Starting A Small Business: Choosing Your Business
By Amy Fontinelle
One of the most difficult decisions in starting a small business can be what line of work to pursue. You might not be sure what talents you have that will allow you to succeed without an established company's name behind you. Or you might excel in so many areas that you're not sure which one or two to hone in on. Whatever your situation, you should consider the following factors before you settle on a business concept.
Play to Your Strengths and Interests
If you thrive on interaction with others, working alone from your desk as a manuscript editor will make you restless. If you'd rather have the flu than pick up the phone and call a stranger, don't start selling insurance. You're going to be spending a lot of time on your business - probably more than the 40 hours a week you're giving to your current employer. Ideally, you should wake up every morning feeling energetic and passionate about the work that lies ahead of you. At the very least, your small business idea should be something that you're interested in and that plays to your strengths.
The process of figuring out what line of business to go into is not that different from figuring out what you want when you're looking for any other new job. It seems daunting because the possibilities are wide open, but that's also the main attraction of working for yourself. You don't have to limit yourself to what your resume says you're good at. What gets you excited? Don't be afraid to consider every possibility. Even the ones that don't initially seem to have any money-making potential - like dining in restaurants, vacationing in Jamaica, or playing with your dogs - can work if you are motivated enough. There are, after all, plenty of successful food critics, travel writers and pet sitters. (To learn more, see In Small Business, Success Is Spelled With 5 "C"s.)
Is there market demand for the product or service you want to offer? Before you quit your day job, you need to do some research to see if your idea has the potential to succeed. If you want to work independently as a financial planner, see if you can attract clients based on your existing credentials and experience. If you want to offer a product, then you will want to start doing market research, product testing and surveys. It can be hard to find the time to pursue your own business while you're still working for someone else, but it's the most secure way to test your idea without taking a big financial risk. And if you're not motivated enough to find the time for it, maybe you're not really that interested in becoming a small business owner.
How much do you need to earn? We'll talk more about developing a business budget in a later section, but for now it's enough to say that you need to weigh the earning potential of any business you want to start against your monthly expenses. If you have to make a $2,500 mortgage payment every month, sign private school tuition checks and pay off your Lexus, it might be a bad idea to open a brick-and-mortar bookstore unless someone else in your household can comfortably cover all the expenses with their paycheck.
How much do you want to earn? Some of us want to be rich. Others find comfort in getting by on as little as possible. When choosing your line of business, consider what kind of earning potential it offers not just in the first couple of years, but down the road. Does your idea offer possibilities for expansion, growth and career advancement? Do you know what those possibilities are and how you can exploit them? (Learn more in 10 Breakout Ideas For Small Business.)
Do you like to interact with others? Some small business occupations lend themselves to solitude, while others require you to be out in the world, constantly schmoozing and selling yourself to people. If you just want to be left alone, don't open up shop as a publicist. If you feel compelled to call your mom for a chat anytime you're alone for more than 15 minutes, don't start a tax preparation business.
What hours and days do you want to work? If you don't like working from nine to five, you don't have to when you're self-employed. You can choose a line of work that suits whatever hours you prefer. That said, many businesses require that you work according to your clients' schedules. This means arranging your life to fit your customers' needs.
How many hours a week do you want to work? Some small businesses lend themselves to longer hours than others. If you decide to open a restaurant, you might as well make space for a twin bed in your office - if you have any hope of ever sleeping again. A sales-based business that involves large commissions, on the other hand, could leave you with more free time if you're skilled enough.
How much time are you willing to spend away from home? For some people, the ability to stay home all day is a major draw of becoming a small business owner, but not all small businesses are home businesses. Becoming a consultant might require you to attend lots of meetings and travel frequently. Open a boutique and you'll spend most of your waking hours at your store, at least initially. (For more, read Start Your Own Small Business.)
Once you figure out want you want to do for a business, it's time to figure out how you will afford it.
An individual who, rather than working as an employee, runs a ...
Expenses associated with the maintenance and administration of ...
An investor who either provides capital to startup ventures or ...
A UK program that helps smaller, riskier companies to raise capital ...
An expense a business must pay each time it processes a customer’s ...
A freelancer is an individual who earns money on a per-job or ...
The price effect is the impact on the market based on how the consumer is spending money as a result of the income effect. ... Read Full Answer >>
Investing in the income effect consists of investing in areas that are affected when an individual's income increases. The ... Read Full Answer >>
When quantitative easing takes place, the money supply is increased, but quantitative easing does not directly boost the ... Read Full Answer >>
Small businesses can manufacture demand by both looking at the market for their product and service and by looking for ways ... Read Full Answer >>
Most entrepreneurs are risk takers by nature. They sometimes face losing everything they invested into a startup business. ... Read Full Answer >>
Finding affordable financing for a start-up can be a challenge for small business owners. Banks are wary of loaning money ... Read Full Answer >>