So you decided you want to be an entrepreneur. There are high failure rates, the nonstop work, and if you’re one of the lucky few whose business takes off, you get to shoulder the responsibility of other people’s livelihood depending on you. Of course, there is the flexibility to work when you choose, the perk of being your own boss, and the rewarding feeling of building something meaningful.
You’ve weighed the pros and the cons and are convinced that being an entrepreneur is the way to go. But now you’re probably wondering, what type of business do I start?
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Here are the four questions I would suggest you consider before deciding what type of business you want to start:
1. Why are you deciding to start the business?
This is the most important question to answer before you do anything else. Are you looking for a more flexible lifestyle? Is your hope to generate a consistent flow of cash and not report to anyone? Is there a social impact or problem you’re trying to solve? The responses you come up with to these questions will help you narrow down the type of business you should start.
For example, if you want to maximize your flexibility and ability to maintain a social life, then you probably want to avoid the entertainment industry where people work nights and weekends. If you want a simple business that creates consistent cash flow, then you should probably start researching franchises. And if you’re looking to be a millionaire in the next five to 10 years, you probably need to invent the future and be comfortable with the thought of spending the majority of your waking hours for the next decade attempting to accomplish that desire.
2. What capital do you have access to?
Once you understand why you’re starting your business, you need to have a realistic evaluation of your cash and personal financing situation. The old adage “it takes money to make money” is especially true if you’re starting a new business. Evaluate all of your options carefully. Is it possible to get a small loan of a million dollars from your dad like Donald Trump did? Do you have to take on a loan? Are there assets you own that you can borrow against to get the seed capital that you need to get started? The type of capital and the amount of it that you have access to will dictate what business opportunities are available to you.
3. What do you know how to do?
Running and building a business requires a wide range of skills. You have to understand how to manage people, make tough decisions with limited information and track your finances. Have an honest conversation with yourself about your capabilities and your shortcomings. Some skills can be developed, while others usually can't. For instance, if you’re not the strongest manager that doesn’t mean you shouldn’t go start your own business, it just means that you need to find someone who might be willing to mentor or advise you until you are able to hire one. With that said, you probably shouldn’t start a clothing line if you don’t know anything about retail.
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4. If this failed, would you regret it?
For every success story we read about in the entrepreneurial space there are probably 10 other stories of failure that weren’t written about. As a result, it is easy to forget that the odds are stacked against you.
So much of being an entrepreneur is about charting your own journey and deciding that you wouldn’t be content with the prescribed paths that others have lived or traveled. But far too often we get caught up thinking about the destination -- if we don’t make our destination, we feel like we failed. Remember that entrepreneurship is just about the journey and not the destination. So be sure to ask yourself, if you started this business and it failed because you didn’t reach your destination would you regret the journey?
Starting a business requires thoughtful reflection. The more time you put up front into evaluating an opportunity, the greater your odds of success will be. The last thing you want to do is second guess yourself. There will be too many others already doing that for you.