ChApter 3 | CHOOSING THE RIGHT BUSINESS | 25What about competition from nearby
retailers?
Answers to these types of questions will
be crucial to the success of your venture
and to writing your business plan. Let me
tell you from hard, personal experience
that you need a written document—even
if you’re sure you know exactly what your
business will do.
With this foundation document to refer
to, you are less likely to forget your good
plans and resolutions in the heat of getting
your business under way. Any changes you
later make can be made both consciously
and with consideration.
To write a complete description of your
proposed business, simply follow the
suggestions on the next few pages.
Identify Your Type of Business
Find the business category listed below
that most closely matches your business.
You’ll use the description that follows as
a reference when you describe your own
business.
CAUTiON
Each of the business categories
requires different skills to run efficiently. Many
small businesses involve one or two types of
business in the same endeavor. But if your idea
will involve you in several types of business,
it may be too complicated for you to run
efficiently. As a general rule, small businesses
work best when their owners know exactly
what they are about and strive for simplicity.
- Retail. Retail businesses buy
merchandise from a variety of
wholesalers and sell it directly to
consumers. Some retailers provide
service and repair facilities, while
most do not. Most retailers just take
in the goods and mark up the price,
sometimes doubling their purchase
price to arrive at a sales price.
Supermarkets, mail order catalogue
merchants, online stores (e-tailers),
computer stores, dress shops,
department stores, and convenience
marts are retailers. - Wholesale. Wholesalers buy merchan-
dise from manufacturers or brokers
and resell the goods to retailers.
Normally, a wholesaler maintains
an inventory of a number of lines.
A whole saler normally does not
sell to consumers, in order to avoid
competing with his retailer customers.
Whole salers usually offer delivery
service and credit to customers. This
type of busi ness is characterized by
low gross profit margins (sometimes
varying between 15% and 33% of the
whole saler’s selling price) and high
inventory investment.
Wholesalers typically buy in large
lots and sell in smaller lots. Like
retailers, they seldom make any
changes to the products. Most whole-
salers aren’t well known to the general
public. - Service. People with a particular
skill sell it to consumers or to other