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Selecting the Right Opportunity
Charles R. B. Stowe MBA, JD, Ph.D
Your selection of what business to start is the most important one you will make.Â Selecting a business is as important as selecting a spouse, a college or a house, and perhaps even more significant. In the course of researching over 250 businesses that failed, I discovered that the majority of business owners simply chose a business that they thought would â€œmake money.â€Â Successful entrepreneurs express their criteria very differentlyâ€¦ Here is some insight on criteria that should be considered when selecting a business to launch.
First, does your proposed business solve a problem and can you define what that problem is, who has that problem, what is that solution worth to them, and finally, can you solve the problem profitably?Â Note that the problem being solved is the prospective customerâ€™s problem and not the business ownerâ€™s problem.Â If you canâ€™t define the problem being solved, then it is going to be extremely difficult to FIND customers or clients.Â It is absolutely critical to be able to define your customers in such a manner that you can get their email, phone number, or face book listing!Â Otherwise, your marketing costs will completely devour your resources. The next issue is whether you can provide that solution profitably which also means that the customer must have the money to pay.Â A student once told me that their business was going to be an afterschool program to teach manners, personal finance and study habit skills to â€œat riskâ€ children.Â While certainly laudable, how many parents or guardians of â€œat riskâ€ children would have the $500 tuition?Â
Â The costs of marketing have never been lower thanks to the internet.Â However, without an email address or the ability to communicate directly with the target market, the cost of advertising over â€œtraditional mass mediaâ€ can be prohibitively expensive.Â The concept that customers will flock to a â€œgreat ideaâ€ is naÃ¯ve.Â
The second criteria: would you want to spend 12-14 hours a day working that business?Â Several years ago, a CAD designer told me that he wanted to open a fried chicken franchise.Â His reason was that his uncle had a very profitable fried chicken franchise.Â When I suggested that he take a part time job at a local fried chicken restaurant, he told me â€œyouâ€™re kidding, I donâ€™t want to work at a greasy place, I just want to profit from owning it.â€Â Find a business where you have a mission â€" a passion for that activity and the outcome you are offering your customers.
The third criteria:Â can you keep your day job while you â€œprototype your business?â€Â Most owners of business failures concede that they did not start their business with enough money.Â In my view that is nonsense, the problem is that they did not have a valid business model.Â They did not start small and build a pattern that could be expanded into a viable business.Â A friend has recently started a business offering to conduct silent auctions over the internet for non-profits in exchange for a percentage of the money raised.Â The problem is that the effort required to run a silent auction over the internet for a relatively small charity does not compensate the auction company sufficiently to justify their time.Â The business model works fine if the non-profit can acquire a million dollars of donated items and has a long list of potential donors or participants in the auction.Â However, if the auction is a bust or even â€œmodestâ€ in total sales, the company will not make sufficient revenue to justify the effort.Â That is why successful entrepreneurs often work from them homes and take a year or two before they launch their business.Â They develop some cash flow and refine their processes before they convert the business to a full time enterprise.
Selecting the right business requires a detailed process of self discovery.Â If you donâ€™t know what you enjoy doing, then find a competing business and try out for a part time job.Â Knowing your likes and dislikes, your preferences for a certain lifestyle, etc.
Ironically, entrepreneurs who are successful spend a year or two reconciling different opportunities to be able to select a business that actually solves a problem and sorting out different opportunities, as compared with unsuccessful small business owners who launch their businesses rather quickly.Â For a consultation on starting your own business, contact:Â charles.stowe @gmail.com.Â