Are you feeling overwhelmed by the thought of choosing a business idea?
Perhaps you‘ve got several, but doubt creeps in like an uninvited guest whispering, “What if the one I choose is a colossal failure?
And it’s a fair question; after all, your future, to some extent, relies on you getting this right.
The good news is that most successful entrepreneurs have been where you are.
But all knew how to choose an accessible, viable, and profitable business.
And you can too.
All you need are practical insights, proven strategies, and actionable steps to help you choose a business idea you`ll and earn money from.
And that`s what this post will tell you.
How to decide what business to start begins with you
In the beginning, there was you.
What happens next depends on you.
So, you are where your search for a business idea begins.
Because if your idea doesn’t suit you and your goals, you could waste the most precious thing you’ve got: time!
Together we`ll ensure that doesn`t happen, and it begins with:
Assess yourself and get realistic
Assessing yourself means being honest about your capabilities and likes before choosing a business idea.
We’re talking about your:
- Skills
- Experience
- Interests
- Goals
And you’ve got to be honest because your business depends on you.
For example, someone dreaming of starting a food truck business who can’t boil an egg and gets car sick might need to reassess!
When you have an idea in mind, consider all 4 points to ensure your idea’s obtainable, interesting enough to keep your fire burning, and provide the opportunities you need to reach your goals.
Time and resources, do you have them?
Here’s where you assess the time and resources you can give your new business and decide whether it’s worth the sacrifice.
For example, let’s say you have a full-time job, kids, and want to start a side hustle. That’ll mean working evenings and weekends. Is that how you want to spend your free time?
And even if you have expendable, do you have the resources?
Resource needs vary depending on the business idea you choose. A service business might need office space, a work vehicle, and equipment. While an online entrepreneur, just a laptop and Wi-Fi.
Once you know your available time and resources, you can design your lifestyle.
What business lifestyle would you like to create?
Your new business will dictate your lifestyle, so you must choose carefully to ensure it suits who you are.
Take me, for example. I was working construction, had my kid, and wanted the freedom to work from home and live in more family-friendly environments. So, I became a writer.
The lifestyle is perfect for me. While we`re not financially wealthy, we`re rich in time and live on a remote Italian island where my son Luca enjoys an idyllic childhood.
Now what about you?
- For instance, do you prefer a flexible schedule or a more structured routine?
- Are you a lark or a night owl?
- Do you enjoy working with your clients or prefer to keep things digital
- Perhaps you’d like to work from home, operate locally, or have a scalable business with expansion possibilities into other states.
You get the idea.
The key is ensuring your choice suits you and gives you the lifestyle you want.
Do you need industry skills and experience?
Ideally, it’s best to choose a business idea where you have the skills and experience as it means you can start quickly and you’ll probably make fewer mistakes.
Here’s where you evaluate your skills and experience to identify areas where you have the expertise to compete and find a business idea that aligns with your background.
- But that’s a perfect-world scenario, and few of us have either when starting our first business!
If that’s you, try this instead:
Choose an idea where the skills are obtainable, and you can learn as you earn.
I did when I started my first e-commerce business. I knew nothing about online sales, beginning with drop-shipping and then Amazon, all while studying at work on my lunch break.
It took a year, but I eventually walked off the construction site and into my online career.
Your business idea doesn`t have to be your passion
Let’s be honest.
You know the saying, “Do a job you love, and you’ll never work a day in your life, “right?
Well, it’s baloney. I get the moral, but few can choose a business idea based on passion alone.
And only a tiny percentage of entrepreneurs do, but we all choose an idea that enables us to fulfill our passions.
Like being our own boss, earning more money, choosing our work hours, running a business from home, or living in a safe environment.
Don’t misunderstand me; I salute you if you can choose your business idea on passion alone.
But if location, skills, and resources determine your choice, find “the why” you want to start a business because then you’ll have all the passion you need.
How to research your business idea
Once you have a business idea, you must validate it to ensure you don’t waste your time and money.
Here’s where research helps you choose a profitable business.
Think of this part as an investment in yourself. Because the better you do it, the more you increase your chances of success.
Size matters! Market and demand wise
Confirming your business idea’s market size and demand ensures people want what you’re selling, and the market will sustain you.
Now is when you conduct market research and gather data on your target audience’s needs to see what they’re buying.
And analyze industry reports and run a competitor analysis to gauge the market’s size and demand for what you’re selling.
You’ll only know if your idea is viable when you have this information; here’s how you get it:
- Market research reports: Access industry-specific reports from IBISWorld and Statista to assess your market size, trends, and consumer behavior.
