Here's everything you need to consider when thinking about your next business venture.
With 29.6 million small businesses in the U.S., your options for business ownership are endless. From bars and salons in California to insurance agencies and restaurants in Michigan, there's no shortage of industries to get into.
If you've been considering buying a business, you may be facing some choice paralysis. Too many options can ultimately lead to more confusion. So, how do you narrow your choices down to determine what business is best for you? By considering the following four factors, coupled with some extensive research, you'll find the perfect entrepreneurial fit.
1. Start with what you know.
Diving into a brand new industry can be exciting, yes, but, ultimately, it requires significantly more work. Having a degree or prior work experience in a particular industry provides you with pre-existing training, industry knowledge, a professional network, vendors, and suppliers, and ultimately, familiarity with your target market.
For example, if you've spent years working in a grocery store, you're likely already familiar with local vendors, seasonal trends, popular products and successful locations – all of which are applicable across the food industry. Knowing the ins and outs of an industry and market can save you countless time in research. However, sometimes the industry you know isn’t the best business option or, more importantly, your passion.
2. Follow your passion.
Some of the most successful entrepreneurs have attributed their vast successes to following their passion. Owning and running a business is hard work, and the endurance it takes to push through research, hard business decisions, and unpredictable revenue requires truly enjoying and valuing your business.
If you don't find coffee interesting, you're not going to want to talk to vendors every day about different blends of coffee beans. Instead, you'll likely become bored with the industry, and the business will suffer as a result. Finding what you love and picking a business that matches that passion is a smart plan to ultimately set yourself up for a financially sound future.
3. Narrow down the business model.
There are a few decisions you can consider that will help narrow down your search. Begin by considering an independent business versus a franchise, retail versus wholesale, and products versus services. When determining whether you want to buy an independent or franchised business, consider how much control and guidance you want. While a franchise gives you a large foundation to build on, the amount of control is limited. For independent businesses, it's the reverse. You'll have full control over your business but very little support or guidance to get started.
Who do you want to work with on a daily basis? Do you love watching customers engage with your business? Would you rather work with other industry professionals? This can help you determine whether or not you'd like to work retail or wholesale. Who you spend your time with every day can determine the amount of enjoyment you'll get out of your business.
Last, deciding whether to offer a product or service can be trickier. While it's been proven that services are less risk-averse, it all comes down to what you want to do. For example, if you're in the gardening industry, you can offer products like seeds, plants, and gardening tools, or you can offer gardening and landscaping services. Either choice has its own advantages and disadvantages and is yours to make.
4. Don't skimp on research.
Even if you've worked in your chosen industry for decades, owning a business takes significant research. From location to competition, you need any information available to succeed. Once you've decided on a particular business type, begin looking into everything associated with that industry.
First and foremost, get an overall idea of what your chosen business costs to avoid getting cheated or purchasing a lemon. This will help down the line with negotiations and final offers. Next, learn where it's most successful to run your business. Buying a winter sporting goods store in Florida, for example, may not be the best idea. Similarly, ensure the location you're choosing isn't oversaturated by competition.
Nineteen percent of small businesses fail because they are outcompeted, and 42 percent fail because there isn't a market need for their products or services. Completing comprehensive market research can ensure you're targeting the right market, with the right product/service, in the right location.
In addition to doing your own research, talk to other entrepreneurs in your industry. They'll have anecdotal information about what has and hasn't worked for them, and any tips for getting started. Just ensure they aren't in your location so they don't perceive you as a threat.
Deciding which type of business to buy can be challenging. However, taking the time to consider your background, interests and available research can help point you in the right direction. When searching for businesses, ensure you're getting a comprehensive look at all available options and not just relying on word of mouth to determine options. An online service can show you available businesses by location, price and other filters so you can find the right option for your goals.