Ideas for a startup business emerge from a variety of sources that should be thoroughly researched and evaluated.
When you drive through your local community or go to your place of employment, you are coming in contact with businesses, both large and small. However, if you or your family members have never run a business, it can be very confusing and daunting to start a business—and in particular, deciding upon what type of business to start.
The most common advice given to aspiring entrepreneurs is to start a business that ignites your passion. It may be a hobby or something of personal interest that enables you to develop a level of expertise that other people value.
Pursuing your passion is a good jumping off point, but not all passions can become profitable businesses—so opening up your eyes to other opportunities is another pathway to start a business.
Here is a framework that can help you delve deeper into your quest to choose the right startup business:
- Self-Evaluation:
- What interests, hobbies, and passions do you have? Do you have contact with a seller or service provider in one of these areas that shows you existing business models?
- Self-assess your skills, expertise, and experience. What are you good at? What skills and experience did you pick up in your work that can be applied to starting and running a business?
- Problems, Needs and Solutions:
- Existing businesses fulfill a need or solve a problem. Survey the various business models that are within view such as local retail stores, delivery service providers, professional services such as accountants, insurance brokers, commercial landlords, landscaping services and more.
- Does a business model appeal to your interest or match with an existing skill?
- Does an existing business model fail to meet a particular need that is profitable for you to pursue?
- Conduct market research about business models for those of interest and look out for instances where there are market gaps of demand exceeding supply.
- Market Research:
- When choosing a startup, take the time to learn about market trends and emerging industries. It is preferable to start a business when that industry is trending upward and avoiding those where demand is lessening and changing. This is particularly true of industries where technology is disrupting business models.
- Identify a target audience and determine if the product or service to be provided meets pain points—but take the additional step to determine that the market size is sufficient to generate sufficient revenue to be profitable.
- Evaluating the Competition:
- Identify who are likely competitors and research their size and if they show any indication they are successful. See if there are products or services that are in demand that are not being met.
- Profitability and Viability:
- Gaining an understanding of the finances associated with particular businesses is very difficult to do. Employees often gain insight about a business’ profitability that others who are outside do not have.
- When assessing the financial aspects of your business idea, assess the amount of revenue it may generate. Is it thousands, hundreds of thousands or millions of dollars in revenue. Then assess the structure of the business, identifying how much labor is required or the range of expenses associated with creating the product or delivering a service.
- Estimate your startup costs and become knowledgeable of sources of funding. In the latter instance, first time entrepreneurs tend to underestimate the capital needed to start a business and run it until it breaks even or becomes profitable.
- Separate innovative startups from those are based on proven business models such as retail stores, computer repair etc. For those seeking to introduce an innovative product or idea check out Minimally Viable Product which is a way to challenge your idea without having to make a large investment.
- Time Commitment:
- Most first-time entrepreneurs underestimate the time commitment for starting and running a business. When startup fatigue hits an entrepreneur, those who are pursuing their passion may find an extra level of commitment to endure. Ask yourself if you have the mindset to be dedicated to something that may take years to reach success.
- Gaining Insight: Resourcing your Community
- When pursuing the idea to start a business, it is helpful to gain input from a range of people. Don’t put weight on just one person’s feedback. Seek out established business owners—some of whom may become a mentor, industry experts, friends, and family.
- Expand your resource base by attending networking events and industry conferences that enable you to connect with like-minded individuals and potential partners.
- Innovation:
- New ideas often become the foundation of large businesses, but they are started with a great deal of risk. If you are well-skilled in a particular industry, you may have the opportunity to identify a new solution to existing problems. These are usually tech-based companies, but not all are started by tech experts. One can build a team around a startup idea that fills out the critical skills to take on an ambitious innovative idea.
- Look out for new trends such as e-commerce, sustainability, or digital services.
- Innovative Startups versus Replicative Business Models
- Conduct a market test of a business idea, if the business being started will introduce innovations that may disrupt and industry. However, if you are starting a business where the business model already exists, conduct research that will fill out critical information to go forward that is part of a business plan.
- Legal and Regulatory Considerations:
- Many industries are regulated requiring permits, licenses and other forms of compliance—some of which can be costly. Contact state and local governments to learn of requirements for your type of business.
- Business Plan:
- Writing a business plan to start a business is fundamental. By taking the time to do research and putting it into writing helps avoid many common mistakes made by entrepreneurs. A business plan includes the business concept, strategy, financial projections, a marketing plan and operations plan. Putting the necessary time into a plan helps avoid costly mistakes down the road.
- Gain Support:
- There is a range of support available to entrepreneurs and small business owners. Check out local business development organizations such as Chambers and local chapters for marketing. For high growth startups apply to accelerators that hone a business model and the founder’s skills over a period of weeks or months. When looking for space outside the home, incubators offer below market rates as well as serving as a strong base of support from peers and visiting speakers and experts.
Opportunities to start a business can emerge from a variety of sources, but to take advantage of those opportunities one must put in the time—almost as much time as the seven day per week that is required once a startup is launched.
Be open to ideas as many startups, even with the most thorough business plan and founding team, alter their business model once they gain direct contact with their target customer base. Once you have chosen a business model to pursue, write a business plan and put in place what is needed to set up the business.
