Starting a business will be hard. It can be extremely rewarding, but first it will be hard. The only way you will be able to push through, and make your new business successful through all the hard parts and long hours, is if you are passionate about what you are doing. Follow your dreams and use your knowledge. Your passion and knowledge are the best places to start in choosing your new business.
You have to know your business
Has anyone ever told you that something is “a sure thing”? Chances are, as you consider your entrepreneurial options, someone will try to tell you that opening a particular business is “a sure thing”—don’t listen. Nothing is sure, and you are much better off making choices about your business (and by extension, your income) that are based on your own knowledge and interests—not someone else’s.
In the end, customers will only part with their hard-earned money in your business if you can convince them that they’re going to get their money’s worth by buying from you, and in order to do that, you’ll need to know everything there is to know about what you’re selling.
Follow your resume…
If you already have years of experience in a particular field, starting a business in that field gives you many advantages. You can make good use of your skills and previous training, your network of contacts, and your knowledge of the industry. You may even already know your first customers. And if you need funding to start your new business, it can be much easier to find when your resume backs up your new venture: banks and investors see a proven track record, and a safer bet.
For instance, if you are an experienced executive chef, and have managed a restaurant for years, starting your own restaurant will be easier for you. You will know suppliers, and vendors. You will know how to build menus and order food. You will also know what people like and don’t like when it comes to food. And when you go to the bank, and the loan officer sees your resume, he/she will know you have the experience to back up what is traditionally a very risky business.
If something from your past experience immediately jumps out at you as something you’re interested in turning into a business, talk to people you’ve worked with about what it takes to run that kind of business. Learn all you can about startup costs, overhead, and expenses, and find out how much revenue you can expect to make.
If you have several interests and aren’t sure which would make the best business, consider your strongest skills and your educational background to help you determine which interest you are best-suited to pursue. It is also extremely informative to research the marketplace and determine which types of business are presently needed in your area.
…or study up
If you don’t know much about the business you want to start, but are set on it, be prepared to spend enough time learning about it before you begin so as to avoid making critical mistakes in your business planning.
Keep in mind that giving yourself “enough time” could mean delaying your grand opening, or otherwise stalling your business’s launch date—that is just one of the costs of starting a business you don’t have experience with.
Always test your business idea
Whether you have tons of experience with your chosen business or absolutely none, you should do everything you can to test whether you and your business are a good match. It is much easier and much cheaper to realize that you don’t want to own a particular business while you’re still in the planning stages than it is when you’re already knee-deep in operating it, with vendor contracts and signed leases and loans.
Here’s a step-by-step guide to evaluating whether you and your chosen business are a good fit, courtesy of our friends at Nolo:
- Try it out. Before you start a business of your own, get some experience in the industry or profession that interests you—even if you work for free. Learn everything you can about every aspect of the business. For example, if you want to start a pasta shop, but don’t know ravioli from cannelloni, go out and get a job with a pasta maker. After a few months, you should be an expert in every aspect of pasta prep, from mixing eggs and flour to flattening the dough and slicing it into strips.
- Talk to entrepreneurs in the same field. If you’re not familiar with the business you want to start and you’re unable to find work in the field, talk with others who provide the product or service that interests you. To increase your chances of getting interviews and reliable answers to your questions, it’s best to do this in a different locale from the one in which you plan to locate. Small business owners are often quite willing to share their knowledge once they are sure you will not compete with them.
- Evaluate whether you enjoy the work and excel at it. If not, find a new venture. It’s a lot harder to make a success of a business you don’t like, and it’s unlikely you’ll like something you’re not good at. If you enjoyed the work and determined you were skilled enough to base your own business on it, go on to the next step.
- Judge your ability and desire to handle every aspect of the business. If you don’t want to or can’t pitch in wherever and whenever something needs to be done—whether it involves manufacturing a product, dealing with customers or keeping the books—you should think twice about starting that kind of business.
- Determine whether the business has a solid chance of turning a profit. After working in the field for a few months, you should have a good idea of whether the business is a potential moneymaker. To be sure, you should analyze your market and conduct a break-even analysis, a preliminary financial projection that shows you the amount of revenue you’ll need to bring in to cover your expenses (this amount is called your break-even point). If you’re able to bring in more revenues than your break-even point, you’ll be in the black (that is, you’ll make a profit).
- Evaluate the risk this particular business requires. Even the best-laid plans can sour if you pick an unusually risky business. For instance, the following businesses have higher-than-average failure rates:
- computer stores
- laundries and dry cleaners
- used car dealerships
- gas stations
- trucking firms
- infant clothing stores
- grocery and meat stores
If your business idea is on this list, don’t despair—it doesn’t mean you should automatically abandon it. However, you’ll need to be more critical and careful with the numbers when preparing your business plan.
Starting a business is exciting and terrifying all at the same time. You will have many hard times alongside many good times. The buck will stop with you, and you alone will be responsible for all the good and bad decisions you make. The more you think, prepare, and get ready, the better off you (and your business) will be.
At the end of the day, the businesses that—in my opinion—always do best are the ones owned by someone who lives, breathes, and loves what they do. So I say, find your passion, and then be smart about how you implement it. That means following the advice outlined here, but it also means tracking your business and setting goals as you grow. Hopefully we’ll be able to help you at every step along the way.