From the September 1999 issue of Startups

Home sweet home. It's where you eat, sleep, hang out and relax. If you're smart, it's also a place where you can make money--lots of money. That's because these days, you don't need a fancy office or storefront to get started in a profitable business. All you really need is a good idea.

And by starting from home, you avoid the hassles of space-leasing, high overhead and daily commutes. If you like the idea of the homebased lifestyle but don't have an original idea for a business, one way to get started is by buying a business opportunity.

Business opportunities are companies that provide varying levels of products, assistance and training to help you launch a business. The listing on page 47 features 507 business opportunities you can run from home.

What's it really like to run a homebased business opportunity? To give you an idea of the wide variety of opportunities that exists, we've put the spotlight on four entrepreneurs succeeding with three very different companies.

A Step Ahead

"People have worn them in other countries for generations. They're only new here," says Robin Cohen, 29, of her jewelry dealership's principal product, the toe ring. In 1995, Cohen became a dealer for Toe to Toe Jewelry, based in Laguna Hills, California, and christened her business Once Upon A Toe.

It all started when she began to frequent Toe to Toe's yearly festivals. Cohen added new toe rings to her personal collection every year, and when she moved to Los Altos, California, four years ago, she couldn't help but notice people staring at her adorned feet. Cohen's gut instinct told her Toe to Toe was a business opportunity worth a try.

With an initial investment of $2,000, which bought inventory and an elegant sales booth, the then-nanny started her business on a part-time basis. "Business skyrocketed the first day," Cohen remembers. When she set up a booth at the Redwood City, California, Fourth of July festival, she sold out immediately and was featured in the local newspaper.

Cohen went full time in her second year, and sales increased eightfold. In her third year, when she hired employees, sales tripled. Her sales stem from the 50 or so art and wine festivals Cohen attends each year. She also throws toe ring parties at customers' homes.

She sells toe rings in 50 sizes and numerous styles. Cohen says customers tend to get addicted. "Soon they're adding a matching thumb ring," she says, "and bringing their mothers or sisters."

Cohen's secret to success? "I genuinely care about my clientele," she says. "When you have integrity and are good to people, you're going to be successful."

Before you buy a distributorship/dealership, consider the following:

  • Distributorships/dealerships don't necessarily have to be registered as a business opportunity or have a disclosure document. Investigate by requesting financial statements, visiting headquarters and talking to other dealers.
  • Is the inventory price really the wholesale cost? Be cautious if the initial amount you're required to buy seems unreasonable.
  • Make sure there's a market for the product you plan to sell. If possible, buy a small amount of inventory first and see if you can sell it. Ask potential customers if they'd be interested in buying the product and at what price.

Sign Of The Times

"I like to work hard and play hard," says Chris Miller, 28. "I've always dreamed of being able to work 20 hours a week and [still make a good] income." After earning a degree in marketing management in 1992, Miller worked for a coupon-mailer franchise, then dabbled in various indoor-billboard ventures. His experiences in the real world taught him much more than he'd learned in college, and he admits he was both enlightened and intrigued the first time he saw a truck with a scrolling billboard drive past him.

"The movement was key," says Miller. "When you see a huge ad change before your eyes, it gets your attention." Anxious to sign on the dotted line and become a licensee, last year he contacted Pompano Beach, Florida-based Advertising on the Move, a company that offers even more sophisticated technology than he'd witnessed on the street.

Since he couldn't afford to purchase an Advertising on the Move truck, Miller turned his attention instead to the company's other licensed product: a stationary billboard with scrolling, continuous display posters.

Made of high-grade, reusable vinyl (picture miniblinds turned on their side, in which multiple panels bearing separate ads are rolled up into a conveyor belt), the backlit sign-in-a-box contains 15 display ads that change every six seconds.

Thanks to his indoor-billboard marketing experience, Miller had developed a relationship with Richmond International Airport in Virginia. Airport management wanted advertising from local businesses on its premises to greet air travelers--but faced a shortage of available billboard space. Miller bought a demonstration billboard from Advertising on the Move and won the bid to supply the airport with scrolling billboards. He now plans to target hotels, shopping malls and movie theaters.

Miller, who signed on with Advertising on the Move last April, is phasing out his indoor-billboard business to work full time on the moving billboards. The business has already grown so rapidly, he recently moved the opportunity out of his home and into an office in Richmond.

Miller's six-month financial plan includes buying that Advertising on the Move truck. Anxious to market it as an event vehicle, he vows, "I'll work 12 to 15 hours a day while I don't have a family. I can work harder while I'm young and energetic. I can build something that'll [always] be there for me." And, he hopes, realize his dream of working just 20 hours a week by the time he hits his 40s.

Before you buy a licensing opportunity, consider the following:

  • If you're buying equipment, ask other licensees if it's reliable. Check with an accountant to see when you'll earn your initial investment back and begin making a profit.
  • Ask for a copy of the license agreement, and consult an attorney to make sure you understand it.
  • Trademarks, copyrights, patents or other proprietary rights might be granted with the license. Are you authorized to sell the product using the company name, or do you have to create your own name? Will the company provide you with marketing materials, or do you have to make your own?
  • Before you buy, make sure there's a market for the product or service. Gather brochures and test-market the product. Ask people what they would pay for the product or service.

On The Level

"Our goal in selling Watkins goes along with our values: spending time with our family and doing the things that are important to us," says Steve Bretzke. "That's what we try to get across to [prospects]." Bretzke has been able to do just that since 1990, when he and his wife, Ginny, both 36, became associates of multilevel marketing (MLM) company Watkins Inc.

"We were planning to have a family, and we wanted the flexibility of having at least one of us at home [with the kids]," explains Ginny.

