Choosing the Right Business

Choosing the Right Business

Level of Competition

Choosing a market with a large number of competitors can be detrimental to your business. A large number of competitors in the market may mean that margins are already low and this may not be sustainable for you as a start-up business. Price competition in most cases can only be pursued by firms which have high economies of scale. You may be better off serving a small target market or a niche market and then expanding.

Profitability

Only profitable businesses can be sustained. If you have a passion for a certain activity and come up with an idea relating to that activity, it is important to judge the business potential of that idea. Questions such as: Is there sufficient demand for your product or service; will you earn a recurring income; and whether economies of scale exist; will need to be considered to determine the viability of turning your idea into a sustainable business.

Does it fit in With Your Goals and Resources?

What kind of business you decide to start will depend on two things: your goals and your resources. What you want to achieve with your business is a decisive factor. If you want financial freedom, it is advisable that you pick a business that has a high possibility of profitability (after conducting a thorough analysis). But some people want to start a business where they want to help people, for that you may need an idea that has the potential to make an impact on people’s lives.
The financial resources you have at your disposal are of importance as well. Some businesses require a large amount of capital to start (e.g. manufacturing) and your ability to enter these markets will be determined by the capital at your disposal. Starting Internet based businesses can sometimes provide you with lower cost entry strategy.

Your Skills, Strengths and Qualifications

Picking the right business will be strongly influenced by the above three factors. Look at the skills you possess. It is important to choose a business in which your skills apply. For example, both the founders of Google were Ph.D. candidates in computer science. Similarly, experience counts. The founder of Wal-Mart worked at retail stores before he started his own retail store. The point here is that if you have the relevant skills and qualifications for a particular business it will show as you will be well suited to the central functions of the business. You will be able to understand the functions much better and therefore make better managerial decisions.

Look at Your Passions – What Do You Enjoy Doing?

This again is something important to look at. If you are passionate about something, or enjoy doing something, it is likely  that your business will succeed. But this is not the only factor for success. It is however important to explore your passions and come to a decision. One way to evaluate this would be to see whether or not you would be willing to spend 40+ hours every week on this project. Try to identify business opportunities that are in line with your passions and hobbies. There are many examples of this in current successful start-ups. Steve Jobs and Steve Wozniak were both extremely passionate about computers. They set up a company in a garage. The result was Apple Inc., whilst many companies don’t grow to be one of the most valuable in the world, what can be taken away from this example is that it can be extremely satisfying and fulfilling to work on something you enjoy doing.