Most prospective entrepreneurs I meet already know they want to be self-employed, but they're less sure of exactly what kind of business they want to run. (Sorry, "One that makes a lot of money" or "One where I can set my own schedule" are not specific enough answers.) Most people have a general idea of what business they want to start -- say, a yoga studio or a health care consulting business -- but they don't always know the specifics of what will make it a success (more on how to define "success" below).
The truth is, no business idea is ready to go right out of the gate. Every entrepreneur needs to poke and prod their idea to varying degrees and usually tweak it a little (or a lot) before it's ready to launch. But folks new to the worlds of small business often wonder exactly how to go about this.
Here's the nutshell version of the advice I give to my students and clients. At the most fundamental level, every business has two basic elements that will either help it succeed or drag it into the ground: the business idea itself, and whether the owner(s) are well-suited to run it. If either the idea is flawed or the business isn't a good fit for the folks running the show, failure (or at least some serious stagnation) is probably just a matter of time.
Let's look a little more closely at each of these in reverse order, starting with the "you" part of the equation, then looking at the business idea.
What kind of business is a good fit for you?
Here's the easy advice first: The best business for you is generally one in which you have key skills or experience. The more skills you have--either general business skills like sales or financial management, or skills specific to the business, like software engineering, jewelry making or running a café--the better you'll be able to handle the key tasks and systems involved in running the business without having to rely on others. And experience in an industry will shorten your learning curve, giving you a head start in figuring out how to turn a profit.
But here's some advice you might not hear as much: Business success isn't just a matter of profits. It's also incredibly important that your business supports the life you want to lead. While some Type A overachievers might disagree, my opinion is your life matters. I think this is especially true for entrepreneurs who are putting in the effort and taking the risks inherent in starting their own venture. Why bother to take this all on if not to nudge (or even shove) your life closer towards your ideal vision?
Remember, you are starting the business, and you get to define what success looks like. For some people, success means big profits, but for plenty of others it means freedom and ample personal time. If you neglect to consider the bigger picture of your life and how the business will serve it, who's going to do it for you? That's right: no one. It's up to you.
There's a tradeoff dynamic here that I think is very helpful to understand: Generally speaking, a business that offers short-term freedom and lower financial risk tends to come at the expense of greater long-term freedom and a higher potential for big profits. For example, starting a simple freelance business with no employees typically involves very little start-up money and allows a lot of personal freedom since you don't have to worry about managing an office or staff. The downside, however, is that the business truly can't run without you. If you take time off, the business essentially shuts down. And this will continue to be true unless and until you transition the business to one with staff (either employees or contractors) that are well managed, requiring policies and systems to be implemented.
Contrast this with a business that is started with a higher investment of both capital and time -- say, a retail store with a couple employees. It will be a more intense start-up experience, involving more money and risk, and a much greater time commitment since it will be essential to train employees well and build systems that will help the business run like a well-oiled machine. But the reward is that in a year or two if things go well and you implemented systems successfully, you'll be able to leave the business in the hands of the employees and managers you cultivated during the intense start-up phase. Hello 4-month (or longer) vacation!
The main point here is to include life planning in your business plan. It's crucial to take the time early on to really examine your vision of your ideal lifestyle, and develop your business so that it fits into that vision. If you're aiming to build an international empire and willing to give your business your all for at least a few years, great! But if you're starting a business in order to get more balance, control, and enjoyment from your life, then you'll need to consciously build a business that supports that.
Is your business idea a good one?
To put it very, very mildly, some business ideas are better than others. As a consultant and teacher I have heard some doozies! Some ideas are truly confounding--but the good news is that the problem can always be traced back to issues in defining the market.
You've undoubtedly heard all sorts of advice and guidance about "the market." As in, "Know your market." Or, "Target a profitable market." Or, "Make sure there's a market for your business." But what exactly is "the market"? A lot of folks use the term as shorthand for your customer base--but they're leaving out some important elements.
As I tell my clients and students, your market includes three key components: customers, competition and industry. I actually encourage people to visualize a market like a farmer's market or flea market. To "know that market" means more than knowing who's shopping there, right? You also need to know about the other vendors, and about the general background of the products being sold, like knowing price ranges for collectibles at a flea market or knowing which organic produce sells best at the farmer's market.
So, when developing a business idea, think about these elements:
- What customers will you target? What are their buying habits--for example, do they prefer to shop online or in local retail stores? Are there enough of them and do they spend enough to support your idea?
- What competitors will you face? How do their products or services differ from yours? Are they targeting the same customers as you?
- What's going on in your industry? Are there trends that your competition isn't taking advantage of that you can?
Be brutally honest when evaluating your business along these lines. If you don't believe there are enough customers to support you, there probably aren't. If there's a ton of strong competition, success may be very difficult -- or at least very expensive -- to achieve. If the industry is constantly changing (as with technology industries), you may find it difficult to keep pace.
Bottom line: There's no substitute for evaluating your business idea by solidly assessing these aspects of its market. And besides careful market analysis, be sure to put conscious thought into the life you want to build by starting a business. By addressing both, you'll vastly boost the chances of finding success on your own terms.
The Morning Email helps you start your workday with everything you need to know: breaking news, entertainment and a dash of fun. Learn more