Hi Ozb,
What would be the purpose of someone say starting a business that will fail 99% of the time, or is just not profitable.
Is there like a tax thing or some kind of new business rebate or something like that?
Applies to both IRL and online businesses
Example - a restaurant in a bad location in an already over saturated market, which was then converted into a laundromat which sits just as empty
Eternal optimism?
There is a receding space for people to hoard wealth, so they turn to (careless) investing.
And whilst saving/holding onto wealth could be bad for an economy, the real cause of recession is bad investments. (Bad investments => unemployment). So I can see how someone in such a situation could gamble like this, as if they win the one-in-a-hundred situation, the gains are nice and juicy. But if/when the investment fails, they shrug it off as that's some money they didn't lose to the govt, and they right-off it through their taxation.
You read way too much into that comment.
@D C: I like to listen to videos on my morning commute.
Heard this one just this morning, in case you were wondering how my comment came to be. It's kinda interesting video, worth a watch: https://www.youtube.com/watch?v=swOpLpZaA78#t=13m18s
Better to have delusional optimism and be 1% likely to succeed than not try at all and be 100% guaranteed to fail.
There's a difference between inaction and failure.
Refer to Point 2.
A lot of people don’t have much experience starting up a business and as a consequence may think it will work.
I believe some may be able to get a business Visa to stay in Australia?
Could be
A front business for a criminal.
I thoroughly recommend you watch the 1967 movie "The Producers". The basic idea is sell more than 100% shares in the business. Syphon the money off and let the business flop.
Jobkeeper?
Doesn't work unless you had the business receiving income before March 2020.
This was pre-corona
Some business generate more income than you realise.
As a business owner, I use to think I know what a healthy business looks like. I use to think pet washes and laundromats were petty cash. I was so wrong. So wrong.
If the restaurant was doing so well, it wouldnt of become a laundromat
It's not just money, what're the difference between running restaurant and laundromat?
What are your thoughts on coffee shops? I can't get my head around how anyone turns a profit selling coffee & cakes unless they have a proper meal service… I've concluded that it's a lifestyle choice more than anything.
Location is everything for a coffee shop.
The coffee is an extremely thin margin item. The fat margin items are the cakes and patisseries.
Unless the coffee shop is churning out mega amounts of coffee, watch the food to gauge the profitability.
I only personally know two cafe owners and both are doing very well so I am only seeing the rosie side of it.
Thanks. I would never have thought cakes and patisseries could cover the rent. TIL!
I know people who have owned asian restaurants which were losing money just for the sake of getting residency visas. The government has put an end to that rule already.
'cough cough'
Think this is what im looking at
'cough cough'
That person sold it immediately after their PR was granted.
Yeah, you need the owners financials to know for sure. They could offset their losses against income gained somewhere else for example.
Can't find a job so you buy a job.
People get sold on a dream and don't want to see the negatives.
What would be the purpose of someone say starting a business that will fail 99% of the time
Most stats will say businesses will close their doors within x years etc. Where do you get the 99% failure rate. Given unlimited time, most small/medium businesses will close.
Are you including the stats where a business gets bought by competition/larger company for a healthy profit and brought into their brand? That's included in the closure numbers. What about businesses that the owner retires? What about when an operator finds a better business opportunity?
I've bought a business and turned it around from failing to profitable. I bought it to test something for another businesses and sold it to another company about three months later for 5x multiple. Technically, that business closed.
I had another one that I started from the ground up. It went great for many years. After a while, the market shifted and it wasn't as profitable enough for me. I moved on to greener pastures. Another business closure.
In reality, you'll find failure rates (covid19 times excepted) from businesses going broke are much lower than you're saying but they're still high.
The trick is about mitigation of risk. Limiting investment until it's proven a success before investing further, or if all goes well using sales to build your own growth. If you can make a small investment early and see if a business works. If the business doesn't get traction, you can close it without investing too much. If an business works, and really works, the upside can be enormous. If you're interesting, look up phase-gating. I initially knew it as stage-gating.
These won't be accurate numbers but this is something like what you typically see for investible businesses.
10% of businesses go broke and lose all money.
30% of businesses go broke and return some money, something like 30-50%
30% of businesses break even and return about the same amount back
15% of businesses return 2-3 times on investment
10% of businesses return 4-5 times on investment
3.5% of businesses are very successful and return 6-20 times
1% become even more successful and sets people up for life.
.5% become unicorns and make the investors and employees very rich.
It means, the majority of the time, you'll earn a profit, but not always enough to care about. Even if it's a loser, it's rare to lose everything.
That being said, some businesses are uninvestible losers.
It doesn't quite work like that for small businesses. It's often someone buying a job for themselves, and/or for their family or someone taking a bet that they can do better than everyone else who failed.
This is more of, if the business owner spent 5mins of research you could of seen the odds were well well against you
CITATION PLEASE
Investment Visas are a big one.
You have enough money and income that you don't need to worry about it, you want to live in Australia…
Open a restaurant, don't promote it, don't do anything, do whatever… visa!
They get exactly what they want, and all it costs was a small failing business.
As Shia Lebeouf said "Don't let your dreams be dreams".
And why do people buy franchises in saturated markets, after years and years of horror stories in the press?
People treat Businesses like investments. With an assumption it will succeed or increase in value.
Blind faith not based in reality. No research, no idea.
money laundering or keeping a family member happy or simply crap business people (plenty of them around).
There was a shop around the corner in Crows Nest that sold smelly candles, drinks, other crap (there was no focus). It was all by itself and the only passing traffic was the dog off leash park people. It was fairly obvious that the owner had a very rich husband who was sick of hearing his missus say she was bored at home.
There's a huge coffee / restaurant place in my area that is busy but it gets renovated every 12 months. It's an easy way to launder money into a legitimate business.
1) Learning experience.
2) Definition of insanity.
3) Money laundering.
4) Diversification.
5) Visa generation.
6) …