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Friday, July 26, 2013

4 Types of Business; Which One Is for You?

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4 Types of Business; Which One Is for You?

I was 35 years old. Three years into my married life. I was ready to start my first food business—a squidball food cart franchise. The franchise fee was P250,000. Saying a prayer, I withdrew my hard-earned money from the bank and plunked it down for my entrepreneurial dream.

I parked the squidball cart near a drugstore, hired two workers, and felt wonderful when the first sale was made. It was an exhilarating feeling owning something!

Even before I could find out if my food cart was profitable, I wanted to put up another business. I couldn’t help it. Once the entrepreneurial bug bit me, I couldn’t stop. So I bought a hotdog stand and an ice cream scooper cart for P500,000, rented two stalls in a foodcourt in a new mall and hired more workers.

But as the days went by, I was alarmed that my daily expenses were bigger than my daily sales. I began to panic. The longer I operated, the more I lost money. I felt devastated. After six months, I had to face the music. I closed them down before I lost all my money. Years later, I realized I went into business with my eyes closed. In other words, I didn’t know what I was getting into.

I also didn’t know that there were four kinds of businesses. A retail business was just one of them. No one told me! (But that’s because I didn’t ask. I entered into business without seeking wisdom.)

There are 4 kinds of businesses:

1.Retail Business
2.Service Business
3.Distribution Business
4.Manufacturing Business

I’ll discuss it one by one. Find out which one is for you…

1. Retail Business

A restaurant is a retail business. A bookstore, water station, beauty parlor, drugstore, school supplies store, and a gasoline station are all retail businesses.

A retail business seems like fun. But in reality, it’s like a glorified job. It’s glorified because your job title is “Owner”. It feels good to be the Owner. But many times, you’re tied down to your physical store, sometimes every day. Your job title sounds nice: “Owner/General Manager/CEO/President.” But your job description is “Driver, Delivery Boy, Messenger, Collector, Janitor, Waiter, Dishwasher, Salesperson, Purchaser, and All Around-Slave.”

Retail Business
Obviously, you can hire people for these tasks. But even this is not easy. Hiring, training, and managing staff is a skill that you need to learn. Quickly. And I must remind you. In any retail business, it’s all about location. If you choose a bad location, say goodbye to your money.

Sometimes, you chose a great location, but the city decides to repair your street for six months. While jackhammers pound away at the road and clouds of dust swirl around your store, customers shy away. But you still have to pay for the rent, utilities, salaries…

Here’s the truth: Usually, a retail business can give you income but not wealth. It’s very difficult to become rich in retail. Unless you SHIFT to retailing in multiple locations. Such as putting up 10, or 20, or 50 or 100 stores or 1000 stores. But when you do that, you’re no longer in retail. Your focus is now in the marketing, distribution, and wholesale business. (More on this later.)

My friend and fellow-preacher Obet Cabrillas and his wife Joie love to put up small businesses. So far, they’ve put up a laundry service, a beauty parlor, a drug store, and a pizza stand. I’m amazed by this couple’s hard work. Unlike me, Joie has done a better job managing these small businesses—and all of their small businesses have been earning money. Not a lot. But steady. It won’t make them a fortune. But it’s enough to make them a living.

I’m sure Obet’s earnings as a corporate speaker will be bigger than all the profits from his small retail businesses.

Which brings me to the second kind of business…

2. Service

I encourage our Feast Builders to be entrepreneurs. (For those who are new to my writings: The Feast is our weekly prayer gathering at my spiritual family called Light of Jesus. And Builders are those who lead and preach at these Feasts.) So that when they preach, they can share from their experiences. A business makes their feet grounded in real life. A business also gives them practical wisdom to lead their Feasts.

Service Business
Obviously, because of their fantastic ability to speak, most of them are corporate speakers. And they do an excellent job doing that. Without a doubt, I dare say that we’ve got the best team of Corporate Speakers in the country.

We achieve two goals. First, they impact companies with God’s love in non-religious places; second, they earn additional income—which means they can serve their Feast with greater abandon.

A corporate speaker is a service business. A doctor, lawyer, and dentist are all service businesses. A carpenter, plumber, electrician, landscape artist, events planner, accountant, and executive coach are all service businesses.

