Why do people start businesses? <-- I am bothered by this question.

Discussion in 'Chit-Chat' started by FEND., Nov 8, 2006.

  1. FEND.

    FEND. Regular Member

    Joined:
    May 14, 2004
    Messages:
    2,786
    Likes Received:
    3
    Occupation:
    Full Time Badmintoncentral.com/forums camper. Part
    Location:
    Perth, Australia
    Alright this question has been bothering me that I can't concentrate on studying on my statistics. I was having a chat on msn with a friend of mine. That friend has started a very niche market business which aims at a small group of people out of the population and when I queried that friend on why that friend started the business and of all places why in such a remote area where only a small minority of this target market can be bothered going to.

    So I asked the question on why that location? Why not somewhere central in the city where one would expect a lot of people to go through the store on a daily basis and more people would mean more business. That person's reasoning is the rent is more expensive. For the difference of $XX,XXX in monthly rent, they decided on this location slightly further away from the city and such. We had a heated argument on this and finally that person said, "You know we did not go into this business to make a profit or make a living out of it, we just did it for fun."

    Now, this is where I am confused and the question pops up. Why bother going into business? That person's reason is "for fun". Granted I do not have parents financially well-off to fork out an estimated minimal of $XX,XXX, so that I can 'have fun.' I thought the prime aim of people going into a business was to make a profit. If one wanted to lose money one might as well have given the money to charities or people in need of them instead of having money drip away from their wallets. Hell you might as well put it on double zeroes on the roulette table and walk off or go 'all-in' on an off suited 2 and 3 in texas hold 'em with KQJ on the flop.

    So for all of you who started your own business. Could you enlighten me. A young'un is wanting some learning and he isn't afraid to ask some experienced hands for guidance. I wish for a healthy discussion here.

    FEND.
     
  2. LazyBuddy

    LazyBuddy Regular Member

    Joined:
    May 20, 2002
    Messages:
    10,096
    Likes Received:
    15
    Occupation:
    Engineer
    Location:
    New York, US
    Not knowing all about ur friends, but I doubt his intention was really "just for fun", unless he's way spoiled and really have nothing to do everyday.

    It's true that if you open ur business in downtown area, it will draw a lot of attention. However, that means higher cost (e.g. rent, tax, etc) and more competition, because your competitor might be just 2 buildings away from you. Sometimes, a monopoly in a small town, might be better off than 10 stores fighting for shares in a metro area.

    Also, it highly depends on what type of business he's into. If his business requires a big flow of customers (e.g. small retail, food business, etc), then in theory, the more ppl passing by each day, the better the chance is. However, if his business does not require "on site" (e.g. IT support, etc), then, a well trained phone representitive and well organized website might just get the job done. Therefore, the cheaper the rent, the better the turn out might be. :rolleyes:
     
  3. crosscourt

    crosscourt Regular Member

    Joined:
    Jan 11, 2006
    Messages:
    364
    Likes Received:
    1
    Occupation:
    Legal
    Location:
    Shanghai/London
    I suppose it depends on what he means by 'for fun'. I would guess he means that maximising his profit isn't his primary concern and that so long as he breaks even or makes a small profit he'd be happy because he would be doing something that he enjoys.

    A lot of people emigrate from England to Spain or France to live in the countryside. They make less money but the quality of life is such that they are happier.

    That's my guess anyway!
     
  4. FEND.

    FEND. Regular Member

    Joined:
    May 14, 2004
    Messages:
    2,786
    Likes Received:
    3
    Occupation:
    Full Time Badmintoncentral.com/forums camper. Part
    Location:
    Perth, Australia
    Just for another fact to consider, the market my friend is having a crack at is a 'niche' market. That means competition in the metro area would be almost non-existent. Btw thanks for the responses LB and crosscourt!

    Keep your opinions coming.
     
  5. jug8man

    jug8man Regular Member

    Joined:
    Nov 7, 2003
    Messages:
    2,123
    Likes Received:
    6
    Occupation:
    MultiTasked guy, Stress Addict, Leisure Bum, mad c
    Location:
    Malaysia
    Fend,

    It's good to see I have the oppourtunity to continue from where we last stopped.

    1) $$$ Money $$$ baby makes the World Go Round
    Initially, his behaviour can be explained by the Maslow' Heirachy of Needs (which i have mentioned to you before, creek creeeeek, old broken record playing!). It would appear that your friends basic needs for sustenance and protection are very much secure, meaning that he does not have to worry about where his next meal will come from. To put it in simplest english,... He does not need to work to make a living.

