I know personally one of the three founders at Afa Tech. This pre-IPO company currently has a OTC market cap value of about $120 million. Assuming a venture capitalist slice of 60%, 36% for founders, and 4% for employees, each founder would have a net worth of 14.4 million (before IPO). The company already has the second biggest market share (right after DiBoom) in DVB-T European digital TV market (link in Chinese), and they had the product on the market for only about two years.

The founders of this company are one of the best dream team in an IC start-up. All three of them have different expertise, covering the entire scope of analog circuitry, system design and verification, digital circuitry, and software among all three. Such a team is really hard to come by in such a small group of people. I have never doubted their future success.

My friend invited me to join their company several years ago. Assuming that I could get a stake of 0.4% in the early stage, that will be $480K at this time. I expect this small company to be on a high-growth curve, so a doubling of their stock price is probably given. Assuming a double in price, $480K can easily become a million dollar. But I guess I’m quite spoiled by the working culture in the USA which is quite humane. My future prospect at my current company is in no comparison to joining this start-up. But I certainly don’t need to work until 11pm or later everyday for some 4 or 5 years straight.

Am I upset with the lost chance of earning a potential million dollar at this start-up? I guess not so much. Life is about making choices. Family time is important to me. Enough money to pay for kids’ college and sufficient buffering into retirement are my personal financial goals. Although I have never done a preliminary calculation, those goals most likely are within my reach (as long as I have a job that continues to pay my current expenses before the actual retirement). In fact, my friend probably has lost his chance of being able to have family & children at an earlier age. How about having a kid in college when you’re 60? You really cannot have it all.

If you are single, willing to constantly work long hours, and is a native or speaks the particular foreign language, I think it’s not too late to join this company. You will not reach a million in the first year, but in ten years, I think that is probably very likely.

P.S. I was not in the founders’ circle. If I had the chance to become a founder, I probably would seriously consider the venture.

Unlimited number of fools? That’s not even political correct. This is indeed the ugly part of the business, unlike Part I which is all about delivering good values and services to customers. Unfortunately, it is somewhat true.

My father taught me about this to warn me about the existence of unscrupulous business. In his words, “you (the business) will not run out of fools for you to cheat or take advantage of. And do not become one of the fools.” One must wonder how such business continues to exist with its unscrupulous practices. But as my Dad has observed how some people do buisness, literally, they just don’t run out of fools.

One of the best examples is in mortgage business. Between CountryWide and Mortgage Capital, there is about $5000 difference in the amount that they charge customers (for fixed loan terms). However, CountryWide certainly is not running out of customers. What is the lesson here?

For businessman, it means that you do NOT need to be the most competitive in price in order to compete (although the best businessman should always try to deliver the best values to his/her customers according to my Dad’s other teaching). The market price of a certain product or service in the business world is really a myth. Rather, there is a price range for all kinds of transactions and all kinds of customers. At the different price points within the price range, the demand/supply curve has a delicate balance for every supplier and customer. The amount of potential customers may be determined by the price, location, reputation of the business, etc. Therefore, you actually do NOT need to be the most competitive in price.

Certainly, as soon as you go away from the lowest possible price point, you are essentially putting customer’s money into your pocket. And in the mortgage business, or any business where the suppliers attempt to confound the customers in the true price that they are charging either by direct lies or confusing charges (just look at the number of entries in your escrow closing statement), the room of additional profits tend to be quite big. Now, the only way for you not to become a big fool is to understand how they charge their service and understand each item that they charge you.

Another example of such business is jewelry stores, selling diamonds using 5 Cs: carat, color, clarity, cut, and certificate to give you the maximum amount of confusion. They certainly will talk about your budget for your diamond, and then move your price point on their 5 Cs multi-dimensional product terrain to give them maximum amount of gross profits, while apparently providing your a “value” buy.

The bottom line is when you find a business that is trying its best effort not to give you any possibility of doing apple-to-apple comparison, you should know what it is upto. If a business makes its charges and pricing exceedingly clear, you can be certain that it is trying to give you a quick apple-to-apple comparison because the business is very confident in its ability to provide you the best value.

My advices for the customers: be a smart shopper, and understand the product/service. Do not listen to the salespeople, but instead do your homework on a fair comparison.

My advices for the business owners: although you do not need to charge at the lowest price point, know that your customers are your lifeblood, not suckers. Treating them good in the long term always pay off. Business is based upon mutual trust.

