Find out What Kind of Business to Start
Many people dream of starting their own business. The independence of being your own boss is enticing. However, before starting your own business you need an idea. Consider the various types of businesses you could form, your strengths and weaknesses, and what kind of business model would work for your needs.
Forming an Idea
- List your interests. The key to starting a solid business is figuring out what you're interested in. Many people desire to start their own company because they want to pursue their passions. The first step to making a decision about forming your own business is listing your own interests.
- Take a sheet of paper and start jotting down your interests. You can start with the very obvious. For example, what do you like to do on the weekends? Do you read? Go hiking? Play sports?
- Reach back a little. What were you interested in before you got the job you have now? Did you minor in literature in college? Did you used to knit or engage in another hobby? Is there anything you miss doing that once captivated you?
- List your skills. Once you've determined your interests, now it's time to explore your skills. What are you good at? What do you think you could contribute to the world?
- People tend to have surprising skill sets unrelated to their field of work. Jon Stewart was an outstanding soccer player. Neil Patrick Harris is an accomplished magician. Do you have a special skill unrelated to your field of work? Do you, say, quilt on the weekends? Is there any way these skills could be made into a business model?
- Make a list of abstract skills as well. Take out a piece of paper and write at the top "These are seven things I'm good at" and proceed to list your most marketable skills. For example, "I am a good problem solver" or "I know how to stay calm in a crisis."
- Pay attention to what's missing. The most successful business models fill in the gaps of an existing market. That is, they figure out what service or product is missing from an existing in demand industry. Consider what's missing in a field of interest to you.
- Once again, making a list can help. Write a list of 5 products or services that would be useful to you but do not currently exist. Think about moments when, driving your car, watching your TV, or using some electronic device, you wished for a specific feature not on the market.
- Keep in mind this may take a few days. A frequent complaint of the middle school essay topic "My Most Memorable Moment" is that when forced to think of something memorable on the spot many people's minds go blank. While you might come up with product ideas all the time, when you push yourself to write them down you might find you've forgotten quite a few. Take a couple of days to think about it, keeping your list on hand if an idea comes to you in a free moment.
- Look for inspiration. A lot of anecdotal evidence speaks to the fact multimillion dollar ideas come at unexpected moments. The concept for Netflix, for example, began when Reed Hastings got a $40 late fee at his local video rental store. He wondered why movie rental companies couldn't work like health clubs, where you get charged a flat fee for using a given product. This is where he began to formulate the idea for his idea for an online DVD rental company. Pay attention to the world around you. Carry at notebook at all times. When you have a moment, like Hastings, where you wish things could work slightly differently write that down. A great idea could come of this later on.
Considering the Basics
- Assess your personality. Starting a business is a big risk. You need to know what your strengths and weaknesses are going in so you can reduce the chance of failure.
- In your current job, what are your strengths? Are you a behind-the-scenes type, making things work from behind a computer desk? Or are you out on the field, making connections and networking with others?
- What do you genuinely enjoy about your current job? People tend to be more successful in jobs they truly love. Do you love attending conferences? Running meetings? Are the sort of person suited for a leadership position? If so, starting your own business may be a good plan for you.
- Ask co-workers and colleagues to give an honest assessment of you. It can be hard to self judge so ask someone you trust what they think your best qualities as a worker are. This can help you see what role you can play in your own company and what roles you should assign to others.
- Decide how much of a commitment you want to make. Are you looking for a side business, something to do for fun and make a little extra money? Or are you looking for something that could potentially replace your current job? Starting your own business, regardless of the size, is a huge commitment and carries a lot of risk. Spend some time assessing how much of yourself you'll willing to put into this new endeavor.
- Look into education. If you don't have experience with running a business, consider getting educated. Even if you already have a degree, taking extra classes or pursuing some kind of supplementary training can help.
- Consider going back to school for something like an associate's degree in business, marketing, or managing. Associate's degrees tend to be only two years and the course load may be less strenuous.
- If you can't commit to getting another degree, consider taking a few business classes at a local college. There are also courses in business and start up companies offered online, which can be convenient if you have existing obligations.
Determining Your Business Model
- Consider a sole proprietorship. A sole proprietorship is the simplest business structure available. In a sole proprietorship, you are the sole owner of your business and entitled to all the profits and also responsible for any debts and losses. You do not have to do anything special to form a sole proprietorship. You just need to be the only owner of the company and the status is set.
- The main advantages of a sole proprietorship is that it's easy and inexpensive to form. You also have full control of the company and tax preparation is fairly easy.
