Now that you’ve determined the skills and capabilities needed to start a business, you’ll need to determine what business you want to start. You may already have a very good idea and feel like you can skip this step. DON’T! It always helps to test and refine your idea.
Make a List and Check it Twice
Make a list of the businesses you could consider. Rule out ones that require talents and skills you received low scores on in Step 1 and ones in which you have no interest.
After narrowing down your ideas, evaluate your idea against other possibilities. You might try one or more of the following sources for information:
- Telephone yellow pages can indicate what is and is not available in your area.
- Public libraries have a number of business directories, including the Thomas Register.
- Searching the Internet can help you find and refine your idea.
- Entrepreneurial magazines often have articles about new business ideas that have potential.
Ask friends, coworkers, neighbors, and relatives if they have product or service needs that are not currently being met.
One of the common errors in choosing a business is not asking for help. This is an important way to gather information to complete the selection process:
- Talk with people in the same or a similar business. If your business will draw customers from a 25-mile radius, similar businesses in towns 60 miles away generally will not be competing for your customers. These business owners may be flattered and willing to discuss their businesses and share their insights, experience, and advice. The local chamber of commerce or other business association may provide access to business owners that you can talk to.
- Work for someone else for a while. A time-honored way of learning a business is to work in a similar business as an employee. Not only will you be getting on-the-job training, but you’ll be getting a paycheck while avoiding overhead expenses. When scouting out potential “employer-trainers,” look for one that is successful and well run.
- Ask for experts. There are four professionals you should get to know early in your business planning: an attorney, accountant, marketing consultant, and banker. They may identify factors in your plans you hadn’t yet considered.
- Share your thoughts with your family, friends, and associates. They may come up with considerations that may discourage you from one idea, or they may offer real encouragement for pursuing another idea. Having the support and involvement of those close to you can be an added benefit.
Common Entry Strategies
Now that you know what business you want to start, you’ll need to choose how to start it. Some common entry strategies are:
- Start a New Business: This option permits you the most freedom and the satisfaction of knowing you did it all yourself. Some opportunities which might prompt this choice are: a new invention, a spin-off of an existing product or service, turning a hobby into a business, awareness of a customer ready to buy your product, unfulfilled market need, expansion of a part-time activity or simply chance.
- Buy an Existing Business: By buying an existing business you can avoid lead time required to launch the business, understand expected income and expenses, acquire an existing customer base while taking hold of an established image. Most successful acquisitions are accomplished by knowledgeable, adequately financed business people. When acquiring a company, it’s important to understand the numerous tax and financial maneuverings available for acquiring and financially restructuring an existing company.
- Purchase a Franchise: This option allows you to “purchase” a known trademark for delivery of products or services under an established system. You will usually pay a franchise fee, ongoing royalties, and the costs of getting into the franchise. While it can be comforting to have ongoing support services like collective buying, advertising power and market research, not every franchise is a guarantee of success. Many small, less expensive franchises are under-funded, lack a good training program, and fail to provide the necessary support. Many of the large, well-known franchises are too costly for many beginning entrepreneurs. This can be an attractive starting point but be sure to check out the franchise thoroughly.