What Type of Business Should You Start?
You have made the decision that you want to start your own company. Now, it’s time to find your motivation. Personal freedom, more money, or the product or service to fill a niche are great motivators. Once that has been determined, it’s time to figure out what type of business for which you have a passion.
Starting With Something You Know
Writers know the saying: “Write what you know about.” Most authors are great communicators because they write about what they know. This leads to better writing skill. Something very similar happens in businesses. If you have been working in retail sales for 10 years, you understand the retail sales field and know that starting your own shop might be a good choice.
If you start a business that is an extension of your former employment, there are some considerations to review. First, review your employment contract and look for information about non-compete clauses. Your employer does not want you to take away their clients and does not wish for you to use what you have learned (trade secrets) and use them to take business away from them. Second, start to notice how your employer handles other aspects of the company that you might not be responsible for. You’ll need to learn as much as possible to increase your chances of success. Third, listen to your fellow employees and what they say they like and dislike about your employer. Keep these things in mind for future hiring in your company.
Changing Industry Paths
Moving from product sales to a service business, or vice versa, can lead to a lot of learning during a time when your efforts need to be focused elsewhere. I started off in a service business and swore that if I ever started my own company I would sell widgets. I didn’t care what type of product it was, just so long as I didn’t have to deal with the headaches that a service industry brings. What type of business did I start? A service business. Why? Because my market research told me it was a good industry and that it met my personal needs for development.
If you want to change industry paths, plan to spend 6 – 12 months researching and interviewing people in that new industry. You’ll need to find out all you can. Also consider taking a low level job in that industry to learn the ins and outs. Do your research on the competition. Consider a service like OneSource Business Browser for doing market research. This resource will give you the information of the larger companies in the US and from around the world. Selling to these companies might also be a quick ticket to success.
Franchises: Don’t Re-invent the Wheel
Considering buying a franchise? This is often a great way to go if you have a good amount of capital going in but not a lot of experience in business or in the industry you are considering. Franchises provide the product, marketing, and structure for success. They have done it in other locations, perfected the process, and sold all of that to you. You’ll need between $10,000 – $500,000 in assets (some liquid, some debt) to own your own franchise. Check out this great resource to review and contact franchise corporations.
Hobby Turned Business
It often seems like a good idea to start a business with a hobby that you love. Crafts, candles, baskets, baking and sewing often fall into this category. Why not start this sort of business? Consider the profit margins. Add up the cost of raw materials, your time, storage costs, advertising costs, shipping costs and business expenses. Can you charge enough to have a 50% profit margin? Most products have that amount or more. Next, consider the market saturation with similar products. How many stores carry a product like yours? What will make people buy from you and not from the stores they already frequent? Lastly, when you’ve spent the last two years staring at your product from morning to late night 6 – 7 days a week through good times and bad, will you wish you’d never even started your hobby in the first place?
A good book to read on this subject is The E-Myth Revisited by Michael E. Gerber . This is an excellent book about a lady who starts her own retail pie business. She starts the business because she loves to make pies and ends up hating them terribly when the business does not work out the way she planned. The lessons learned through this book still come back to me when I need them.