Welcome to Carnival of Business #21 at 1stMillionAt33.com. So many quality posts with interesting ideas. Thanks to all those who participated, and thanks to Tim at MyMoneyForest to give me this opportunity to host.

If you’re on my site for the first time, I welcome you to take a look at my SiteMap or look through my categories and popular posts at the left column.

Onto the Business Carnival, posts are listed in the order of submission. I have highlighted the posts that I like by RED color. Please do note that what I like better may not appeal to you. Because this carnival has one of the above average submissions, I would advise you to read anything that interest you (post #3, #5, #7, #11, #13 are good too, but I stopped short of highlighting them by RED).

The best post that I like is by Christine Kane (post #6). Although you won’t get resource or information directly related to Business, you can find wisdom which is more rare. See my commentary here.

1. By Advertising Age: Life Takes Visa. A commentary on how buying on credit has changed our life.
2. By RadicalHop.com: 21 secrets to becoming a millionaire. I went thru the 21 secrets, and I gave myself 17 full-point, 3 half-point, and 1 zero-point, total of 18.5 points out of 21 secrets. A fairly good list if you’re interested.
3. By Empowering People Through Information:
   Google Reader: For Those Ahead of the Curve. A brief review on Google Reader, and comparison with other traditional means of gleaning information.
4. By RadicalHop.com: Building a successful business: 8 qualities of an expert. I concur with all 8 points.
5. By Spare Change: Social Marketing vs. “Social Marketing” Smackdown. Comparing the contemporary usage and purposes of “social marketing” vs the old ways.
6. By Christine Kane: Are You A Quitter?. This is one of the rare posts that you can come across.. I highly recommend this to any over-achievers or any people who are facing a difficult quitting decision. You will definitely find some pearl of wisdom in this article. Please see my post for further commentary. In summary, letting it go does not mean that you are being a quitter.
7. By RadicalHop.com: 3 personalities critical to explosive business. Three kinds of people you need help from in order to get beyond just the early adopters.
8. By Bryan C. Fleming .com: Why Cash is King. Without cash, you cannot take advantage of an opportunity when it comes.
9. By Passion, People and Principles: The Psychology of Waiting Lines. Very good summary and discussion how waiting line experience can be improved or exasperated.
10. By Instigator Blog: The Secret to Successfully Delegating Work in 6 Steps. Delegating work is very important for a business to grow. Excellent article on how you delegate successfully.
11. By Free the Drones: Promoting Your Boss to Advance Your Career?. Good counter arguments on why it may not be always a good idea. Certainly, it only works to some extent and only on some bosses.
12. By help with everything: Compound interest. How compounding works.
13. By Innovation Zen: Strategy and Resource Allocation. Using example from Intel to illustrate the importance of resource allocation and how one can go about doing it.
14. By Nubricks.com: Rightmove and its web 2.0 competition. An observation on how Rightmove (a UK real estate website) may be falling behind the competition.
15. By Stock Market Beat: Employment Clearly Slowing. A look at the recent release of employment figures.
16. By the Pine Needle Lawn: Real Estate Reality TV – Good For Ratings, Bad For Industry. Commentary on how the TV show of Million Dollar Listing will affect real estate industry.
17. By Life PBS: 10 questions to ask before you join a new job. Excellent post on the things that you should consider for your new job.
18. By BloodhoundBlog: Securing the home-buyer’s place at the table: How two simple reforms can finally result in a full, uncompromised form of buyer representation. This post is a bit lengthy and not as focused, but good nevertheless. It talks about potential reforms that will finally, fully empower buyers as supervisory employers of real estate agents.
    It really angers me that the sellers and the agents just don’t know who comes up with the loan or cash to pay their bills. Real estate is probably the only industry that doesn’t respect fully the person who pays.
19. By Jack Yoest at Yoest.org: Getting business done on 9/11/01. A personal recount of closing a deal right before 9/11.
20. By The Real Estate Tomato: New To Business Blogs? The 6 Steps To Getting Started. A guide to what things should be done or considered when starting a blog.
21. By Trizoko: How to Complete Big-Ass Projects. A few good tips on how to do a big project.
22. By Bizinformer: Why I Don’t Like Discounts. Discounts are admission of a bogus listing price.

