Entrepreneurship
Can I make a living as an Entrepreneur?
I have a difficult time explaining what I do to my grandfather. He bears his skeptical face when I tell him that I’m an entrepreneur on the internet.
“Trying to strike it rich, eh?”
Truthfully, I don’t think he understands how I feed my family, but that’s ok. But, this story does bring up a question that’s raised all the time among prospective entrepreneurs.
Can I strike it rich if I go on my own?
My response is always “yes and no.” Chad Moutray, the Chief Economist of the Office of Advocacy of the U.S. Small Business Administration, published some of his research on the income likelihood of entrepreneurs. His research backs up my response nicely.
Blades and Razors / Razors and Blades
Back in the 1890′s the Gillete Safety Razor Company, now a part of Proctor and Gamble, created a new business model commonly known as a Blades and Razors model. They invented a razor with a replaceable blade, so that the expensive shaver would not need replacing as often as it had. The main shaver would last a long time, and the smaller razor blades would be replaced rather than sharpened.
The pricing model was new. They began selling the shavers at low prices, actually losing money on each one they sold. The blades were sold with high profit margins. In the long run, they were highly profitable.
The video game business has used this same model for years. Microsoft sold Xbox 360′s at a loss knowing that they would sell millions of games at huge profits.
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