But at the end of the day, unless you SHIFT your service business, you won’t get rich. Why? Because in the service business, you exchange your time for money. Believe me, you’ll never get seriously rich exchanging your time for money. Not all lawyers, doctors, and dentists are rich. The average lawyer earns P575,000 per year. The average doctor earns P355,000 per year. The average dentist earns P195,000/year.

What SHIFT am I talking about? As your business grows, you need to hire other great people to work for you. You no longer do all the services (as doctor, lawyer, accountant, speaker…), but focus on getting new customers for the people you hire. The moment you STOP exchanging time for money, that’s when you can become seriously rich.

Which brings me to the third kind of business…

3. Distribution

My corporate seminars business is a distribution business. Why? Because 95 percent of our seminars are now given by other great speakers. (My ministry work prevents me from accepting many corporate seminars.) Most of my work is really marketing our seminars to companies.

Let me give you another example.
My fellow-preacher Pio Espanol distributes bangus products. His friend in Dagupan delivers all the products to him. Once upon a time, Pio had a little bangus store in Marikina. He rented commercial space, bought a huge freezer, hired one saleslady, and sold bangus products to walk-in customers. It did okay. Not great. Just okay.

Well, that store is closed. And Pio is richer. Why? Because Pio has decided to distribute the bangus products to other distributors, supermarkets, and restaurant chains all over Metro Manila and beyond. Instead of selling piece-by-piece to individual customers in Marikina City, he now ships his bangus “wholesale” to distributors as far as Davao and Singapore!

And the great thing about this? He doesn’t need to rent commercial space. He operates his entire business from his own home.

That’s the power of distribution. As you can see, I prefer a distribution business over a retail business. Running a restaurant or a beauty parlor is a romantic idea.

Running a boutique store or a bookstore is a very charming idea. But in reality, it’s a lot of work with meager returns. (There are exceptions.)

When people think of starting a business, very few people think of distribution. Because it’s not very obvious. All we see are retail stores. We don’t see the distribution network behind those stores.

I’m challenging you now to LOOK at those distribution networks. Ride one of them. Create them!

Other examples:
An MLM or multilevel company is a distribution business. You’re not only selling products, you’re recruiting distributors. A franchisee is in a retail business. But a franchisor is in a distribution business. Obviously, you cannot be a franchisor if you don’t first build a number of successful retail stores.

An insurance agent is in a retail business. But an agency owner is in a distribution business. Again, it’s quite impossible for an agency owner to be one without first being a great sales person.

In other words, retail can be a great stepping stone to distribution. 

4. Manufacturing

Normally, manufacturing is highly capital intensive. In plain English, your pockets are deep and they’re overflowing with cash.

Titanium Member Ronnie Siasoyco is the biggest distributor of electric meters in the country outside Meralco. He imports electric meters and lightbulbs from China, but slowly, he’s biting into the manufacturing process by creating his quality control laboratory here—so that all his electric meters have excellent quality.

Titanium Member Junie Toreja builds roads. Sometimes, he has 300 road projects happening at the same time. Recently, he bought his own asphalt plant for P150 million—so that he can be sure of his supply of raw material for his projects.

I repeat: You need a lot of money to get into manufacturing. Unless of course you’re in my business: Wisdom-Giving. An infopreneur is in the manufacturing business, but because his product is non-tangible, it doesn’t cost a lot of money.

Especially because of the internet. For example, imagine an author who writes his ideas on his computer, creates an eBook, publishes it over the internet, and sells it to the world using Amazon and other websites. If you notice, this author is in the retail, distribution, and manufacturing business at the same time. The great thing about it? No inventory necessary. No warehousing necessary. No delivery trucks necessary. No big manpower requirement necessary. No high capital necessary.

As you can tell, I’m very biased. But with this broader perspective, I hope you can think deeper about what’s the best business for you.

Source: Wrote by Bo Sanchez, EntrepCircle, TrulyRichClub Wealthstrategy 


Two years ago, I joined the TrulyRichClub. It was one of the best decisions of my life. Founded by Bo Sanchez, its purpose is to “help good people become rich”.Because of the guidance I get from the Club, I’m now investing in the Stock Market (and mutual funds, bonds, UITF’s) each month! It’s amazing how I’m personally growing in my finances.

I’m inviting you to join the Club too.
If you’re interested, then join the TrulyRichClub NOW!

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