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In this economic down turn, the unemployment rate jumped. Many of
those lost jobs are likely seeking business opportunities. I am not
writing to offer you any "fast money making secretes" that have swamped
the cyberspace for years. Instead, I am telling a true story about how
to become a small entrepreneur virtually without any initial investment.
Actually, this is a story about me, yes, myself, and there are no
secretes.
Perhaps, many people have asked the same question, what are minimum
requirements to start a retail business? I am sure a vast majority of
business experts would give a similar answer: marketable products,
competitive product sources, hard working attitude, effective
marketing strategy and most importantly, financial backings.
I have to agree with all these items but the last one, as in my entire
retailing career, I have never had such a financial luck.
Nevertheless, I had grown my very first business, Amlink Computers, from
a $800 investment to 2 million dollar annual revenue
within exactly 18 months.
Here is my brief resume. I came to the United States from China in 1989 to attend
graduate school at the University of Michigan and got my Ph.D. in
early 1993, the time when job market was shattered by 1991-1992
recession. Less than one hour after the champagne party to celebrate my successful defense of
the Ph.D. dissertation, I reported to work at a
Chinese restaurant, with a title of "trainee waiter". In order to get a
health insurance for my family, I had to change my career in early 1994
to become an ICU tech at UM hospital. After receiving room-full
beautifully worded rejection responses to my job applications, I decided
to start my own computer retail business, Amlink Computers, with our
entire saving of $800. In 1995, the revenue for Amlink Computers
reached two million dollars.
You may not believe this. I didn't think I would be able to do anything
with eight hundred dollars at that time either. I did try to apply for
business loans but virtually got kicked out the bank. I now understand
why that loan officer was sneering at me. I did not possess any minimum
qualifications. If he had approve my loan application, I might have
become a small contributor to this financial crisis.
My accountant has always referred what Amlink accomplished in the first
eighteen months as a "miracle". But I really don't think that is a
proper attribution. I believe everyone who is willing to seize
opportunities, work hard and work wisely can potentially achieve the
similar successes.
As I mentioned earlier, marketable products with competitive sources and
good marketing strategies are necessary elements in starting up a retail
business. In 1993, computer market started to expand although a
real tech booming did not take place until several years later. So
computers as well as computer parts were reasonably marketable products
at the time when I started the business. Nevertheless, how I located
competitive sources for the products was somehow coincidental. Several
days after I decided to a computer business, I picked up a outdated fax
machine from a garbage can. Making use of this type of garbage was and
still is my favorite hobby. Almost immediately after I connected the
machine to my phone line, a fax from a
computer distributor came in. I then realized my new phone
number was the fax number of a bankrupted computer company.
My first order with that distributor totaled eight hundred dollars,
including one 340mb hard drive and two 1mb memory sticks. I advertised
them by putting short flyers on the garbage cans, which was the only
marketing strategy I could afford. The strategy worked great as I sold
out my entire inventories in two days, with a markup of 5%. It was from
that point that my cash started flowing.
It is a common sense that cash flow constitutes a lifeline in any
businesses. When funding is limited, the key to manage and expand
the cash flow in retail business is to establish credit with suppliers.
When you just started a business, I am sure all your suppliers will
require cash payments, typically in the form of cashier's checks.
However, this situation can be changed after few orders, especially if
you can develop a solid trustworthy personal relationship with your
sales rep who can in turn persuade their credit department to change
your payment term from COD cash to COD company check even if you have
been in business for few weeks.
Check term was of great significances to me. Needless to say, even the
initial limit was much higher than the total cash amount I had.
That greatly increased my buying power. More importantly, there were
seven to ten days between the time when an order was delivered to me and
when the check cleared my bank. That time difference in fact became my
"financial backing" that is viewed as a key to business success by many
experts.
Please be cautious, however, you can effectively take advantage of the
check term only if you are able to sell the products quickly. You should
never misuse the term by ordering excessive inventories as it only takes
one bounced check to ruin your credit standing with your supplier
completely.
Here are three important rules you must follow when using check terms to
increase cash flow. 1. You should not expect high profit margins as you
are new to the market and pricing is your only ammunition to compete.
That is why a hard working attitude is very important here. 2. You must
move the products as fast as you can. If you have to sell a product at
cost, just do it, since your top priorities are to assure prompt capital
circulation and get your name out. 3. You should place your order
weekly and must limit your purchasing volume to what you can move
within a week.
This is what I defined as an unique "initial capital accumulation" for
starting up a business with limited investment. This process can be very
fast if being handled properly. I would be honored if my tough yet
successful experiences could deliver some useful messages to those who
are struggling to find working capitals for their startup businesses. |
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