Student Question:
Master, I ended my children’s clothing business journey on April 29th of this year. Throughout the process, I repeatedly maxed out credit cards to keep funding the operation. I started with a small street-side shop, then expanded to a large branded store — it looked impressive from the outside. Looking back at the past four years, total revenue was 1.53 million yuan with a profit of 500,000 yuan. For the most part, I was overextending my husband’s credit cards. Now the business has failed. The debt has collapsed, and our marriage is under tremendous strain. Every day I worked hard — taking photos, planning promotions, building an online presence, spending endless hours in the store. As a result, my child complains I never paid attention to her, and now with the business failing, I’m heartbroken. We’re 600,000 yuan in debt — I estimate interest alone accounts for nearly half. If I had noticed earlier that profits couldn’t cover expenses, I really should have cut my losses sooner. I’d like to ask Master: in a business venture, how do you choose the right project? How can I avoid this kind of problem from happening again?
Master Chi’s Response:
Among those who venture into business, some simply don’t understand the industry or project they’ve chosen well enough. They enter with the fearlessness of a newborn calf, hoping that luck and other uncontrollable factors will somehow deliver high returns.
Entrepreneurship begins at the level of mindset.
I. Starting a business is not gambling.
Many people hold this mistaken belief — treating a business investment like a casino. In reality, when you put money into a venture and carry out production and operations, you are earning the profits that the project generates. And through that process, real value is created and grows.
II. Protect the safety of your principal.
In practice, many people are drawn to high-reward, high-risk projects. But one of the most important principles of entrepreneurship is this: protecting your principal comes first — especially when you’re entering an industry or project you don’t fully understand. Control the amount of capital you put in.
For example, if you currently have 1 million yuan, the recommendation is to invest around 300,000. If you overcommit, once things start to collapse, it becomes very difficult to get out.
Beyond that, there are three standards for choosing a project:
1. A high degree of control.
In the actual course of running a business, you must have real, practical control. The product or asset you’ve invested in must remain within your control — you decide when to sell, and you can sell when you choose.
2. Liquidity.
After making an investment, when you want to exit, you must be able to exit. You can’t afford to be stuck holding something you can’t sell — that will strangle your cash flow. Consider what many people have witnessed recently: those who bought property during the hottest years of the real estate market, often with limited liquid funds and sometimes with borrowed down payments, have found that with income dropping sharply over the past two years, selling or transferring the property quickly has become nearly impossible. They bought at peak prices.
3. Stability.
The fundamental goal of starting a business is to make money. Returns are naturally a major concern — but you can’t only look at whether they’re high enough, because returns and risk almost always move together.
Aside from those chasing quick money, most people should be looking for projects that provide a stable income foundation first, then maximize earnings on top of that. So study the project’s stability — specifically, whether it can exist over the long term without being easily disrupted by external forces into major swings.