- Research your competitors: Run a Google search using your business idea as your search term to find your major competitors and visit their websites and social media platforms to determine their popularity.
Ensure the market is growing, not declining
To choose a profitable and sustainable business idea, select a market that’s growing in popularity.
How to assess your market’s growth potential:
- Industry association websites: Provide market insights, industry trends, and reports to help you see whether the market is growing or declining.
- Government statistics: Government websites show economic data and statistics, like GDP growth, industry-specific data, and forecasts that tell you about your chosen market’s overall health and potential.
- Google Trends: Use trends.Google.com to see if your chosen market is growing or declining based on keywords relative to your business idea.
Choose a scalable business idea
A scalable business idea allows you to expand and enter new markets without starting a new business.
Why would you want to do this?
The simple answer is a scalable business makes more money for less investment.
For example, say you started a vending machine business selling soda and candy. As your business grows, you could add other products, like health food options, for minimal expense while maximizing your profits.
How to choose a scalable business idea:
- Business model canvas: Business Model Canvas (available as a template in platforms like Canvanizer or Strategyzer) helps you map out key components of your business model and identify potential scalability factors.
- Industry research: Study your successful competitors to analyze their strategies and see what products and services they add to the original business model. Hey, if they work for them, they could work for you too!
Can you compete with your competitors?
You find the answer to this vital question by conducting a competitor analysis to identify your major competitors, their strengths and weaknesses, and their market share.
You need this information for 3 reasons:
- To ensure there’s room for another business in your market.
- Confirm you can compete on your budget.
- And find ways to differentiate from your competitors to engage your target audience.
How to assess your competitiveness:
- Competitor analysis tools: Use tools like SEMrush or Moz to analyze your competitor’s website traffic, keyword rankings, and backlinks to gauge their digital marketing success and find areas where you can gain a competitive edge.
- SWOT analysis: A SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) assesses your business idea’s viability and compares it to your competitors to see where you excel and where you need to improve.
Ensure you can afford the penetration cost
Your next step in validating your business idea is calculating the penetration cost, which is the investment needed to enter and establish a presence in the market.
Now is when you get your calculator out and crunch the numbers.
Include your upfront costs, such as product development, manufacturing, equipment, and distribution expenses. Then add your initial marketing and advertising campaigns.
How to estimate the penetration costs:
- Financial planning software: Online tools like LivePlan and QuickBooks create detailed financial projections to help you estimate costs related to product development, marketing, operations, and other aspects of your business.
- Supplier and vendor quotes: Get quotes from suppliers and vendors to understand the costs of materials, manufacturing, or equipment.
Do you have the budget?
After you, your budget often determines which business idea you’ll choose.
Your budget is the amount of cash you have to invest in your business idea without guaranteeing a return on your investment.
Here’s where you take the market penetration cost and compare it to what you can afford to invest.
It’s a simple equation:
Your budget – penetration costs = How much cash you’ll need to reach your break-even point
Your break-even point is when your business earns more than it’s spending, and you can take a wage.
Sure, it’s only a projection, but it can also tell you if you need a loan.
Speaking of which:
Have you thought about your funding options?
Small business funding is a classic chicken-and-egg scenario.
Start-ups often need funding, but lenders prefer giving loans to businesses with a proven financial track record.
So, what do you do?
Fortunately, you have other options besides banks.
Small Business Administration (SBA):
The SBA helps American entrepreneurs start and grow their businesses by obtaining SBA-backed loans from lending institutions throughout the U.S.
Chosen lenders provide lower interest rates and various repayment schedules for specific needs, like purchasing commercial real estate, equipment, or stoke.
Learn about backed loans on the SBA website and find SBA lenders in your state.
Credit Union:
U.S. credit unions are tax-exempt organizations that operate as not-for-profit cooperatives.
These financial institutions establish partnerships with their clients, who also become credit union members. They serve specific neighborhoods and communities, directing their services toward the needs of those particular areas.
Credit unions also provide favorable interest rates and repayment terms compared to many banks.
State-specific grants and business incentives:
Business assistance programs, like grants and incentives, offer various benefits to start-ups, including tax breaks, cash grants, free land, and job training.
Local governments provide these incentives to encourage business growth and employment in specific locations in their state.
Check out the State Business Incentive Database to see what’s available in your location.
Conclusion
And that, my aspiring entrepreneurial friends, is how to choose a business idea you`ll love and earn money from.
Remember to be true to yourself because your business depends on you.
Choose an idea you can live with every day, enriching you in the most important ways.
Because when you do that, everything else usually falls into place.
I wish you the best of luck.
