“I want to start a business, but I don’t know what kind of business.”
It’s a common question that we are asked at The Business Plan Company, from aspiring business owners keen for the experience of business ownership but not sure where to put it. Oftentimes these folks are seeking an immediate answer, like picking a stock with great potential.
If you really have no burning desire for a particular type of business to start, deciding which one is not a snap decision, but an extended process of research, due diligence, planning and introspection. It’s a question that – ultimately - only you as the aspiring business owner can really answer. There are many competing factors that will contribute to final decision, or whether you should start a business at all. If you are planning to own and operate the business, not just the pure investment, the process is further complicated beyond just the financials.
From the starting line of absolutely no idea, use these questions to guide you.
Why do you want to own a business?
Not all businesses are created equally and each one delivers different benefits to the owner. Despite a common perception that owning a business is all about making money, in reality it’s balanced up with other wants like lifestyle, flexibility, autonomy, working from home (or not), working with people (or not) and doing something fulfilling.
It’s not just the type of business either, but the age, stage and size of the business. Businesses change over time, so think about what those needs might be in the future, as getting out of a business is usually not very easy or fast.
A start up restaurant is going to be more work than one that is established, but will cost less. Businesses that are a brand new concept may take longer to reach your income goals. E-commerce involves much less interaction with people than retail. A home-based consulting business will be more flexible with family life and lower cost to start but you need expertise. Check our post on buyings vs starting a business.
How much are you going to spend
Businesses cost money to start or buy, so be clear about your budget as that will narrow the scope considerably from the get-go. If you have a high budget you could buy an operating business, for example, or set up a business with a dedicated site such as retail. If you have a lower budget, then it might be home-based, but with no established cash flow. Check out our post on start or buy a business
Choose something you like doing.
Most business owners actually deliver the service, at least at the start, unless it grows quickly or you buy an already operating and larger business. If you are an owner-operator you are going to be doing a lot of whatever your business does, so make sure you are happy doing it. My colleague was once considering buying a knife sharpening business, so I asked if he wanted to sharpen knives 40 hours per week; he didn’t buy the business.
Use your insights
Successful businesses quite often have an insight into the experience of their clients, so are able to be innovative in how the product or services can be delivered. Do you have any such insights? Consider what you can bring from your own experience. What is something about a business you interact with that drives you crazy, that you can do better.
Use your skills and experience
Consider how you can leverage your skills and experience. What are you good at? What are you bad at? What do you know how to do well? The business will obviously have a higher chance of succeeding (and lower risk) if you are skilled in that area. For example, many of our clients are aspiring café owners but have never worked in hospitality, which creates a risk as it’s easy to mess it up if you don’t know what you are doing.
Understand the compliances
Many businesses have pre-qualifications or accreditations that you need to operate, or someone in the business who does, such as a pharmacy. In other cases such as NDIS, the registration processes can be arduous. Once you know these, it will cut out some businesses that you don’t have the necessary credentials. For those that have a key personnel with the required accreditations, be careful that you are not dependent on them - if they leave you are very exposed. Building, medical, accounting, health, aged care and NDIS are examples we see a lot of.
Match with opportunity
Certainly it’s easier to grow a business on a rising tide. My feeling is that many of the aspiring callers actually want to know this part more than any other – what are the sure bets, the growth industries, the easy money? It’s not difficult to find these out, with many pundits publishing their opinions, as well as industry reports and business forecasts.
Depending on the other preferences in your choice of business, this should be consideration but not the only one. Look at market trends and movements so you can see if your chosen industry is growing or shrinking and what the future expectations are; a changing market may open up a niche that you can fill. There's a great TED Talk about this here.
“What kind of business should I start?” is not a question with a simple answer if you want to be happy with the outcome. If you are really stuck, look at business for sale websites, to get a sense of what’s out there, how much they sell for and what kinds of revenues and costs are involved. As always, do a plan and spend time looking thoroughly at each potential business that you are seriously considering before taking the plunge.