#1 Online Businesses

Obviously, we had to mention the online businesses. Whether we’re talking about selling courses, membership websites, ebooks, workshops, webinars, and so many other options, all of them start in the exact same way:

You start with nothing. You use free tools to develop your courses and you, if needed, you even create your own website through WordPress and all its plugins.

The typical structure to launch an online business is the following:

You understand really well your target audience and the niche you’re selecting in the first place. You focus on validating your business concept and digging into the customers burning pains.
Then, you start writing blog posts, developing videos or creating audio podcasts before you even launch the website. You want to have some backlog of content so when you launch your website, you can spend a lot of time focused on promotion.
You finally launch the website, publish one piece of material every week and focus a lot of your time in the promotion, whether we’re talking about guest blogging, helping people on forums, sharing on social media actively, etc.
You build a mailing list by giving a freebie - the so-called magnet link.
Then you start selling digital goods to your products through the mailing list.
In a ridiculously simple explanation, that’s how it works.

#2 Business Models based on Variable Costs

Any type of business that you might think, there’s no use in starting it if you’re going to need a lot of capital investment. So, my humble advice is that you focus on finding areas that allow for variable costs-driven business models.

And are variable costs? How does this work?

Here, I’m quoting this article: How to Start a Business Without Money? - I highly recommend that you read it entirely.

I never recommend my students to go BIG at the beginning, for a couple of reasons:

It’s not the way how amazing businesses are built. In spite of what you might think, the vast majority of the best businesses doesn’t start big, they don’t start with the big flashes, and on the cover of Time magazine. A great business is raised from the ground, it is built with passion and by working out the details, and it usually grows organically, with time. Because that’s precisely how human trust is also built – it takes time.
It stupidly increases the pressure upon the founders’ shoulders, to know that they have so much money to spend on infrastructure and advertisement, so they feel forced to do EVERYTHING, which eventually leads to a waste of cash and a mediocre level of communication effectiveness.
It will be harder to run a heavy infrastructure business for someone who has never managed a company before (sales people, marketing, hierarchic structure, processes, etc.). One of the reasons why you should start small is because that way you have enough room and space to learn.
Now, let’s get back to the importance of starting with variable costs.

If you’re not familiar with management verbiage, let me tell you that typically firms have two types of recurring costs:

Fixed costs: Stuff that you have to pay every month independently of selling. Things like salaries and rents are the typical examples of fixed costs – and salaries usually amount to 90% of total fixed costs.
Variable costs: Sometimes they are called production costs, while other times they are Cost Of Goods Sold. Both ways mean the same – the direct costs incurred to sell a product. As an example: to sell a steak dish, you have to buy meat, vegetables, potatoes, spices, sauces, and to know the variable cost of selling this dish, you must calculate how many grams of each ingredient you have on your plate (on average) and how much it costs. Let’s imagine that you sell a stake for €10. If all ingredients cost you €3, it means your variable costs are 30% of the price, and you have 70% operational margin.
Ok, so now that we’re aligned in what variable costs mean, what I want to tell you is the following:

While in every business you’ll always have variable and fixed costs, the fact is when you’re starting, many times you don’t need to incur the fixed costs from the get go.

In fact, my humble recommendation is that by using your creativity and outside-of-the-box thinking, you find a way of cashing out money ONLY when you sell.

That probably means that your cost PER UNIT will be higher, in the beginning because you’re paying to mitigate the risk. But that’s OK if you start with a slightly superior unit cost, as that allows you to validate the concept and the initial version with no investment.

A final example of starting with a variable costs’ business model instead of having fixed costs.

You want to create a business that delivers food at people’s home. Your company will pick up ready to eat food directly from the restaurants and will take it to customer’s home or office. You can either start this business by having your own courier – to whom you pay a salary – or you can reach out to a firm that already does this service, and you pay them a fee per each delivery.

What I want you to understand is that when you already have volume, it will always be cheaper to have your own couriers. You pay a salary and each delivery costs you like €0,30. But when you’re starting out and you don’t have volume, you won’t mind paying €1 per delivery, if that means that you only cash-out when you’re actually selling. It mitigates the risk, while if you have to pay a salary at the end of the month, you know that independently of selling or not, that salary must be paid.