Qualify your idea of a business

Discussion in 'Homesteading Questions' started by Beeman, May 14, 2006.

  1. Beeman

    Beeman Well-Known Member

    Messages:
    6,977
    Joined:
    Dec 28, 2002
    Location:
    East TN
    What do you think the idea of a business should be? Should anything that makes a profit be a good enough enterprise for you to consider yourself "in business and your own boss"? Or is there more an enterprise would have to do before you considered it your "business" and your sole source of income?
     
  2. Little Quacker in OR

    Little Quacker in OR Well-Known Member

    Messages:
    2,126
    Joined:
    May 9, 2002
    Location:
    Oregon
    Well, For ME it would have to be, something that I could do in my area at home...beautiful surroundings and not in any city or punching a time clock. People have varying expectations as to what they want to glean from a business and high on the list is quality of life for me and my family.. Time for family, time for enjoying the country.

    Lots of people make this work by running their business out of their home and it's more and more practical all of the time these days with computers and cell phones.

    Marketers, Morgage companies, Realtors, dog sitters, house sitters, baby sitters, Swimming Pool designers, catering, plant nurseries and many more businesses can be run successfully at home now. I don't reccommend that any one undertake this without good solid grounding in economics, book keeping and what other skills they need to do the work they choose. :p

    LQ
     

  3. donsgal

    donsgal Nohoa Homestead

    Messages:
    5,398
    Joined:
    May 2, 2005
    Location:
    SW Missouri near Branson (Cape Fair)
    To me if you make any money it is a business. Even if you don't make any money - but treat it like "a business" I would say that qualifies. After all, the IRS does not require that you make any profit to be considered bonifide.

    donsgal
     
  4. Mike in Ohio

    Mike in Ohio Well-Known Member

    Messages:
    3,143
    Joined:
    Oct 29, 2002
    Beeman,

    The bottom line idea of a business is to make a profit. It doesn't have to be your sole source of income.

    Just a couple thoughts.

    Mike
     
  5. Beeman

    Beeman Well-Known Member

    Messages:
    6,977
    Joined:
    Dec 28, 2002
    Location:
    East TN
    I'm not talking about making your heart happy or what the IRS considers a business. Let's talk economics of what people think would be the requirements of an enterprise they would call their "business" or source of income.

    I've owned and operated a few small businesses and closed or sold all of them while they were profitable. To most that sounds crazy but the long term business plan showed there was no more wealth to be gained from the business.
    If the endeavor doesn't surpass what a job could provide with money and benefits and have a long term "pot of gold" at the end for the time and investment I don't qualify it as a business, do you?
     
  6. Mike in Ohio

    Mike in Ohio Well-Known Member

    Messages:
    3,143
    Joined:
    Oct 29, 2002
    I think making your heart happy is certainly a factor. I had a business for a number of years (consulting for online/new media) back in the late 1980s to mid 1990s. I could have made more money witha job in my field but I wouldn't have had the flexibility. That flexibility allowed me to race on the windsurfing circuit.

    Quite a few businesses don't have a "pot of gold" at the end of them. Think of businesses where it is all about the individuals talents or skills. When they go the business goes. Perhaps the children aren't interested in the business. I know a fellow with a good auction business that nets in 6 figures. He's 74 and the "kids" aren't interested. He figures that he will shut the business down rather than sell it when he retires (maybe he will and maybe he won't).

    Perhaps I'm just illustrating that there are always exceptions to every rule.

    Mike
     
  7. rabbitgal

    rabbitgal Ex-homesteader

    Messages:
    1,508
    Joined:
    Feb 11, 2005
    Location:
    Virginia
    I think a distinction needs to be made between "business" and "hobby", even if what you're doing for recreation is making you a profit. For example, I breed and show rabbits. I know a lot of people who sell show/breeding animals and pets, and maybe they're making a profit (probably not in most cases), but they aren't necessarily into rabbits to make money.

    I guess the difference in my mind [between business and hobby] is the "businessperson's" goals: are they doing it with the intent to make a living? Or is it just a hobby?
     
  8. donsgal

    donsgal Nohoa Homestead

    Messages:
    5,398
    Joined:
    May 2, 2005
    Location:
    SW Missouri near Branson (Cape Fair)
    I guess I am not a "business person" in the cold, hard context of the word. To me, being my own boss, not having to deal with the crappola of punching a time-clock or dealing with other idiot co-workers has intrinsic monetary value in my book.

