Choosing which business type to go into is critical to your business’ success.
Believe me—many people have no idea.
It’s like what I used to hear when interviewing people who wanted to get into HR (by the way, I have 35 years of HR experience) because they ~like working with people~.
I used to tell them to join the prison service. “That’s working with people and probably a lot more rewarding!”
Before anything else, let’s have a quick rundown on the different business types.
- Service business – you provide intangible products such as professional skills, expertise, consultancy, marketing strategy, graphics design, and the like.
- Merchandising business – this is where you buy physical products at a wholesale price and sell them at a retail price. Think grocery stores, distributors, and resellers.
- Manufacturing business – Unlike a merchandising business, this business type is where you purchase the raw materials to create a whole new product to sell.
However, before deciding on one, it’s vital that you ask yourself these four big questions. And remember, getting them wrong could spell F-I-N-A-N-C-I-A-L D-I-S-A-S-T-E-R.
Let’s have a look at them one by one.
Question #1: What is my prior experience and knowledge of this business?
Before you start your own business, you have to consider your knowledge about the industry and the market, especially if you’ve never been in that particular field!
So ask yourself a critical question: What is my prior experience and knowledge of this type of business?
I’m a big fan of writing everything down and I think it would benefit you IMMENSELY to see the pros and cons in writing. Here’s how you do it.
- Take a piece of paper and draw a line down the middle.
- Label Column 1 “What I Know”.
- Label Column 2 “What I DON’T”
- Start writing.
To be honest, what you put in Column 1 is nice to have. What you put in Column 2 will save your life.
Be as true to yourself as possible. Don’t worry about Column 2 being longer than its counterpart. Literally, it will save your life—time, money, stress, the whole nine yards!
Question #2: What and how much research have I done thus far?
Nearly everything you’ll do when it comes to starting your own business will be based on research. So before jumping in the whirlpool of the business world, you need to be VERY well prepared with facts and data.
What research have you done about
- The business models?
- The competition?
- Available resources?
- The financial investment to get started, then continue successfully?
- The time it will take to break even (and stop the bleeding of cash out/nothing in)?
Follow up question: how much research have you done? Is it enough to support what you’re going for? What are your sources?
Research is powerful and a big game changer in knowing what type of business you should be getting into. I’m telling you, do A LOT of research before anything else. Research, research, research!
Question #3: What specific niche am I best suited to choose?
It’s much easier to start with the thin end of the wedge so you can get an entry point.
I’ve launched businesses which I thought were almost unique. They weren’t. I got buried.
Talk with people currently running similar businesses who won’t be competitors but are in the same market. They can save you LOTS of heartache.
When your wheels leave the runway is not the time to figure out how to fly the plane.
Go into something that you know a lot about because your expertise and knowledge will be your unique selling proposition (USP).
NEVER start a business about which you know nothing except that you like the idea of making cheese toasties or running a shoe shine delivery service or hand-kitting cat fur into jumpers.
Choosing your niche is a fundamental part of knowing the type of business you should be going into. It will literally be a part of the foundation of starting your own business.
QUESTION #4: How easy will it be to scale the business?
You know, grow it beyond what you individually can do with the hours that the Sky Pixies give us in each day.
Nobody launches their business and hopes to stay small. Of course you want to grow and scale your business! So, again, ask yourself: How easy will it be to scale your business?
Will you be able to attract investment? Can you find people who understand the business that you can outsource work to? Will they do an excellent job and not turn you into a homicidal maniac?
These are important things to know, people! Scaling your business means having more business coming in.
If the type of business you’re going into is a service, then you’ll want more clients sign up for your work. But with only so many hours in the day and a bucketload of tasks, how are you going to get everything done? You need to learn how to outsource the work!
Deciding to launch your own business is a huge step. It requires a lot of time, hard work, and commitment. So it’s paramount that you make the right decisions from the beginning! Choosing the right business type is only the first step. But what about the other steps? Well, if you’d like to learn exactly how, you can sign up for BizTreats, the free training to help you start your business!