I am looking to start a business. Got two choices:

One- Gas station/resturant/hotel (Motel)/stores

Two- IT consulting company

Which to prefer?

two completely different arenas of venture..

depends where you feel comfortable putting ur money[ if that is ur money]

ThapaP ji,
Exactly, two different directions. I just want to start one with no turing back to other. Well money is, some protion will be mine and major chunk will be from some loan. Just want to invest on something. So which will be prefarable in market/long term?

gas station/rest/hotels/motels ===>>> if u work hard and have some help u can succeed easily.

it consulting ===> u need contacts.. to succeed..

so u decide ur self

If you have the qualification and man power and contacts shoot for IT Consulting, but again depends on what kinda client are you gonna target for.

For gas station, i'd say thats a good investment too, but that also depends on if you're tyring to buy w/the property or just the business.

If its just the business, then you'd have a really hard time getting a loan, i know coz i am going thru one right now, most banks wont even touch the gas station because of environmental issues.

your other option might be to have a owner finance it.

if its the property, then banks are more ready, again it depends on how much you are willing to put down payment, lets sya the store is worth 1.5M , they will still ask you to put down a minimum of 10%,, that is if you're lucky, have a good Credit score, and can provide all the document, not just PnL statement but tax returns of the business too.

you could try for either SBA loan or regular commercial loan, but again, depends on the deal and cash flow, be prepared to put anwwher from 10% - 35 % down.

goodluck

mansion,
you're the man! you seem to be well verse on these financial issues. i will certainly get in touch with you in the future if i decide to start my own business cheers!

goman,
don't think i really need to input. but i guess, IT business is quite risky. it was booming in late 90's then all of a sudden went through a rather slack period until 2002 or so. then again now it's booming. so there is quite a risk involved in it. also, since most of the projects are flowing to india, you never know what is in store for you!

gas station/hotel/restaurant on the other hand are seamlessly scopeful. so if you are a good manager, you can always prosper.

LooTe

my advise is do not go for SBA loan. too much paper work higher interest rates and there is always a catch in the early payment (i.e. pre payment of the loan).

all business loans are difficult to get..... .. but there are preferred bankers for each type of business

for example:
dunkin donut >> has its own financing
shell >> goes through chase
mobil >> goes through citi.

they have their own alliance and its easier to finance through their own kind. usually if you have more than 10% down then its easier to get it approved.

well versed **

having said that, if i were you, i would go for IT consulting company. the reason being.

1) i am a technical person myself, so i know its titbits.(not that it matters a lot)

2) there are quite a lot IT institutions/schools/unis back in nepal. as per my knowledge, there is no dearth of talent and hence good manpower in nepal itself.

3) you can keep in touch with those institions/schools and hire good people from there. who would not want to come to US in H1-B

4) you can deploy them at a good rate, pay them decent salary and still make a chunk of money out of it.

5) if desi compnies are prospering, why can't a nepali consultancy?

LooTe

well here is the thing,


If the business you are purchasing is under 2M go for SBA loan, i'll tell you why, SBA loan is backed by govt. as far as too much paper work, i dont think so, i've done it thru both commericial and SBA loan, if you have all the required paperwork for the business, such as PnL statement, tax return, gallons sheet, for last 3 yrs, and you have a good credit history of atleat +- 650, you will get the SBA loan. beside the closing cost of 1%, you will have to pay approximatery, around another 30k for the govt, coz of the warranty.

Pre-Payment:- if you are a business man, and you think like a business man, the last thing you want to do is pay early.

lets say your bussiness is 1M.
put 10% down ( if u get that ) 100
you are financing- 900K
your interest rate- Prime (8%) + lets say 2 % interst ( now ofcourse u put more downpayent lets say 25% = 250 k, you could negotiate for lesser IR)
your paymetn will be approx 8000 - 9000 = 108000k a yr.

now if you had, 100k extra, would you pay the loan off, or would you purchase another store, worth same 1M , by putting 100k down, and increase your cash flow.

you do the math, what makes more sense.

the biggest thing about mortgage is leverage, you can control a large asset will little of your own money.

chase asked me for 35% down
city asked me for 30 % down

why, because of environmental issues, even when i was trying to purschase it with land ( that too in 200k less than the appraised price)

and i will guarentee u , if you have all the paperwork from your business ( which you would want to have it anways ) you have a good CS, and personal equity, you will end up paying lesser interste with SBA loan.

Try any other commercial loan, and u'll find out, most wont even touch your gas station, they will ask for atleast 25 % down.


dunkin donuts , lets not even get to that, if you buy a store, doing 1M in sales, you're asking price will be 650k. they go by cents per dollar.

and also please keep in mind , how long they have to before they have to remodel.

how do i know, like one of the user here in sajha says, what do you know, i've only manged 9 DD stores for 5 yrs, and i've done gas station dealing for 3 stores, and i am doing it for another 3 stores now.


goodnight, i am off to bed.

Go for IT..IT is booming..Its Technology age..But it depends on the location you choose as well...

mansion,
its not about increasing cash flow always. its about the options.

u just mentioned that u r paying $30k for the warranty plus admit the prepayment.
it all depends on individual choice and their condition. if you are already bound then u r forced to make a decision.

and to top off your list we have may b similar experience.. managing dd's and owning stores.. but I LIKE HAVING MY OPTIONS OPEN. and restriction is not a term of condition when i DO MY BUSINESS.