    I find it interesting that your "long term business plan" is able to pinpoint exactly when there would be no more wealth to be gained. My gosh! That is close to a miracle. If it was *that* easy, there would never be any businesses that go bankrupt! Your faith in some obscure notion that the business plan can see into the future is interesting.

    I know you will never agree to this, but in business - much the same as life - MONEY IS NOT EVERYTHING. And the satisfaction of a job well done, self respect, and the respect of the community, the ability to be autonomous, these are all things which give true validity to the term "business" just as much as turning a profit. Your narrow point of view would be shocking, if it weren't so typical.

    My husband is a professional entertainer and has a "business". How could he possibly ever sell it to anyone? He couldn't. Your definition is far too narrow.

    Donsgal
     
  9. Obser

    Obser "Mobile Homesteaders"

    Messages:
    577
    Joined:
    Feb 13, 2006
    Location:
    Highly Variable
    What is a business? Although I have owned several businesses with varying degrees of “success”, I would start with a dictionary definition and add qualifiers or clarifiers. The Merriam Webster definition that best fits the present discussion is:

    Business: “a usually commercial or mercantile activity engaged in as a means of livelihood” or “a commercial or sometimes an industrial enterprise”.

    It seems as though livelihood and expectation of profit (in some form) are an integral part of business, without which there would be little motivation to engage in business. However, it is debatable whether something is a business only if it “surpass what a job could provide with money and benefits and have a long term ‘pot of gold’ at the end for the time and investment”.

    If a person engages in construction contracting, for example, with employees, tools, materials, etc, but makes no more money than if he simply took a construction job, I would still consider him/her as being in business because s/he functions as an entrepreneur by bidding jobs, entering contracts, hiring labor, etc.

    If a restaurant makes no profit, or produces losses, after a start-up period, and if it closes, it was still a business – an unsuccessful or failed business, but a business nonetheless. The owner may have entered the business with the expectation of profit, but for whatever reasons the business did not yield a profit. The lack of profit (or negative profit) does not negate that a business venture existed. BTDT.

    A SUCCESSFUL business might be defined as one that produces greater financial returns than a “regular job” might produce – IF a person defines success only in terms of money. An executive may option out of the corporate world and open a fishing guide service (a business) at substantial reduction in compensation; however, life as a fishing guide may be much more rewarding in terms other than money.

    Financial success is only one of many criteria that can be used to define success. I, personally, regard quality of life (as I see it) as far more important than financial reward. A business producing firewood can provide me more personal satisfaction but far less profit than a “successful” restaurant business or a distinguished, high paying job. (Note: I am not in the business of selling firewood, although my wife and I produce enough firewood for friends to add a considerable percentage to our annual income if it were sold at prevailing prices).

    So, what is a business? My personal definition would be something like, “Any activity in which a person acts as an entrepreneur (one who organizes, manages, and assumes the risks of a business or enterprise), regardless of the financial profits earned.”
     
  10. Beeman

    Beeman Well-Known Member

    Messages:
    6,977
    Joined:
    Dec 28, 2002
    Location:
    East TN
    "So, what is a business? My personal definition would be something like, “Any activity in which a person acts as an entrepreneur (one who organizes, manages, and assumes the risks of a business or enterprise), regardless of the financial profits earned.”

    That sounds more like farming to me than business.
    Maybe I should have been clearer is saying "successful business". Most successful business people I have known were in the business of making money and what they did whether it was firewood or fishing guide wasn't as relevant as it being profitable.
     
  11. Wildoutdoorsmen

    Wildoutdoorsmen Active Member

    Messages:
    39
    Joined:
    Mar 25, 2006
    Location:
    NJ to WV
    If money is the root of all evil, what is the root of all money? Money only buy false happiness!
     
