisualCapitalist.com to read the full article How Americans Make and Spend Their Money.
There are 18 spending categories. The general idea of business planning is to pick a business that has a market. Make sure the start-up costs don’t break the bank and go for it. However, I would like to suggest one other concept. Love of self. What do you love to do? If ten year’s from now people stood around at your wake talking about your contribution to society, are the things they’ll talk about elements from your business or items from your community involvement? For me, I want them to be the same, I choose to enjoy what I do for a living and bring my community involvement along for the ride.
Make a list of business ideas and match them to the above categories. Then do the math. Assume a market share of 1/100th of 1% (or 0.001) and multiply by the number of people in your community. Example:
Making cell phone covers with a cool graphic. The formula looks like this:
Average income families:
$1,356 * 0.001 * [local population] = potential annual income. Assuming a local population in this bracket of 45,000, this formula works out to $61,020. Knock off half for business expenses, and you could make about $30 a year.
Some would argue the market share equation should go to population, but actually, it goes to average spending because we are looking at spending categories and that is the market share we’d be competing for.
Let’s try another example. Let’s make printed T-Shirts. Here is the formula using our same 45,000 population and 1/100th of 1% market share:
$1,833 * 0.001 * 45,000 = $82,485 now multiply by 50% business cost factor and we are left with $41,242.50.
Market share is determined by competition and marketing resources. Using the U.S. Household Averages, people spend money in those categories, so the spending exists; it is a question of how much of the expenditure can you capture from the local market place. That is what the 50% business cost factor is adjusted for. We all know the adage, you have to spend money to make money. Well, first you have to pick a product people want, and then market to the people where they expect to see your ads.