====================================================
as always
what do i know (O:

thapa ji, first of all i am not trying to compete with you, and i hope you really become much successfull in life than me, or anyone in states.

all i was doing was provide info to goman from my own experience. so please dont give me your attitude, i have enough of my own.

"........u just mentioned that u r paying $30k for the warranty plus admit the prepayment.
it all depends on individual choice and their condition. if you are already bound then u r forced to make a decision......."

let me ask you a question, or rather i should say, here is what i did, what would you do.

if a bank is asking me 30% down on a 1M business thats 300K down payment.

with SBA, U can get it with 10% + approximatery 35K(govt fees ) TOTAL COST 135k

freed up money- 165K

and yes for someppl it might sound a stupid thing or a bad option, but pay 35 K,in govt fees ( and no thats has nothing to do anything with pre payment) and with that 165 k in freed cash, you go and purchase another business.

now is it better to pay 35% = 350k to a bank for 1 loan, or pay 38k more to govt, and you can have 2 property worth 1 mil each, with still the same 350K.....yes, i might have made a mistake or chose the wrong option, but well thats the dearest mistake i am done.

once again, i am just sharing my experience with small business and loans, hope this helps the person who started the thread.

penny saved is penny earned (O:

=======================================================
as always
what do i know (O:

First question that comes to my mind is do you have any experience working in a 'service' industry? Moreover, since you're contemplating ventures in completely separate sectors have you come across an opportunity in either one that we don't know about?

If your answer is 'yes' to both of them then I'd say you've probably got something going. Otherwise, I'd say stop and think before you make any more moves.

Even if you're not a professional white collar worker you may just be better off (and happier) then owning a small business (there's a lot of headache especially the first couple of years as you strive to break-even).


Note:
Many years ago (perhaps, even prevalent now) immigrants and/or minorities started a small service/retail business (restaurant, motels, gas stations) to survive either because they couldn't find work or weren't educated enough, etc. I think this norm is long gone; however, you will have to pardon me if you still fall into this category (absolutely no pun intended), and you might as well give it a go (with some assistance I hope) even if your answer was no to my questions above.

whatas the other kind of business in low costs of investment?

I don't know much about Risks and ROI on Gas station/Motel/Restaurant business but I know for sure that software industry has very high ROI compared to Real State or Gas Station business. As Mansion already pointed out, you should be ready for 10%-35% down payment for buying Gas Station even if a bank is willing to lend you rest of the money.

But with IT Consulting (it is a huge term indeed!!!), you will find lots of angel investors who are willing to put their money on brilliant ideas. If I were to start an IT business, it would be contract based programming or a project based software development. Find a niche market whether it is a software for Voice Recognition , GPS navigation, Data Security or Embedded Systems. I would suggest you to start a business with no more than $50k from your pocket, bring in angel investors with experience and business contacts in the field, and sell your company to your competitor within 5-8 years.

And don't forget to throw a party to all Sajha-landers!!!

Mansion: Thanks for the SBA loan info. Did not know SBA wants $35k govt. fee. Why this fee is so high? $35 k fee is standard for any amount of loan or that varies depending upon the loan amount?

Javabeans: you said: "Many years ago (perhaps, even prevalent now) immigrants and/or minorities started a small service/retail business (restaurant, motels, gas stations) to survive either because they couldn't find work or weren't educated enough, etc. I think this norm is long gone;" ..

That tradition still continues! In fact i know several Nepalese/Indians who went into business (Gas Station/Motel/ Restaurant) because they could do nothing else! Not educated enough to get decent job in this country! Guess what? Those guys are doing much better (some are millionaires!) these days than most of those who have hi-tech degree with "decent jobs" in industry!

PS: I even one couple, both illegals, running multiple gas stations offering javabeans coffee and now they live in big mansion! Interesting! :-)

madhesi,

There are differences in your way of thinking in owning a business than mine; I suppose a caveat is called for.

Most successful entrepreneurs (or if you are a fan of Micheal Porter) will tell you that there's a far greater opportunity to be had if attributes like uniqueness, differentiation, methodology, low cost, etc are defined by the product you sell. I am sure you've heard of the phrase 'thinking out of the box'. This is called innovation; the rewards are much greater and not everyone can do this.

Unlike the entrepreneur above if you buy into an existing business or start one that has abundance of competitors you are essentially reinventing the wheel. You can be successful but rewards aren't great. Anyone can do this if one has enough capital.

It was nearly imposssible (for many reasons) a couple of decades or more ago for immigrants and minorities to start an innovative enterprise, thus resorting to proprietorship of small businesses as explained in my previous post. I am of the opinion that albeit this might still exist there are far more greater opportunities if one's an innovative thinker, has some experiences in the similar industry and knows his network well, and can hit the ground running.

And I don't bode well with money being only the reward; there are others.

JavaBeans:

I was merely responding to your comment on your post that the tradition of owning businesses like gas stations/motels by immigrants/minorities are probably long gone. It is not. Those people still own and operate those businesses. They are doing excellent!

I do not own those business. I wish I did! Never had time to think "out of the box" or apply Micheal Porter Theory on management!

I wish you good luck. You appear to be intelliget person trying hard to do something new! Just remember - reward may be high for innovations, but not completely out of risk. Steven Jobs "NEXT" (eveybody thought it was next Apple!) disappeared, Spyglass/Netscape (first internet browsers) is virtally gone, WebVan (first internet based grocery store) vanished, even AT&T (the first long distance telephone company) and PanAm (first trans-atlantic airlines) hit the dust! It seems everyone is applying Micheal Porter Theory trying to cut each other's throat.