    This greatly suggest that his family is well off with high saving that would last brazilian years (Joke poking on George Bush, please read chit chat section. thread : jokes). Also, he may have passive earnings elsewhere (Means $$$ that comes without working, say : rent income for example).

    This pretty much explains the initial part...

    2) The Clock still turns....
    The Second phase is the Human Allocation of Time. This is a persons choice on how to spend the time & in the bigger picture : how they want to live their life.

    It doesn't matter how rich you are.... Even if you are filthy rich, every one must find something to do during their conscious hours. Being gauranteed your every next meal just does not mean this would confine a person to the Bed / Dinner Table / Crap Pot ritual for the entirety of 24 hours in a day. A human being born with limbs to aid in motion is just not a creature of inactivity. People addicted to crack are excluded from this population. Humans in essence are creature of activity.

    So the venture into business is one of many logical choices for your friend to pursue in order to spend his daily allocation of time. Sure that there are many other activity options , and even different approaches to doing the chosen activity which is opening a niche business, such as the one you have mentioned. This is discussed further is in the next part :-

    3) Back to $$$. Profit Potential vs Risk.
    Wide market business --> greater potential for greater earnings. however with the greater earnings, also posses greater Risk. Such as the higher overhead cost (e.g. the rent in the city which u mentioned).

    So to a guy who is well off, doing perfectly fine, having to gamble & risk large amounts of his savings to try to get great profits........... just may seem to much to bear. After all, he has everything he needs. Why would he be foolish enough to risk it all for greed of a few extra bucks (this is his perception of the extra profit), unless he was absolutely sure the plan was full proof. So greatly suggest that he is not a risk taker but risk averse.

    To him, he might just run a niche business, something that would stand out for him in a social conversation..... a 'conversation piece' unique for him, and would make him feel just a little special... and sleep extra well at night that he is not just another drone on this world rehashing a tired broken record. This ties in with part 4) of course. 4) Utility from activity.... & along with the upper levels in the heirachy of Maslow.

    5) The Truth. Reality kicks in.
    It all comes back to $$$$. In the end. Your buddy is well off. But he aint that rich.

    Simple maths explain :-
    Big business... great potential to lose everything.
    Small business = lose a small sum or maybe break even. In actual consideration, the small loss may even be cheaper than total inactivity.

    the pursuit of complete leisure is the worst scenario!!!
    Pursuit of complete leisure (E.G. = Weekly trips to the Casino, Monthly trips to exotic islands like Bahamas & hawaii, following completely the BWF tournament calender as a free Mad supporter / stalker of our Pro Badminton Players) = the complete destruction of possibly the entire family's fortune!!!

    So your suggested idea of of casino fun is really really a bad idea ! Heck we always know the chances are stacked in the favour of the Casino!!! Banker always wins!


    Well that's all i got to say. If this doesn't reach your head, with your reputation of being a flamer.... hmmmmmmm

    Cheers

    TBBMBB(N)

    Class is in Session!!!! by a Nut. BaddyNut (Hey, it's James Bond season aint it!)
     
    #5 jug8man, Nov 8, 2006
    Last edited: Nov 8, 2006
  6. Eurasian =--(O)

    Eurasian =--(O) Regular Member

    Joined:
    Sep 3, 2004
    Messages:
    1,158
    Likes Received:
    1
    Location:
    aujerbajan
    Maybe he couldn't find a location. Or he knows your right and doesn't have a solid rebuttal. Is he opening the business with friends? He might just be the capital but his friends may be the actual brains.
     
  7. cappy75

    cappy75 Regular Member

    Joined:
    Sep 21, 2002
    Messages:
    3,502
    Likes Received:
    26
    Occupation:
    Depot Support Representative
    Location:
    Burnaby, BC, Canada
    Incidentally, that's how Walmart got started. If your friend is going after the niche market, it won't be traffic dependent so having his store located in a central area might be a waste of money for him anyways. More important for him is knowing who his customers are and how to get them to go to him.


     
  8. slvrdrgn123

    slvrdrgn123 Regular Member

    Joined:
    Mar 6, 2004
    Messages:
    217
    Likes Received:
    0
    Occupation:
    Improving what little skills I have
    Location:
    San Jose
    Agreed, my mom has an orchid business at our house and we get customers by word of mouth. People just pass around our business cards and then we make appointments for them to come to us. Sometimes we get people from LA to come all the way up here. You just have to know who you're targetting and how to get them to you.
     
  9. FEND.

    FEND. Regular Member

    Joined:
    May 14, 2004
    Messages:
    2,786
    Likes Received:
    3
    Occupation:
    Full Time Badmintoncentral.com/forums camper. Part
    Location:
    Perth, Australia
    Points well taken. Keep the discussion flowing.

