Starting Point

The British government through its site http://www.direct.gov.uk/en/Over50s/Working/WorkingToSuitYou/DG_10027003 actively promotes us over-50s to start our own businesses and offers a whole bunch of soft inducements to encourage us to do so, and Saga, finds space on its website http://www.saga.co.uk/money/makingmoney/making-money-over-50-spare-room-... to focus on the very small business as a source of income for its target audience which tends to be rather older.

In the States AARP on its page http://www.aarp.org/money/work/articles/thinking_about_starting_a_busine... gives useful pointers to its visitors who might contemplate a business start up.

All these sites, plus much of our own material is aimed at those hoping to start a conventional business from which they, and perhaps others, can earn a full living. Our look at ‘microbusiness’ is aimed at those looking to top-up a pension or even have a rewarding hobby.

The Microbusiness.

We can adapt the Wikipedia definition of a micro-business to read

…a small business or enterprise with less than 5 employees and little access to commercial banking.

Our definition is slightly different and looks at an operation designed to produce profits of around $10,000 or £6,000 a year with little or no up-front investment or overheads and often intended to top-up existing income streams.

Starting a Microbusiness

The internet has changed the microbusiness scene by offering very low start up costs and public market places on which to buy and sell your goods and services. Anyone can trade on eBay or even setup an on-line shop on a commission-only basis.

We looked at a very simple model of someone with a knitting machine – or a red-hot hand knitter able to

• knit sweaters for $20 (or £20) or buy them in for $40 (or £40) from friends or even over eBay
• deliver them through the post for $2.50 (or £2.50) per article
• pay eBay fees of around $1.10 or (£1.10)
• sell them over the internet for $60 (or £60)
• and buy and sell over the internet in a monthly cycle

(The product or the currency makes no difference the outcome)

With no more investment than the cost of the initial 2 sweaters ($40 materials + $5.00 delivery + $2.20 post and packaging) and reinvesting everything earned you would have built up a theoretical income of about $3,500 (or £3,500) a year.

Constraints

Of course theory and practice ‘gang aft aglay’ and other factors will limit your profitability.

Overheads

In our calculation we have allowed nothing for overheads. In our definition of a microbusiness we excluded overheads and if you’re working from home there should be little or nothing in the way of overheads, but if the operation requires you to spend out on extra heating, or to build a shed to house your stock, then you will have a real overhead and you must allow for it. An overhead of just $25 (or £25) will reduce your profitability to 2,150.

Overheads are the bane of microbusiness.

Unsold or returned stock

Unsold and returned stock will cut into your margins

Your own ‘take’

Don’t forget the cost of your own time. You may see the benefit of building up your microbusiness as your reward in the initial period but sooner or later you will want to take some sort of financial reward.

Saturation

Of course, there are limits to the practical growth you can achieve. At some stage you will reach the limit of

•
• your ability to sell or distribute or
• your ability to buy in or produce your product
• your willingness to devote time and effort to further growth.

At which time you may wonder if the Micro-business model is for you.

But in the mean time you can enjoy the fruits of your labour.