There are many great business ideas out there, but how do you find the right one for you? It’s hard enough to get up the courage to start a business, but that’s only the beginning. Now you need to decide what business to start, and it’s not as simple as doing what seems obvious. For example, a friend of mine learned how to design websites while he was in college.
When he decided to start a business, he figured, “I know how to design websites, I guess I’ll start a website design business.” Others have started certain types of businesses because of a hobby, because they heard it was a good way to make money or because someone else dragged them into it.
Sometimes these decisions work out, but often they don’t, and that’s a shame — because if you start a business, it’s likely to consume several years of your life. Asking the following questions can help you make sure you’re starting the right business for you:
What’s my objective?
Why do you want to start a business? It seems like a simple question, but if you ask different entrepreneurs you’ll get different answers, at least you will if you dig deep enough. Most entrepreneurs will say they want to make the world a better place or make money, but many entrepreneurs use their businesses as a laboratory to experiment and learn, others are driven by a psychological need, and yet others are trying to please someone else. What’s motivating you?
In his book, The Founder’s Dilemmas, Noam T. Wasserman, dean of the Yeshiva University Sy Syms School of Business and former professor of clinical entrepreneurship at the University of Southern California, divided founding entrepreneurs into two types based on their objectives. One type of founder wants money, while the other wants control. It’s a useful exercise to figure out which type you are and how that aligns with your other motivations.
Will it make a profit?
Too many entrepreneurs ask, “Will it make money?” and perhaps they mean “profit” when they say “money,” but it’s good to be specific. Almost any business will make money, but a business can’t survive, thrive or grow unless it has profits. Will your business idea turn a profit? How much? How fast? If you can’t answer those questions, are you sure this is the right business for you?
Is demand growing?
One hundred years ago, almost every man in the United States owned at least one dress hat, if not several. Men wore them whenever they stepped outside, to work and on dates. Then all the hats disappeared, and today you’d be hard-pressed to walk down a city street and see a single man wearing anything but a ball cap if they’re wearing a hat at all. Imagine all the hat manufacturers and hat sellers who went out of business when hats faded from common fashion, not to mention the suppliers of raw materials to make hats.
On the other hand, when the internet began to grow in the late ’90s, many entrepreneurs recognized the fundamental shift this new technology would bring to society and jumped on the bandwagon. Today, companies that are wholly dependent on the internet like Alphabet, Meta and Amazon are among the largest businesses in the world.
How can you know if demand is growing? Thankfully, the internet provides today’s founders with tools to answer this question in ways our entrepreneurial ancestors couldn’t have imagined. “Using search query data, we can detect breakout trends in different markets to identify rising consumer needs so we can meet them with a solution,” says Mulenga Agley, CEO of Growthcurve, whose company helps entrepreneurs identify and validate new business ideas before assisting them to scale.
Agley says they use Glimpse to gather and analyze data from Google Trends, Google’s own search trend tracking service, to help clients “discover trends before they’re trending.” Agley continues, “With the rapid advancements in machine learning, this technology will become ever more reliable and is one of the best ways to find new business ideas out there.”
Do I have what it takes?
You may have the grit and determination to be an entrepreneur, but do you have the right experience, skills and drive for the specific business you’re thinking of starting?
“After my first exit, I looked back at the experience running my first company Bikewagon to see what made me tick, and how I added value,” says Dale Majors, who is an investor in multiple companies and runs Venture Anyway, a mastermind group for entrepreneurs. “That experience helped me in my next business to know what problems I wanted to solve, the ones I felt best suited for.”
Some lessons only come with time, but one shortcut is to identify a business you want to run, then talk to others who are running that type of business, and ask them what it takes. The answers you get may steer you toward a different opportunity, or they may solidify your plan. Either way, you’re in a much better position.
Do I have the right team?
When a venture capitalist is pitched on an idea, one of the first questions they’ll ask is, “Who’s on your team, and have they done this before?” A VC’s job is to maximize returns and minimize risk, and a team that has been there and done that stands a good chance of being able to do it again.
Whether you plan to raise funding or not, it’s good to ask yourself, “Who’s on my team, and are they the right team to bring my vision to reality?” One red flag to watch out for is team members who have never started or run a business before, let alone the kind of business you plan to start. Another danger sign is when a co-founder wants to get paid the kind of salary they would get in an established business.
Yet another is the co-founder who doesn’t have immediately useful skills that are critical to the business. There are too many red flags to list them all here, but if you consider just a few of them, you’re better off than the entrepreneur who doesn’t give it a second thought and brings on co-founders because they’re friends or because they seem “smart.”
Launching a new business is hard work, but it can also be rewarding. To increase your chances, don’t shy away from asking yourself hard questions. The hardest questions to answer may be the keys to your success.
By Andres Tovar