I had a really long post written and then left my computer for a while and it got gobbled up by the Picklesnet. Grr..
Anyway, I've started a lot of businesses and most of them failed. But along the way, most of them were successful for at least some period of time and I was able to extract valuable lessons. If/when I start another business, it will follow these rules (in order of importance).
1. Residual income vs. one time. My "biggest" business endeavor averaged 100k gross each month. And on the first day of the next month, we'd be back to zero and start clawing again. Predictable sales, expenses, and cash flows are the best gifts you can give yourself when starting a business. Find something where customers pay you regularly for something instead of one-off sales.
2. Cash on the barrelhead - COD, prepayment, credit card, brown bag full of 20's....the faster you can get paid the better. Giving credit terms not only impacts your cash flow, it creates more work on the administrative end. "Invoice due on receipt" is your new favorite phrase.
3. Service, not product - Selling products means having to buy or make products to sell which means giving up part of your cash to facilitate a future transaction. It also means you are competing on features and price, which are both awful things to compete on because someone else can always come along and be less expensive or offer more features. Sell a service, an expertise, a time savings. If you sell products as part of that ("Bacon of the Month Club" subscriptions) fine, but you have to deliver more than just products or you will go broke.
4. Enterprise, not consumer. Consumers are cheap and require a ton of service/support. Conversely, businesses are not averse to spending money on things. Furthermore, the person signing the contract/PO is likely spending someone else's money so they aren't as likely to beat you up on price. Also, business offerings typically cost more than consumer offerings so your average sale/contract is likely to be higher than something comparable on the consumer side.
5. Proven market - Competition is a good thing because it means your business/idea has a market. But you need to make sure the market has some money in it. There is no money in social networking, for example. There is a lot of money in advertising, and social networking is a good vehicle for advertising. But Facebook has a billion users because it's free to use. Saying, "I'm going to make a version of Facebook with no advertising but charge $1/month per user!" is a terrible idea because you have no idea if that is a proven market.
6. Reasonable scalability. The business needs to be able to grow. Let's assume your $10k can generate 10% EBITA per month (reasonable if you pick the right business). You need to pick something that will generate
AT LEAST 10% EBITA per month for every dollar you reinvest. For example, if you take your $10k and look up in 6 months and you've profited $6k (10%/month for half a year) and still have your original 10k, then you need to confident that any money added will result in growth that is accelerating, not contracting.
So, what business fits all these models and can be started for under $10k?
Commercial Landscaping.
Recurring revenue - check. They sign a contract for you to mow/edge/whatever each week or every two weeks or whatever.
Cash only - probably not, but you can invoice once a month (for example) and refuse to mow if they owe you money. So you have a little leverage.
Service, not product - Yup.
Enterprise, not consumer - yup. You can charge Ms. Smith $40/week to mow and edge her lawn or you can charge the property manager at the business park up the road $400/month for the same service. He'll just build it in to the "condo fees" so it's no skin off his teeth. And the work isn't any more substantial.
Proven Market - absolutely. The grass will grow and it will need to be cut.
Scaleable - sure thing. Let's say you can charge $400/month to maintain a commercial property by mowing/edging once each week between March and the end of October. You can reasonably mow/edge two properties per day. Once you have 10 properties under contract, you are grossing $4k a month with your only expenses being gas/maintenance of the equipment you bought with your $10k. Signing up contract number 11 means you need another crew. No problem, you hire someone to take over the first 10 accounts and you take over 11 and build until there are 20. Hire someone to take over accounts 11-20. Rinse and repeat. What, you don't think you can find someone to mow lawns for a wage that, when combined with expenses, doesn't exceed $3600/month? Yes, yes you can.
So, there you have it.