  12. fordy

    fordy Well-Known Member

    Messages:
    9,305
    Joined:
    Sep 13, 2003
    Location:
    Whiskey Flats(Ft. Worth) , Tx
    ....................For me it's all about "whose in Charge" ! As an employee your job description defines your work assignment , the amount of time that a person must invest in that job to be successful as determined by the Boss and your job performance to some extent dictates your compensation for a job well done . In this context the boss really doesn't want to hear about your stress level , the pertformance anxiety you are experiencing that has turned your previously great sex life into 5 minutes of foreplay after the 10 o'clock news .
    ...................When a creative person becomes self employed they pursue their passion with a focus and tenacity that they could never achieve as an employee . The stress is gone , they loose all track of time because it's the final result that matters and they don't have to document all the little steps they took to get to the final product . And , there may ...or ...mayNot be a profit involved when all is finished . fordy... :hobbyhors
     
  13. Niki

    Niki mini-steader

    Messages:
    1,510
    Joined:
    Apr 9, 2006
    Location:
    NE Ohio
    I love this!!!

    Threadjack over :rolleyes:
     
  14. Beeman

    Beeman Well-Known Member

    Messages:
    6,977
    Joined:
    Dec 28, 2002
    Location:
    East TN
    That sounds very romantic, almost like homesteading. it's just tough to pay the bills if there may or may not be a profit. your description sounds more like artist and or musician.
     
  15. kmaproperties

    kmaproperties Well-Known Member

    Messages:
    222
    Joined:
    Jul 6, 2005
    Location:
    ohio
    The Quote is " The LOVE of money is the root of all evil.
    Big difference, money is not evil. it is the misuse, loving,hoarding and the like that is evil.
     
  16. Jan Doling

    Jan Doling Well-Known Member

    Messages:
    4,898
    Joined:
    May 21, 2004
    Location:
    Zone 9b
    What does the IRS require?
     
  17. CraftyDiva

    CraftyDiva Is anybody here?

    Messages:
    3,340
    Joined:
    Aug 25, 2003
    The IRS requires you to show a profit your 3rd year in business, otherwise it's a hobby and you'll owe back taxes for all your write-offs (business expense) for the first 2 years.

    You can work at a loss for the first 2 years, but you must show a profit in the 3rd, even if it's only a dollar, it must be a profit.
     
  18. Michee

    Michee Well-Known Member

    Messages:
    133
    Joined:
    Mar 10, 2006
    While that is one possiblity, it's not always that cut and dried. The irs does have other criteria for determining hobby vs business. Check out publication 535 at the irs
    http://www.irs.gov/publications/p535/ch01.html#d0e884 Basically you need to be able to prove you are attempting to make a profit whether successful or not. You can also have the presumptions of business/hobby extended to 5 or 7 years. I am self-employed, running a strong business, have been for many, many years. For anyone starting a business I highly recommend studying everything business as it is never as simple as getting to "do what you love" all day.

    I've read this post a few times now and am still not clear on what Beeman is asking. To me successful business and money can't be seperated unless you are running a non-profit organization.
    Beema quote: "If the endeavor doesn't surpass what a job could provide with money and benefits and have a long term "pot of gold" at the end for the time and investment I don't qualify it as a business, do you?"
    I do require my business to meet or beat what I could earn on the outside, I have very high standards for my business. Pot of Gold.....no, unless you mean eventually being able to sell the business for a profit and live off the results.


    Excerpt from the publication
    " In determining whether you are carrying on an activity for profit, several factors are taken into account. No one factor alone is decisive. Among the factors to consider are whether:

    You carry on the activity in a businesslike manner,

    The time and effort you put into the activity indicate you intend to make it profitable,

    You depend on the income for your livelihood,

    Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business),

    You change your methods of operation in an attempt to improve profitability,

    You (or your advisors) have the knowledge needed to carry on the activity as a successful business,

    You were successful in making a profit in similar activities in the past,

    The activity makes a profit in some years, and

    You can expect to make a future profit from the appreciation of the assets used in the activity.
    End Quote
     
  19. Beeman

    Beeman Well-Known Member

    Messages:
    6,977
    Joined:
    Dec 28, 2002
    Location:
    East TN

    I'm getting at exactly what you've stated. the pot of gold is the equity of a saleable business or the saleable/leaseable real estate the business paid for. As Michee stated the "Pot of Gold" is what you could possibly depend on to retire.
    As for the IRS that makes or has no bearing on the question. The percentages of small businesses that fail is extremely high. I always hear people saying they want to own their own business and wonder what their standards are that they would hold their business to in order for it to be considered successful. I've had a few profitable businesses that never achieved the standard I stated so I sold them or shut them down. Some of the best money I've seen made in business is selling the business while it is on the upswing.