That’s all folks. Thanks to all those that participated. Thoroughly enjoyed this carnival. Definitely one of the better carnivals that I’ve ever seen. Next week, the Carnival of Business will be hosted at FRAUDfiles Fraud Blog.

My father is only a high school graduate. But all of his three children have at least a master’s degree. He may not know anything about calculus or quantum physics. However as a successful businessman, he has taught me a few things about how to be a good businessman. He said to me: “A good business is a business in which you let people take out of their money to buy your stuff, and still smile and shake your hands.”

My Dad’s teaching may sound very plain, but the more I contemplate over it, the more I glean from his insightful words. Every business involves certain exchanges of money and goods or services. But to gain any repeat business, you must make your customers happy. A good business is always win-win. You must provide something of real value to the customers, and in return, you also profit from it. If you are simply trying to cheat money out of your customers, your business cannot last.

Although I have not yet started any business of my own, everytime when I look into any business opportunities, I always ask myself these questions:

• Can I provide any values to my customers?
• What additional values can I deliver to my customers, that my competitors cannot?

If I can answer the above two questions satisfactorily, then I know very well that I can make it into a good business according to my Dad’s criterion.

Some people including myself may think that a businessman makes a boatload of dirty money by telling lies and trying to trick money out of your pocket. I never like to lie to people, and so I never wanted to become a businessman. I just cannot tell my customers: “oh! you’re getting a great deal,” while I’m making lots of profits from it.

But throughout the years of possibly wanting to start a business of my own, I finally realized that being a good businessman is so far from making money by telling lies. Being a good businessman is about delivering values to customers at a lower cost relative to fierce competitors. Ultimately, I grew up from a teenager who couldn’t appreciate my father’s profession to an adult who understands how difficult it is to “let people take out of their money to buy your stuff, and still smile and shake your hands.”

Since then, I have applied the same principle to my dealings with others. To have a lasting partnership or relationship, one must treat the other party like customers, and deliver values in exchange of what you want. I like to be treated fairly, and likewise, everyone else wants to be treated fairly too.

I will never give the short end of a stick to my partners, and always try to be as fair as possible. To do otherwise is called exploitation of your employees or your partners. You can try to put any word spin on it, but facts are facts. A successful partnership is a win-win situation. A lasting relationship is mutually beneficial to each other.

To give values to others, whether it’s tangible or intangible, you will be rewarded in the long term. Such is the basic principle of a good business.

Do you know what is the top franchise in the US? According to Entrepreneur’s Franchise 500 data, in 2006, it’s Subway. What’s amazing about Subway franchise is that in 2005, 2004, 2003, 2002, Subway ranked #1 for consecutive 5 years. The #2 this year is Quiznos Sub which was also in the top ten list from 2002 to 2005. And the #3 this year is Curves, but it was in the top 3 list from 2002 to 2005.

Here is the list combined from 2006 to 2003, only 15 franchises in total:

1. Subway
2. Quiznos Sub
3. Curves
4. The UPS Store
5. Jackson Hewitt Tax Service
6. Dunkin’ Donuts
7. Jani-King (commercial cleaning)
8. RE/MAX
9. 7-Eleven
10. Liberty Tax Service
11. Sonic Drive In Restaurants (#6 in 2005)
12. McDonald’s (#7 in 2004)
13. Baskin-Robbins (#10 in 2004)
14. Taco Bell (#6 in 2003)
15. Super 8 Motels (#8 in 2003)

You can click on the franchise to go to the franchise page on their website. Most of these franchises are food (7 in total). The rest of them are mostly personal or business services. I personally looked into Subway and Quiznos Sub franchise. The start-up cost is about $150K to $250K, and the potential income is about $70K to $100K for the owner with depreciation added back. But if you have a well-managed restaurant at very good location, you can bring in $500K a year without problems. Two friends of my friends have brought in profits close to 0.5 million a year. I never knew or could believe it, until I heard it myself. The upside for franchise can be huge (although only a small percentage makes to that level). And the downside is more limited. In the worst case, you can sell your franchise at a discount and recover some of your initial franchise costs.

Here are the start-up costs for all the fastest growing franchises in 2006. Since the start-up cost is the biggest entry barrier, you can look over it and decide on what franchises you can potentially consider. By the way, you can borrow a loan for your start-up cost too. But obviously, you will need to put in a significant stake to the start-up cost in order to get such loan to come through.