ry, money to loan -- too high, and it doesn't move out the inventory, its costs (above) exceed the profits on the loans it makes. Remember that the next time you go into a bank to make a loan. The bank needs you!

Every business, at its heart, ha

number six in a series taken from:

How to Evaluate and Profit from a Business Opportunity - The Entrepreneur's Guide

It's important that you understand how the business makes money. You must take that business down to its essence. For example banks make money by loaning it out at higher rates than it pays to get the money. What it pays to investors as interest, to its shareholders as dividends, and what it pays in interest to the other institutions it borrows from are its costs. It has to get the money (Its inventory) it has and has access to out into our hands as loans at rates that produce more income than its costs.

It really is no different than a car dealer. The dealer has inventory -- cars, which it doesn't own until it sells, on which it pays interest (usually to the manufacturer.) If it prices its cars too high and doesn't sell them quickly the interest on the inventory exceeds the profits on the sales and it winds up in trouble.

If the bank prices its inventory, money to loan -- too high, and it doesn't move out the inventory, its costs (above) exceed the profits on the loans it makes. Remember that the next time you go into a bank to make a loan. The bank needs you!

Every business, at its heart, has

ple banks make money by loaning it out at higher rates than it pays to get the money. What it pays to investors as interest, to its shareholders as dividends, and what it pays in interest to the other institutions it borrows from are its costs. It has to get the money (Its inventory) it has and has access to out into our hands as loans at rates that produce more income than its costs.

It really is no different than a car dealer. The dealer has inventory -- cars, which it doesn't own until it sells, on which it pays interest (usually to the manufacturer.) If it prices its cars too high and doesn't sell them quickly the interest on the inventory exceeds the profits on the sales and it winds up in trouble.

If the bank prices its inventory, money to loan -- too high, and it doesn't move out the inventory, its costs (above) exceed the profits on the loans it makes. Remember that the next time you go into a bank to make a loan. The bank needs you!

Every business, at its heart, ha

to get the money (Its inventory) it has and has access to out into our hands as loans at rates that produce more income than its costs.

It really is no different than a car dealer. The dealer has inventory -- cars, which it doesn't own until it sells, on which it pays interest (usually to the manufacturer.) If it prices its cars too high and doesn't sell them quickly the interest on the inventory exceeds the profits on the sales and it winds up in trouble.

If the bank prices its inventory, money to loan -- too high, and it doesn't move out the inventory, its costs (above) exceed the profits on the loans it makes. Remember that the next time you go into a bank to make a loan. The bank needs you!

Every business, at its heart, ha

ells, on which it pays interest (usually to the manufacturer.) If it prices its cars too high and doesn't sell them quickly the interest on the inventory exceeds the profits on the sales and it winds up in trouble.

If the bank prices its inventory, money to loan -- too high, and it doesn't move out the inventory, its costs (above) exceed the profits on the loans it makes. Remember that the next time you go into a bank to make a loan. The bank needs you!

Every business, at its heart, ha

ry, money to loan -- too high, and it doesn't move out the inventory, its costs (above) exceed the profits on the loans it makes. Remember that the next time you go into a bank to make a loan. The bank needs you!

Every business, at its heart, has a simple plan. Take McDonalds -- many think it is in the business of selling franchises. It isn’t, in fact I don't think you can buy one anymore. Some think that it makes its money by getting a percentage of everything the store sells. It does, but that's not its real business. McDonalds' real business is real estate! That's right it owns all those properties and collects rent and as they go up in value, it will rent them to somebody else who will pay even more rent.

When I was in the business of selling manufactured homes, I made it a point to find out how my competitors made money. Some were interested in high volume and would take small profits or even losses if they thought it would move them into a higher discount bracket. Others were interested in maximizing the profit on each transaction. When my salespeople brought me a deal to consider I wanted to know who else the customer was talking to. If it was a retailer who was focused on volume, one who would take the deal at any pric