The most common advice for aspiring entrepreneurs is to start a business that ignites their passion. Whether it’s a hobby or a personal interest, leveraging your passion can help you develop expertise that others value.
While pursuing your passion is a great starting point, not all passions translate into profitable businesses. Therefore, staying open to other opportunities is another viable pathway for launching a business.
Here’s a framework on how to choose a business idea to help you delve deeper into choosing the right startup venture:
Self-Evaluation
What interests, hobbies, and passions do you have? Do you know a seller or service provider in these areas who can show you existing business models? Assess your skills, expertise, and experience. What are your strengths? What skills and experiences from your work can be leveraged to start and run a business?
Problems, Needs, and Solutions
Existing businesses address specific needs or solve problems. Consider various business models, such as local retail stores, delivery services, professional services (e.g., accountants, insurance brokers), commercial landlords, landscaping services, and more.
Does a particular business model pique your interest or align with your skills? Is there an existing model that fails to meet a profitable need you could address? Conduct market research on business models that interest you and identify market gaps where demand exceeds supply.
Market Research. To find out which business to choose
When selecting a startup, invest time in understanding market trends and burgeoning industries. It’s advantageous to launch a business in a sector experiencing growth while avoiding those facing declining demand or disruption from technological advancements.
Identify a target audience and assess whether your product or service addresses their pain points. Additionally, it ensures that the market size is adequate to generate sufficient revenue for profitability.
Evaluating the Competition
Identify potential competitors and assess their market presence and success indicators. Examine if there are unmet demands for specific products or services.
Profitability and Viability
Understanding the finances of a business can be challenging. Employees often have insights into a business’s profitability that outsiders lack. When evaluating the financial prospects of your business idea, estimate the potential revenue—whether it’s in thousands, hundreds of thousands, or millions of dollars.
Next, analyze the business structure, including the required labor and associated expenses for producing a product or delivering a service. Calculate your startup costs and familiarize yourself with funding sources.
First-time entrepreneurs often underestimate the capital needed to launch and sustain a business until it reaches profitability. Distinguish between innovative startups and those based on established business models like retail stores or computer repair services.
For those introducing a novel product or idea, consider the concept of a Minimally Viable Product (MVP) to test your idea without significant investment. These efforts can deliver a solid foundation for making informed decisions when figuring out how to choose a business.
Time Commitment
Many first-time entrepreneurs underestimate the time required to start and run a business. When startup fatigue sets in, those driven by passion often find an additional level of commitment to persevere. Reflect on whether you possess the mindset to stay dedicated to a venture that may take years to achieve success.
Opportunities to start a business can arise from various sources. To capitalize on these opportunities, one must invest significant time—often comparable to the seven-day-a-week commitment required after launching their startup.
Remain open to new ideas, as even startups with the most comprehensive business plans and founding teams often adjust their business models when they interact directly with their target customers. Once you have selected a business model to pursue, draft a business plan and implement the necessary steps to set up the business.
