online business

More and more people are making a full time income online with low cost business ideas. As the inflation increases and the cost of living goes through the roof - more people are turning to make money online.

But is it really worth your time.

In this article we will look at whether doing online business is a viable option for you and whether this is something that you should do based on cost comparison.

1. Cost of Entry

One of the biggest barriers to getting into any business is the cost of entry. This is the amount of money and resources required to enter any market place. For e.g. if you wanted to open a McDonald's franchise in your town you would have to come up with excess of $100,000 to get in the business. For most people this is a lot of money. Thus only a very select few people will be able to enter this business.

However, when making money online this barrier is no longer there. The cost of creating a website is less than $100 per year - this includes domain cost and hosting. This is the kind of money any one can come up with and get into business.

2. Months to Profitability

This is another factor that we must look at when doing any business. So using the example we mentioned above, if you were to invest in a McDonald's franchise with $100,000, and you made conservative sales of $10,000 per month after the first 6 months and had a profit margin of 50% (please note these figures are for illustration only)

how many months would it take you to recuperate your investment.

You would be making a profit of $5000 after 6 months - so it would take you 26 months (6 months plus 100.000 / 5000 = 6 months + 20 months)

On the same scale if you were to make 1 sale of $20 per day ($600 per month) from your website - you would recover your investment in 5 days.

3. Breakeven Point

Break-even point is the point at which profits from our sales are equal to our costs. In effect nothing is being paid out of our pocket and the business is paying for itself.

In the example above if we were selling $10,000 per month our break-even point would be in 26 months, so in effect we would be paying for the business for 26 months before it would make us any money.

On the other hand with our online business it would break even on the 5th day and all amounts after that would be profit.

4. Return on Investment

This is the percentage return we get on an annualized basis on our investment money. This helps us make the decision of what investment is better based on a dollar for dollar investment.

In the example above - we make $30,000 in one year ($5,000 profit after the first 6 months). This is a 30% return on our investment.

On our online business we make $7,100 in profits (600 per month for 12 months less cost of 100). Thus our return on investment is 7,100% - 237 times more than investing in the franchise.