    And juggy, I do not suggest going into a casino and trying to play the casino out as a business proposition. Rather I put those examples as perfect ways to purposely lose money. Do not try and misinterpret things here and I do not appreciate being called a flamer especially after a relatively long period of inactivity by my part.

    On the other hand. I have listened to all the points considered and I would think that these are valid reasons for choosing such a far place. But another part of the question is left unanswered, why do you start a business? To lose money? To have fun? To make a profit (Yea obviously). But to the other part of the question, which has so far been relatively left unanswered.
     
  10. slvrdrgn123

    slvrdrgn123 Regular Member

    Joined:
    Mar 6, 2004
    Messages:
    217
    Likes Received:
    0
    Occupation:
    Improving what little skills I have
    Location:
    San Jose
    For my mom, it wasn't really a business at first. It was just a hobby of hers to collect orchids and grow them. After a while, we just had so many that she started to sell some to friends and then, it just grew from there. So I guess it's half for fun and half for profit in this case since my mom loves orchids and have won a few shows herself.
     
  11. cappy75

    cappy75 Regular Member

    Joined:
    Sep 21, 2002
    Messages:
    3,502
    Likes Received:
    26
    Occupation:
    Depot Support Representative
    Location:
    Burnaby, BC, Canada
    Actually, FEND. That's the question you have to ask yourself why you want to start your own business. It's personal and really not up to others to discuss why you want to start your own business. For your friend, he has his reasons and that's good enough for everybody. The main thing is passion, whether an entrepreunier business succeed or fail depends largely on interest. Making right business decisions comes with experience, but if you no longer have an interest in the business, it will fail automatically.

     
  12. jug8man

    jug8man Regular Member

    Joined:
    Nov 7, 2003
    Messages:
    2,123
    Likes Received:
    6
    Occupation:
    MultiTasked guy, Stress Addict, Leisure Bum, mad c
    Location:
    Malaysia
    Hey FEND,

    OK, I'll acknowledge that your Flamer reputation is now Categorize under 'Dormant', due to 'your relatively long period of inactivity my your part' :D
    So I'll just have to take note of this for future referrence.


    Regarding the CASINO part, my simple point is that doing a business with lower overhead might lose some money, but its not quite on purpose. Going to a CASINO is more than a sure bet of throwing larger lumps of moolah away into the sea. Basically, it's Loss control. Minimizing the loss you might make. The lesser of 2 evils was deemed to be opening the business in some far away land.


    To answer your question (bolded) below, if I have not answered in my earlier post....

    Allocation of Time
    People open Business because they need something to do with their time.
    It is one of the many choices, and is among the more 'Liberating' choices.
    This is because Being your own boss means you don't quite get bossed around.

    Bossing Others!!!
    Great utility is often related to having people work for you. Not necessary just about bossing people around, and feeling high and mighty, don't need to put in any research study here but People generally get a higher satisfaction with having a larger group of workers under him. The increasing salary cost though induces a diminishing return after a certain point.

    Pursuit Of a particular interest / hobby.
    In the big picture, people look to open a business that is related to their interest. People who did not do this, dream of doing it some day, as a life target.

    Opening a business reduces tax!
    When you open a business, lots of cost can be transfered partially or completely from Personal cost to Business cost. This reduces your taxable income and puts a small smile on your face.

    Reducing Social / acitivity Cost!
    Opening a business gives the proprietor a social outlet / place to hang out. This already directly reduces his spending needs on other activities to meet people (say going to a bar, or casino :rolleyes: ) Him being at his business premise also means instead of him spening money to travel to meet people, all kinds of people might travel to see him / his business. Also, if the owner of a Badminton Shop, is an avid social Badminton player, he will enjoy the benefits of cheaper cost related to his badminton activities.


     
    #12 jug8man, Nov 8, 2006
    Last edited: Nov 8, 2006
  13. jug8man

    jug8man Regular Member

    Joined:
    Nov 7, 2003
    Messages:
    2,123
    Likes Received:
    6
    Occupation:
    MultiTasked guy, Stress Addict, Leisure Bum, mad c
    Location:
    Malaysia
    I totally agree!

    cappy75,

    you the man.

    FEND, there is not much reason to get rilled, annoyed, or bothered by other people's business choices. It may to you seem that your friends apparent simplistic needs is bothering you. If he knows what he wants in Life, that this answer comes easily to him and not the rest of us.... than let us just be happy for him.

    'nuff said.


