Is a Dropship Business Worth It?

I’ve heard a lot of horror stories about dropshipping and it made me do more research about it. You see, the most common reason why people fail in this kind of business is that they fail to prepare on one of the important aspects of it. As with any business, preparation is critical and making sure that even those simple steps are taken cared of will mean the success of your business.

I visited a forum the other day and there was one guy who said his dropship business failed and he is not recommending the business model ever. He said it’s a bad business to get in to and you’ll lose money on it, no questions asked.

So I sent him a message asking him about what happened and how a supposedly good business model failed him. It turned out that he was partnered with a lousy dropshipper and he was not prepared enough to answer customer service questions. You see, with a dropship business, you still have to take care of your customers, it’s not a set and forget thing that will make you money even while you sleep.

Dropshipping is a real business with real customer interaction and real hands on experience. Of course, minus the inventory and physical stuff but all the other business aspects are still there.

During our conversation I was leading him to think about what happened and to re-assess everything and think who really is to blame about his failure. In the end, he said, you’re probably right, the business model was not the problem, I’ve always thought a dropship business would make rich, and it was me who screwed up. I’m not sure but after our conversation, I’m thinking he’s out there setting up a dropship business all over again.

So in my opinion, any business, be it a dropship business, an affiliate marketing business, or even a good old brick and mortar business is well worth it if you prepare well and you’re ready to take on the challenge. Go for it full blast, with all your heart and all your might and I’m sure everything will be perfect.

What Makes a Business Worth Investing In?

You have always been interested in investing in a business, however you always hold back because you are scared of making a bad choice and losing your investment. However, there are some ways to evaluate businesses to reduce the risk you are taking when you invest. Of course, risk is never eliminated, but when you properly evaluate what makes a business worth investing in then you will more than likely have your answer whether the company will be a success or failure before you invest your dollars. The following tips will help you make the right investment.

Investment Tip #1 Management

When deciding whether a business is worth investing in or not you need to evaluate the management because a business really is only as successful as its management. Because of this you want to evaluate if the management is knowledgeable, rational, and able to make the right choices to make the company money and prevent it from losing money. Of course, this is an easy question although the answer is a little more difficult.

Investment Tip #2 Business Plan

A business plan that is well laid out and shows positives, negatives, and how the company and management will handle problems within the business is very important. A good business plan shows that management knows where the company is, where it wants to go, and what it needs to do to get there. Be sure you take a look at a company’s business plan before you invest.

Investment Tip #3 Return on Investment

The ROE, or return on investment, is also crucial when you are considering making an investment in a company. Of course, the ratio of equity to debt can be confusing, but if you evaluate the ROE and other economic factors you should be able to tell if the company is bringing money in or losing it.

Investment Tip #4 Room for Growth

Making sure the business has room for growth in its market is also important. A company that has little competition is preferable, but a company with a moderate amount of competition and a plan to be number one is OK as well. Just do your research.

When you are interested in investing in a company you need to take your time and evaluate the company, look over financial statements, talk to management and have all of your questions answered to your satisfaction. After all, it is your money and you aren’t going to give your money to just any company. So, be sure and confident in the company and have that backed up with proof and you will decrease your risk investing in a company.

Selling My Business – How Much is My Business Worth?

Almost all businesses are for sale to some degree. Lets say yours is not For Sale. Assume Your business is worth $100,000. You love what you are doing, someone contacts you with an offer to buy your business for $500,000. Is your business now For Sale? The preceding is not a likely scenario for most business owners. To successfully sell your business planning and preparation is needed. But if you are now or at some point considering the sale of it you may want to consider the following 3 points:

1. Identify your honest interest level when selling your business. Early in the decision process of selling your business consider what approach you may take towards selling it. As a Business Broker in Florida I interact with the various interest levels by small business owners.

  • – My business is not for sale but if someone walks in and offers me way more than what I think it is worth- I would sell it
  • – My business is not for sale but if you run across someone that would want to buy it please let me know. – I want to pursue selling my business but I won’t sell it for less than…( A somewhat inflated price). I am willing to accept that it may take 1-2 years to sell my business, and if priced too high I can accept the fact that my business may not even be sold.
  • – I want to pursue selling my business and after significant due diligence I feel the price I am seeking is consistent to what other like businesses have recently sold for.
  • – I want to sell my business and I want out now. I will set my price aggressively and set a lower price than price currently sought for businesses similar to mine. I will expect this aggressive pricing to both help me sell my business and decrease the amount of time it will take to sell my business.

If you do have a true interest in selling your business as suggested in above last 2 points you do need to exercise due diligence to gain understanding of what the value of your business may be.

2. You can expect that the perceived value of your business to you and the value of the business to a potential buyer will probably be 2 different values.

  • – Ultimately the price of your business is what a willing and able buyer is prepared to pay to buy your business.
  • – Seek “reasonableness” to your price that you will seek to sell your business for. If similar businesses to yours are sold at 1 1/2 times adjusted cash flow, why is yours worth 3 times adjusted cash flow? – Ask yourself what you honestly would pay to buy your business
  • – Do a free Search on my website or other similar websites to find out what similar businesses to yours is asking to sell their business for. Remember – all businesses are different, but use such a search as part of your due diligence. A business for sale asking price and the price a business sold for can be greatly different, but asking prices can provide some basis-while current Businesses Sold information is more pertinent
  • – Speak to your trusted advisers. A business broker may be able to help with non-public info on sold businesses in your area. Your accountant or attorney also may or may not be aware of such sales as well. A Professional Business Valuation specialist may benefit you.

3. Whether it is part of your exit strategy to sell your business or not, you should have an exit strategy.

  • – Most small business owners do not have an exit strategy.
  • – If you own a business you should have an exit strategy. Do some planning, perform some due diligence. Know what you have or may have.
  • – Even if you are not planning to sell your business there is value in knowing approximate value of this potentially large asset. You know what your house is worth, you car, your other assets. Understanding the value of your business can be a significant piece of information when planning ahead.

Selling ones business can be a rewarding experience when done properly. Understanding a proper value for your business can set the stage to a successful sale of your business or a business that is unable to find a willing and able buyer.