It is worth repeating: The most common mistake — and the most costly one — is not selecting the right business initially. This is the time for soul-searching for operating entrepreneurs.
IF YOU HAVE NOT YET DECIDED ON A BUSINESS, DO THIS:
- On the top of a blank sheet of paper, write an activity you like to perform (make this the heading). Do a separate page for each activity or interest you have.
- On those same sheets list as many businesses you can think of that are related to that activity.
- On the same sheets, list all the products or services you can think of that are related to that activity. Use your imagination and think of every possible product or service you could perform.
- Make a list of businesses that do better in bad times (one may be appropriate for you). Some examples might be pawn shops, auto repairs, and fabric stores.
Let’s assume you end up with three potential business ideas: towing service, used car sales, and auto repairs. You can now make a comparative evaluation using the following checklist (or better still your own checklist) with a 1-10 scoring system. This kind of analysis can help you gain objectivity in selecting your business.
How to Evaluate the Business
Here are some questions to help clarify your thoughts:
- Is it something I will enjoy doing? As Harvey McKay has said, “Find something you love to do and you’ll never have to work a day in your life.”
- Also, if you’re doing something you love, you’re much more likely to stick with it through thick and thin times.
- My favorite activities are __________________________
- I like to serve people by ________________________________
- Will it serve an expanding need for which there is no close substitute?
- Can I be so good at a specialized, targeted need that customers will think there is no close substitute? For example, in California, nobody comes close to See’s Candies.
- Can I handle the capital requirements? In Session 11 Accounting and Cash Flow, you will learn a simple cash flow control method to forecast your future cash needs.
- Can I learn the business by working for someone else first? Our favorite example: if you’re planning to open a convenience store, for heaven’s sake go to work for a national chain first!
- One option for going into business is buying a business or a franchise. Valuable insights in evaluating both possibilities are included in our Session 9 Buying a Business or Franchise.
- An entire session in our course Business Expansion is devoted to buying businesses. In many cases, buying a business is less risky than starting from scratch.
- Could I operate as a hollow corporation, without a factory and with a minimum number of employees? For example, if you have in mind marketing a line of furniture, you might consider outsourcing to a manufacturing vendor in China. Cost savings is often the prime objective, but you also free up your time and capital. The major risk is the performance of the vendor and your success in developing good relationships that provide mutual benefits.
- Is this a product or service that I can test first? Your concept of a successful product or service may not be in harmony with the reality of the marketplace. On a small scale, prove it out first. As Wolfgang Puck states: “I learned more from the one restaurant that didn’t work than from all the ones that were successes.”
- Should I consider a partner who has complementary skills or who could help finance the business?
Use a “For” and “Against” List to Evaluate your Business
Make a “for” and “against” list regarding characteristics of the business. On a blank piece of paper, draw a vertical line down the middle of the page and list on one side all the “fors” and on the other all the “againsts.” Sometimes this will help clarify your thinking. We have provided a Template to Evaluate a Business for you to use.
Write down the names of at least five successful businesses in your chosen field. Analyze what these five businesses have in common and make a list of reasons for their success.
Talk to several people in your intended business. Don’t be afraid of the negative aspects of your intended business. Instead, seek out the pitfalls of your new business ideas — better now than after you open your doors. Take notes if possible. Write down the information as soon as you can.
Analyze the competition that are not doing well and write down the reasons.
Get Completely Qualified
Before you proceed further in your business, get completely qualified:The best way to become qualified is to go to work for someone in the same business.
- Attend all classes you can on the skills you need: for example, accounting, computing and selling.
- Read all the “How To” books you can.
- Don’t be afraid to ask questions or seek help from the most successful people in your intended business.