Do You Plan To Sell Your "Baby" Or Someone Else's?
Understanding the numbers that are inherent to a new business can be difficult and frustrating for new entrepreneurs. A business, especially your own, can start out very exciting as you dream of the freedom, financial gain, and ability to impact someone else's life. But it's important for retirees to understand that businesses live or die based on how much work it takes to make them succeed, not the numbers or mathematical assumptions on paper.
Frequently, retirees in the start-up stage will come up with a product or service that addresses a need that exists in a large market segment, let's say a million consumers. Then, they wrongly assume that if they can just capture 1% of the market, or get 10,000 people to purchase their product, they will be well on their way to retirement riches.
"If you don't like something, change it. If you can't change it, change your attitude."
"You must be the change you wish to see in the world."
"Never believe that a few caring people can't change the world. For, indeed, that's all who ever have."
"If you do not change direction, you may end up where you are heading."
"If you change the way you look at things, the things you look at change."
But starting a business based on those kinds of numbers is a sign of a true amateur, and a reason so many new businesses never make it past the first year. If capturing that 1% of customers were that easy, 85% of new business would succeed, not fail each year.
Aspiring writers represent another good example of people who need to understand the numbers. Turning your idea for a children's book, murder mystery, or cookbook into a $10 paperback, then selling 5,000 copies, doesn't seem farfetched. Based on simple multiplication, how could any retiree balk at adding an extra $50,000 to their retirement account ($10 book x 5,000 buyers)?
Attractive numbers, combined with the seeming ease of publishing a book these days, illustrates how the dream of a post-retirement writing career can be born. Retailers, however, can take up to a 55% cut from a book's final sale price ($5.50 from a $10 item).
That may not seem like a terrible split, considering the marketing and web traffic they bring to the table but, when you factor in the cost to produce a book (say, $3.50 per copy) plus another $1.00 per copy or so for shipping costs, you could wind up actually paying people to read your book instead of making money. That doesn't mean it can't work, it just means there's more to it than coming up with a snappy boom title and simple money-making math on paper.
Don't take these points as discouragement. Instead, this dose of reality supports the need to align yourself with a business that fits your personality, strengths, and the degree of work you're willing to do.
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