When they discovered Winona, Minnesota-based Watkins, they were intrigued. "The diversity of the product line is one of the things that [appealed] to us," says Ginny. Watkins sells a wide variety of household, personal-care, health and nutrition products, as well as specialty foods.

MLM opportunities differ from other business opportunities in that selling products isn't your only focus. You also recruit new salespeople into the system, building a chain of recruits and receiving a percentage of their sales. "[Ultimately], you can get to a point where your residual income doesn't depend on [your own sales]," says Ginny. That point came for the Lee's Summit, Missouri, entrepreneurs roughly two years after they started--sales hit nearly $250,000, and they had about 500 recruits. At the time, the pair used the then-new venue of online bulletin boards to advertise their business. After a year, Steve quit his job, and in 1996, Ginny did, too.

The benefits of this opportunity go beyond a comfortable income and lifestyle; for the Bretzkes, it's all about freedom. "[Our business] has taken on a life of its own, and we couldn't stop it now if we wanted to," says Steve. "The money is great, but I'd work for half this amount just to be home with our three daughters and not have to go [to an office] every morning."

Before you purchase an MLM opportunity, consider the following:

  • Since your success depends on the product, look for a high-quality product or service for which there is a real demand in the marketplace.
  • Look carefully at the upfront investment to see whether it's reasonable.
  • Contact state authorities to ensure the business is legitimate or see if complaints have been filed. Check out the company's business records; they should be on file with the state and county in which it operates.
  • Investigate what the business proposition involves and how long the company has existed.
  • Make sure the company has evidence to back up any earnings claims.
  • Check for a buyback policy. Legitimate companies will buy back unsold inventory and sales kits from you if you want to leave the program within a reasonable time.
  • Pyramid schemes, which require participants to make an investment or buy something in return for the right to recruit others into the system, are illegal. Legitimate MLM companies must be genuine retail organizations that sell a product or service to customers.

Biz Op ABCs

The term "business opportunity" is often misunderstood because it covers so many types of businesses (including franchises). This story and the listing on page 47 focus only on nonfranchise business opportunities. These fall into five categories: dealers/distributors, licensing businesses, multilevel/direct- sales businesses, coin-operated businesses and cooperative buying groups.

1. Dealers/distributors: Individuals or businesses who are granted the right to buy wholesale and sell retail Business XYZ's products, but aren't entitled to use XYZ's trade name. An authorized Apple Computer dealer, for instance, may have an Apple sign in his window, but he cannot call his business Apple Computer. While the terms dealers and distributors are often used interchangeably, there is a slight difference: A distributor may sell to a number of dealers, while a dealer usually sells to a retailer or consumer.

2. Licensing businesses: Trademark/product licensees receive access to the seller's trade name as well as specific methods, equipment, technology or products. If Business ABC has a special method for detailing cars, you will learn its method and get the equipment and supplies needed to set up your own business. You may or may not call your company Business ABC, but you will become an independent licensee.

3. Multilevel/direct-sales businesses: Individuals sell products through their network of friends, neighbors, co-workers and so on. In some instances, you can earn additional commissions by recruiting other agents.

4. Coin-operated businesses: The seller provides the machines and the locations where they'll be placed, and the buyer restocks or services the machines along a specific route.

5. Cooperatives: Loosely resembling a licensing arrangement, these allow an existing business to affiliate with a network of similar businesses, usually for advertising and promotional purposes.

Call Them On It

To get more information about a business opportunity, contact the relevant office in the state where it's registered. (The following 25 states require business opportunity registration.)

Research compiled by Liza Potter, Bowen Park and Meredith Russell

ALABAMA

Attorney General's Office

Consumer Affairs

(334) 242-7320

CALIFORNIA

Department of Corporations

(415) 557-3787

CONNECTICUT

Banking Securities & Business Department Investment Division

(860) 240-8230

FLORIDA

Consumer Services Division

(850) 922-2770

GEORGIA

Consumer Affairs Office

(404) 656-3790

ILLINOIS

Secretary of State

Corporate Information

(217) 782-7880

INDIANA

Attorney General's Office

Consumer Protection Division

(317) 232-6330

IOWA

Securities Bureau

Regulated Industries Unit

(515) 281-4441

KENTUCKY

Attorney General's Office

Consumer Protection Division

(502) 696-5389

LOUISIANA

Secretary of State

Commercial Division

(225) 922-0425

MAINE

Business Regulations Department

Corporations, Elections & Commissions Bureau

(207) 287-3676

MARYLAND

Securities Division

Franchise & Business Opportunities Unit

(410) 576-6360

MICHIGAN

Consumer Protection Division

Antitrust & Franchise Section

(517) 373-7117

MINNESOTA

Commerce Department

Registration Division

(651) 296-6328

NEBRASKA

Banking & Finance Department

(402) 471-3445

NEW HAMPSHIRE

Attorney General's Office

Consumer Protection Bureau

(603) 271-3641

NORTH CAROLINA

Secretary of State

Securities Division

(919) 733-3924

OHIO

Secretary of State

(614) 466-3910

OKLAHOMA

Securities Department

(405) 280-7700

SOUTH CAROLINA

Secretary of State

(803) 734-1951

SOUTH DAKOTA

Commerce & Regulation Department

Consumer Protection Division for opportunities costing less than $250: (605) 773-4400

Securities Division for opportunities costing more than $250: (605) 773-4013

TEXAS

Secretary of State

(512) 463-5555

UTAH

Commerce Department

Consumer Protection Division

(801) 530-6601

VIRGINIA

Clerk of the State Corporation Commission

(804) 371-9733

WASHINGTON

Financial Institutions Department

Securities Division

(360) 902-8760

Contact Sources

Advertising on the Move, (804) 673-7373, chris@indoorbillboards.com

Once Upon A Toe, (650) 969-3719

Watkins Inc., (816) 478-8035