- The main drawback to a sole proprietorship is that there is no legal separation between you and your business. This makes you liable for all debts an obligations. As you can't sell stock as a sole proprietorship, it can be difficult to raise funds for expenses. It can also be very stressful to handle all responsibilities alone.
- Learn about partnerships and LLCs. If you're worried about too much responsibility and liability, consider a partnership or LCC. In these arrangements, you're more protected and it may be easier to raise money for expenses. In a partnership, two or more people share ownership and responsibility of a business. In an LCC, your business would be a hybrid of a corporate structure and a partnership.
- In a general partnership, you and another business partner share responsibility equally. In some types of partnerships, like a limited partnership, one person has slightly more control than the other. The main advantages of partnerships are they're easy and inexpensive to form, commitment is shared, you can find someone whose skill set compliments yours, and partnerships tend to attract more competent employees. The drawbacks are you will still have a lot of liability, disagreements between partners can hurt business, and profits are shared.
- In an LCC, you're not an owner but a member and the way the structure is set up limits your liability. This is the main advantage to the LCC structure. Other advantages include less record keeping and profit sharing is far more flexible. Drawbacks include the fact LLCs can dissolve if too many members drop out and the self employment taxes associated with this structure can be complicated.
- Familiarize yourself with corporate options. Forming a corporation can be a complicated process. However, forming a corporation can make running your business easier. Consider the corporate model when making a decision about your business.
- The main advantage of a corporation is that you save a lot on taxes. Tax rates for corporations are generally lower. Your business will also have an independent life, separate from you, which limits your personal liability.
- The biggest drawback about corporations it that operating processes are much stricter. Shareholders also have compensation requirements that can be difficult to meet if you're a smaller company.
Selecting A Business Type
- Consider buying a franchise. An easy way to start your own business is to buy up an existing franchise. Franchises are well-known chains, such as McDonald's, that allow independent owners to purchase and operate a location.
- Before you start a franchise, do your research. You'll have to follow certain corporate guidelines, so make sure the corporations overall ethics match your goals as a business owner. See if the type of franchise generally performs well in your area.
- Understand you have less freedom as a franchise owner. You have to follow guidelines based on layout, designs, prices, specials, and other aspects of your business. On the upside, however, you'll receive support from the corporation through training sessions, corporate seminars, and networking opportunities.
- Read your contract carefully. Contracts for corporations often benefit the franchiser more than the franchisee. Make sure you can feasibly make money running your franchise.
- Look into an online business. If you're running a business on the side, running an online business can be convenient. You'll also have a more flexible schedule and slightly more creative control.
- You do have to know a bit about web design in order to start an online business. You'll probably have to register a domain name, design and website, and advertise and market yourself. If you have an existing background in online media and marketing, an online business might be a good choice for you.
- There are also separate regulations for online businesses, based on your state. Contact a lawyer who specializes in internet law to ask about policies if you're interested in starting a business online.
- Learn about retail. Retail is a viable business type in which you sell goods and services. Retail is somewhat on decline due to the convenience of buying products online, but clothing items and other items that need to be tried on tend to sell better in a physical store.
- Retail items tend to do well when they initially open up. Customers are usually drawn in within a couple of weeks. Procedures for taxes and initial opening are less rigid. Having a physical presence also helps you stay in consumer's minds.
- It can be expensive to maintain a retail outlet as opposed to other businesses as you have to buy your supplies. Scheduling is more rigid, as you need to be physically in the store waiting for customers.
- Consider consulting. If you're interested in self-employment, consulting is a fairly straight forward business type. Consulting also allows for a more flexible schedule and can be done on the side while you keep a more stable job.
- Consulting tends to pay fairly high. This means fewer working hours. Having consulting experience also looks good on a resume for future employment opportunities. There are also many chances to network and grow your business.
- The main downside of consulting is that it does not always provide a steady income. It also takes a lot of time and money to become a consultant. You will also have to take care of your own benefits and taxes.
- Keep in mind that the vast majority of new businesses fail. Always maintain a "Plan B" just in case and keep some money in savings in the event of failure.
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Sources and Citations
- ↑ http://www.entrepreneur.com/article/217368
- ↑ https://www.sba.gov/content/sole-proprietorship-0
- ↑ https://www.sba.gov/content/s-corporation
- ↑ https://www.sba.gov/content/franchise-businesses
- ↑ https://www.sba.gov/content/start-online-business
- ↑ http://www.slideshare.net/jawparcel0/what-are-the-pros-and-cons-on-retail-outlet
- ↑ http://www.wahm.com/articles/the-pros-and-cons-of-consulting.html