If you want to start a business and are young, look for high profit margins. High profit margins are the key to making money from nothing. It seems pretty obvious, but a lot of new business owners don’t focus on this. They spend all their time creating a product, but they don’t focus on return on investment. Here’s why that’s a mistake.
High profit businesses are easier to run
If you run a high profit margin business, you get validation on the quality of your product quite quickly. This is because you should be getting more money for your efforts. If you can get data and feedback more quickly than normal, you can make adjustments more quickly. You can become a better business owner, faster.
High profit margin businesses are cheaper to run
This is because you need to put less money in, in order to make a return. So high profit margin businesses are cheaper to run, especially when you’re starting out. If you can start a high margin business with lots of demand in your 20s, you’re going to be well-positioned to be better than the competition in the long run.
Value added products
If you sell value added products, you’re going to make more money than if you simply extract raw materials from the ground, or if you farm/grow your own food. This is because value added products add the opportunity for sales and marketing skills to be employed. They add perceived value.
Marketing
If you can’t sell, you can’t make money from thin air. To make money from thin air, you have to convince someone to give it to you. Focus on marketing and sales in the beginning, and you’ll become a master in the long run.
Consolidation
If you consolidate your operations and build a mega business, you’re much more likely to be able to be successful than if you’re trying to run several small companies. This is why your best shot at living a happy life is to try starting a business super young. If you get any skills at all, you’ll be in a position where you can go location independent even if you fail. You just have to work really, really hard in your 20s. The results of your labor should really start to show around your mid 20s. At this point, you should reach a critical mass, and all of your toiling should pay off. Your profit margins should increase as you learn your industry. But you really need to put in the time and complete your task. If you don’t you won’t make a good return on your time investment.
What’s a good profit margin?
Generally speaking you should aim to double your money. If you’re a bit off from that, fine. If you’re making 90% profits that’s great. Businesses with a wider focus tend to have lower profit margins.
Knowledge and skills are profitable
Especially when the government is on your side. This is why lawyers make a crapload of money, especially as their seniority increases. The more you know, the more you get paid.
The whole point of a business is to turn a profit. If it doesn’t make money, it sucks. If a business doesn’t make money, it actually drains society because real value could be created elsewhere. You want a business to turn a profit. Create more value in the short run by finding something that’s profitable.
Thanks for paying attention.
