You are looking for profitable business ideas, with good future prospects, that you can operate from home without a large initial investment. This post is for you! There are many aspects that you can take into account when analyzing the interest of a business idea.
And one way to do this is from the prism of the profitability of the business you are researching. It is completely true that not all (online) businesses are the same in terms of profitability, but is profitability the only criterion you should use when researching innovative business ideas?
How do you measure the profitability of a business?
This simple question can get complicated very quickly.
Main elements that make one business more profitable than another:
Sales volume: I’m going to focus on small businesses that turnover less than 10 million a year. A good business has a turnover of 6 or 7 figures per year.
The gross margin of these sales (Revenue – Cost of sales – Fixed costs): Some business models will leave tiny margins, others spectacular. You will see it in a few seconds.
The break-even point of the initial investment: I am going to focus on businesses that do not require a millionaire investment, such as a motorway concession. We are going to focus on businesses that you can set up with a very small initial investment, without having to go to the bank to ask for financing.
It turns out that these businesses are also the ones that have the best future prospects because they are part of the digital transformation process that impacts 100% of the world’s businesses.
What is a successful business?
This is another essential question to answer and it is not easy to define success for a business. Because this success is measured through the prism of the founding entrepreneur. From his expectations and what he gets out of it – at the level of his personal satisfaction with this business, beyond money.
The best businesses give you 3 things:
1. Purpose, because you really help a particular group reach their goals
2. Status, because you get public recognition for your work
3. Money, that’s what makes your business profitable
For me, and again this definition is somewhat subjective, a successful business is a business that:
1. Attracts customers at a reasonable acquisition cost, without too much effort
2. Is able to finance all business operations, and to invest in futures projects
3. Pays all employees a salary sufficient to support their current lifestyle and make them happy in their jobs
4. Leaves additional capital (reserves) for the business founder each year
Common characteristics shared by most successful businesses or businesses operating today
1. They operate in digital 100%, they sell digital products or services, which are also delivered in digital. So they can operate instantly worldwide, without many intermediaries, and you can work from home or while you travel.
2. They allow the automation of a large part of the operational processes. As a result, teams are smaller and can collaborate in a network, without a physical office.
3. They have focused on the scalability of their solutions, so selling much more does not mean increasing costs in the same proportion.
Now that you have the main definitions clarified, let’s go into the actual analysis of the different business models.
What business to set up when researching profitable home-based businesses?
- Advertising: put ads in your content like Google Adsense. It is instantaneous to start trading, but without a large volume of visits, you will not earn anything.
- Sponsorships: look for brands willing to invest money to appear in your contents. Higher margin, but more work to get these advertisers.
- Dropshipping: the idea is to create an online store without the operations of an e-commerce. You act as an independent distributor for the company that manages the order, delivery and customer support.
- Affiliate marketing: The idea is to promote third party products in your content. Amazon or TradeDoubler allow you to find many brands that work with an affiliate network. You are monetizing your reputation in exchange for third party products.
- Influencers: Both on YouTube and Instagram, “micro-influencers” are swarming, who are doing product placement actions for big brands.
- Network Marketing: The favorite model of Termomix, TuperWare and similar. Small meetings between acquaintances in which a sales action of some products is made.
- Online comparisons: a priori a fantastic idea. Comparing offers on a website. Super useful, especially on the Internet, where there are hundreds of offers in some cases. The problem arises from their business model, they charge by affiliation and they are also judge and jury because where there is an economic interest, there is a biased opinion involved.
As you have seen, all these completely legal business models tend to excite kids with a hacker’s spirit who want to generate extra money without worrying about creating a personal brand.
What is the secret to setting up a profitable business?
There is no universal formula for starting a profitable business. Whether it’s online or offline. There is no guarantee that your investment will be profitable when you set up a business.
You have to choose a business model that you like and that – a priori – can offer you the profitability that you expect from your business, but then you will have to execute correctly the necessary actions so that your business generates the expected profitability. In other words, profitability is not a characteristic of a sector or a type of business.