The Underdog's Bark

My previous article brought you a wealth of charts and data on "Business Opportunities in 27 Countries" and, with that, you are surely able to start a profitable business easily just by looking at the lists of nations and paying the toll to create a venture?



Not exactly! There are often potential pitfalls to a business that can be difficult to identify, and everyone knows that coming up with the money to get into business can be far from easy.

Top 10 Reasons Your Business Will Fail

These are some common reasons that businesses have problems. These, themselves, overlap. There are others besides.

(10) Taxes change on you. With higher VAT, punishing income taxes, or falling Import taxes, your business can become much harder to run. For those doing export, this applies to rising Import taxes on their exported product. The best preventative for these and similar woes is to become familiar with the politics of the country in which you plan to do business.

(9) Everyone jumps on your bandwagon. Suppose that a country showed that people were buying Moving Tickets like mad and that they were selling for 3x international values. Suppose at the same time that ten businesses opened at once during that situation. Suppose it will ever be as profitable again?

( Your country fails to involve itself in war games or real war, or it has no good hospitals. This makes it hard for employees to maintain high wellness.

(7) Your country changes on you by conquest. You can buy an export license to the new country for 5 gold, but the market could be entirely different and make it very hard to profit in your business.

(6) Your country expands and creates more profitable businesses in your sector. This applies especially to Land. If you had a Grain company but your country acquires Diamonds or Iron, it may be much more difficult to make Grain profitable because of higher wages.

(5) In general, the cost of labor goes up on you. Other reasons for this include businesses being formed rapidly, population stagnant or decreasing, or just overzealous bidders for labor, some of them "fishing" just for better employees than their current roster.

(4) The cost of your raw material for your Manufacture or Construction business goes higher, and the price of your product does not change. This is very likely to happen for many products, such as Houses, where the price memory of buyers will be a stronger force than the change of wood prices.

(3) There is no local market for your product, or the market is vastly smaller than you anticipated, such that people are not buying your product in numbers. You either have no export or black market plan, or one would be too expensive.

(2) You fail at any of a number of basics such as: proper evaluation of business profits in terms of Prices Sold (pre-tax) Minus Wages (minus also raw materials) and refusing to sell at a loss, keeping wages of workers high enough to prevent loss of skilled and high wellness workers but not too much above the current offer, keeping the number of workers optimal, improving the workforce through hiring or suggestion to work at close to 100 wellness daily, buying raw materials at the best time and in the best market, and so on.

(1) The price at which you can sell the product you sell goes down, and you continue to follow the price down the curve instead of waiting for a better time. The leading cause of price erosion is zealous competition for the top place in the Market by other business owners. This problem becomes even worse when there are fewer purchases; in the case of Weapons or Moving Tickets, for example, purchases are highly sensitive to current events. A better strategy would be to enjoy the lower labor costs (often coinciding) and reserve most of your product sales for whenever the market recovers. Alternatively, if they will not likely recover for healthy profit, exit the business.

Some of these problems are endemic to the Q1 businesses, in which many "newbies" are starting out as entrepeneurs, and are to some degree alleviated as you enter the more "elite" ranks of Q3, Q4, and Q5 company holders. The summary of all this is:

Lots of competition, or zealous competition, from other businesses is the most likely reason that your business will be hard to profit from.

This makes it especially important to scout out the business climate in any country and industry in which you plan to operate.



Sizing Up the Competition

There are three basic scouting methods that I suggest.

First, look at the marketplace for the product that the industry produces in that country. This will give you an idea of the intensity of competition, how many are competing, and just how low the lowest bid currently is.

Second, look at the job market for the labor pool in that country needed by the industry. This will also give you an idea of the intensity of competition, this time that competition taking place for labor, and also how high or low the top bid is.

Third, look at the "Info > Rankings" feature of eRepublik and choose "Companies" along with the country of interest. You can sort by number of employees within an industry and find out about companies that are not even active.

An alternative both to taking an offer from "Companies for Sale" and to creating your own company is to get one of these Organizations holding a dormant company to list it on Companies for Sale. Sometimes it works if you send a nice message.

Ensuring Success

There is no way to ensure success, but you can see what you might expect. Later, the reality may be different and either exceed your expectations or disappoint you.

The formula is:

Company Profit = Company Sales - Taxes If Applicable - Raw Materials Cost If Applicable - Wages Cost

You can find the pre-tax sale price of a product on the company page of an existing business, so the first two figures can be taken directly from one (or, otherwise, computed by dividing sales price by 1 plus the taxes). The raw material cost per product sold is also easy to figure. Wages is a little more difficult, but not that hard... to find the production of a skill 4 worker, for example, I suggest using an average 4.5 skill, 95 wellness, and a calculator of productivity that assumes a perfect quota of workers. To find the cost of their contribution to one product, divide the total production of the worker(s) by the amount of production per product, to obtain the number produced, and then divide the wages by the number produced by that worker (or all the wages divided by the number made by all the workers).

Nothing beats personal knowledge of the country for knowing more about the factors that lead people to purchase. For example, if the country has no war, not even a training war, it's a poor market for Weapons. Countries with larger populations of more advanced players are more likely to consume more higher level Food and to use high level Weapons in conflict than those with mostly new players, who can't afford such luxuries. On the other hand, countries with a maturing baby boom population are often a great market for entry-level Houses. There are as many different considerations as there are markets.



Funding a New Business... Loan or Partnership?

You can see from the eRepublik forum that several people are looking to make investments at any given time and that even more people are looking for "loans" and "selling shares" for any of a number of different purposes.

I'm going to help you cut through some of that morasse and make one recommendation for a lending bank and one recommendation for investing by partnership.

The lending bank that I suggest is t'jelle bank for several reasons. No private bank of eRepublik has ever achieved the amount of capital that this one has, and what makes this all the more remarkable is that it checks out better than any in terms of being well-operated and unlikely to fail. The only thing I worry about, really, is that they may not have enough quality loan applications in order to make the 4% spread between their interest paid and collected profitable. If you want to pay about 15% interest, calculated monthly, on a loan for your business not exceeding 50 gold, fill out their form.

On the other hand, there are several advantages to creating a partnership instead of taking a loan: (1) for investors, you can just invest and not have to manage a business. (2) For the manager and indeed all partners, temporarily poor business conditions do not create a loss after loan interest. (3) For the partners, you can benefit on the upswing of the business in a way that banks cannot offer. (4) For managers, you can create partnerships for larger amounts or longer lengths of time than a "bank" would be willing to handle.

Let Me Be a Matchmaker to Investors!

... and let your business be beautiful with strong birthing hips!

I suggest that anyone with the ability to invest as little as 10 gold in a business to fill out my interest form, which is both for potential managers and for investors. Instead of sifting through the morasse that is the eRepublik forum, you can have pre-examined business opportunities presented to you, the intelligent investor. As a future business owner, you can have investors knocking on your door easily and for free.

In addition to the free matchmaking, I offer a service to (1) write the contract for all parties involved, (2) provide non-binding mediation in the event of a claim of improper operation against the manager, (3) provide "Trial insurance" that pays out 5 gold to any investor who brings the manager to trial and is charged 5 gold by the admins, and (4) provides the manager with advice and support for the lifetime of the partnership. The cost of all this is 1 gold for each investor or manager; it is optional and requires the agreement of all parties.

However, the matching is always entirely free; this extra service is optional, and filling out the interest form creates no obligation whatsoever... so click here to be able to find out about possible businesses that could bring you profits by matching you with other investors.



Stay Tuned for the Opportunity Report Next Week

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