How do you tell if a business idea is a bad one? Google does not want to tell you which business ideas during the time of COVID-19 are bad ideas. I tried to ask. It turned up 224 000 000 results in 0.32 seconds. I confess I did not go through all of them. I scanned the first 5 pages. None of the articles touched on what not to do.
What is on offer falls into two categories:
- Things are bad – this is what you can do to cope
- Things are bad – this is how you can potentially make money from it
Realists, optimists, pessimists, dreamers, schemers and desperate others
We’ve been around the block a few times. Not only that – we have helped quite a few others around theirs! Psychologists tell us that for change to happen you need two things: hope (a vision of a different reality) and discomfort (the motivation to change). The reality, though, is that the idealistic and the desperate and everyone in between tends to underestimate what it takes to start a business and how long it will take before they can live off it.
Desperation makes some capitalistic hearts beat stronger
Wherever there is desperation, there will be someone ready to take advantage of it. Humans are quite often lazy! If there is a short-cut, they will take it. They fall quite hard for anything ‘fast, fancy and free’.
Sometimes though, their intentions are absolutely 100% honourable and THIS is why we want to talk about what to avoid – we want to spare the sincere some pain!
Smell that rat
- We will give you the recipe but first join the club
This scheme mentioned above comes with dozens of ‘Glowing Testimonials!!!’ from people ‘Just Like You and Me!!’ whose lives have been Irrevocably Changed!!!’ (In case you missed it – beware of people using Capitals and Too Many Exclamation Marks!!!)
Some schemes add ‘bonus deals’ to prove to you that this is a real opportunity to ‘better yourself’ – it usually involves training. Of course, this comes at an additional cost. But wait! There is more! If you work hard and invest more, we will train you to become a trainer yourself! You can use our training material for free! That is after you have paid the license fee. And bought the resource packs. And on it goes.
- We will teach you how to become stinking rich by trading on the stock market
‘They’ state: five easy lessons is all it will take! ‘They’ even supply a virtual platform to practice on (not rigged, of course). Answer this: why would stockbrokers need 8+ years of solid academic studies and years of experience and still not be able to guarantee their returns?
Let us say you do succeed to profit from the temporary difference in cost per share as you buy it and sell it on another market at a higher price. (This is called arbitrage trading.) You may make a profit of 1%. You would need a stupendous amount of capital to make that worthwhile!
- I know ‘n ou (‘a guy’, for those from outside Mzanzi)
You receive an email from someone claiming you are distant cousins. They tell you that their uncle’s cousin’s step-sister is in the last stages of developing a vape pen that will cure COVID-19 using the smoke from the indigenous ‘bossies’ from the ‘veld’ on their farm. Their great-aunt’s cousin’s nephew’s grandmother had learnt how to use these from roving traditional healers during the Flu of 1918. ‘All’ they still need is a ‘small’ investment of R50 000 – you will make millions.
Our advice? Take R5 000 and change it into R10 notes. Roll a ‘zol’. Do not share that ‘zol’. It is cheaper and as effective.
- Bitcoin: our all-time ‘favourite’!
Let this be a lesson: a South African has recently been arrested after he started a bitcoin vault, amassed more than R200 million worth of Bitcoin and disappeared (until he was found, of course!). Investors may get a few cents for every Rand invested. You play with Bitcoin at your peril. It is not illegal but it is difficult to track once the wheels come off.
- When Corona makes you hot
The Government made it clear that businesses must check the temperatures of staff and customers. Naturally, demand for thermometers outstripped supply.
Companies imported thermometers in bulk. Before the containers even hit RSA, the contents were sold in bulk units of 1000 each. A thermometer with a cost-price of R350 sold for R2 000. Good profit, you’d think! Well so did a lot of people. This caused unit prices to drop sharply … Many units were found to be faulty. Small investors who had taken out significant loans found themselves stuck with stock they could not sell.
Rule of thumb for determining if an idea is worth pursuing
- There are no quick fixes and no short-cuts – The Good Book did not say ‘by the sweat of your brow will you eat your food’ for nothing!
- Start with WHAT you know, not WHO you (think) you know – Before you rush out in a blind panic to attack the unknown future, take a breath. Take stock of what you know and can already do.
- Do your research, then do research on your research – Look at things from all angles. Get opinions from diverse sources. Research your sources! Sometimes scammers will allow you to contact investors. Even though there may be many individuals involved, this gives you only one perspective. Don’t forget to check sites like Hello Peter – if it’s a scam, chances are someone would have blabbed about it!
- Talk to those in the know – Friends and family are wonderful. But they don’t come with guarantees. Find and follow experts. Befriend experts. Pay experts. If you are serious about investing in the right business venture, be serious and invest in the right people. Look for those who have walked further down a similar road and now stand higher up the mountain and stick to them.