     
    #13 jug8man, Nov 8, 2006
    Last edited: Nov 8, 2006
  14. cappy75

    cappy75 Regular Member

    Joined:
    Sep 21, 2002
    Messages:
    3,502
    Likes Received:
    26
    Occupation:
    Depot Support Representative
    Location:
    Burnaby, BC, Canada
    Starting a business is not akin to going to a casino. To start a business is a calculated risk whereas it's almost impossible to beat the 'house' in casinos. That's why casinos make lots of money. Caculated risks have better odds of you coming ahead.

    One has to admire your friend for having the balls to start business. It's a tough choice to make for the average person.
     
    #14 cappy75, Nov 8, 2006
    Last edited: Nov 8, 2006
  15. Pete LSD

    Pete LSD Regular Member

    Joined:
    Apr 25, 2002
    Messages:
    6,297
    Likes Received:
    13
    Occupation:
    Soul Searching
    Location:
    Canada
    That's why the average person is an employee.

     
  16. Break-My-String

    Break-My-String Regular Member

    Joined:
    Dec 6, 2003
    Messages:
    728
    Likes Received:
    2
    Location:
    Vancouver, BC
    My speculations would be based on the above two criterias along with your friend being financially secured.

    When you're in the higher tax bracket, it is essential to have "good debt" where the monthly payments are tax deductable.

    Secondly, focusing on a niche market (or on an industry which you have a passion for), the business potential for future growth is greater (or future buyout from investors), plus it is no longer a job.

    Essentially, it is not not how much you earn but how much you keep! :)

    Cheers!
     
  17. Double_Player

    Double_Player Regular Member

    Joined:
    Jul 21, 2005
    Messages:
    415
    Likes Received:
    0
    Location:
    Kingston, ON
    buy a GIC/high interest account and put your start-up money in it, untill u know what exasctly u wanna do. that's what I'm doing right now.
     
  18. wilfredlgf

    wilfredlgf Regular Member

    Joined:
    May 6, 2003
    Messages:
    2,583
    Likes Received:
    11
    Occupation:
    Security Engineer
    Location:
    Malaysia
    All businesses exist for the sole purpose of making money and more money - that is the primary rule. No business and nobody dumb will start a business without the intention of making a profit.

    Tear away the packaging, the pretty words used to sugarcoat the practice and you will get basically the same thing.

    Social responsibility, are mostly heard only from the biggest of companies/people with lots of cash to spare such as mentioned earlier in this forum of Gates and Walton. Smaller setups will do this 'social responsibility' thing if it can help elevate their stature (or stock).

    To be honest, I'm troubled that I can't think of a non-profit business venture.
     
  19. jug8man

    jug8man Regular Member

    Joined:
    Nov 7, 2003
    Messages:
    2,123
    Likes Received:
    6
    Occupation:
    MultiTasked guy, Stress Addict, Leisure Bum, mad c
    Location:
    Malaysia
    All business makes money initially. That is operation Wise (during transaction process). (e.g. buy at USD1 & Sell at USD1.5 to make a USD0.5 profit)

    After everything else is taken into account (Admin cost, Fixed Cost, & other miscellaneous cost not directly involved with the $$ making process of the company), A business might in the end ---> Make losses!
     
  20. taneepak

    taneepak Regular Member

    Joined:
    Jan 5, 2004
    Messages:
    6,526
    Likes Received:
    25
    Occupation:
    Designing and producing quality feather shuttlecoc
    Location:
    Hong Kong
    If you think you have identified a market need, or better still, you can create a new market need, plus a strong personal conviction that you can supply that need competitively, then you have the solid foundation for a business venture.
    Depending on the environment, most business people start their own business either because they have no alternative-they are not academically qualified to get a decent job-or they are exceptionally talented entrepreneurs. Most people who have a professional or academic degree will work for other people-corporations, government, academic institutions, etc. The reason is simple-there is no better alternative. However, there comes a time when you have reached the top in a corporation, you are then haunted by this challenge from within yourself : why don't you walk away from your job now and start an enterprise or business on your own-isn't this the real acid test?
    Of course there are highly qualified businessmen; but the numbers will be much smaller if you discount the financial backing or the family links that got them to where they are today.
    The cheaper rent reason given by your friend reflects how inexperienced he is in business. After having a fix on the market need and your ability to supply that need competitively, you then seriously start to work on a rough business plan.
    If you are not born with a silver spoon, I would suggest that you seek employment after graduation. You can then get some business experience. From there it is then your own ability to spot opportunity that you can capitalise on. Herein lies the key-the ability to look out for opportunities.
     

Share This Page