Choosing a Type of Business

Most of the books you can read on the subject of finding a small business will tell you that the best place to start is with a matching of your skills and experiences to some business that requires those skills. For example, if you love to cook, they'll suggest you open a catering business or a restaurant.

If you have a strong interest in something, think about the needs of other people who share your interests. Is there something you can provide? It may help to think in terms of goods and services. Most businesses involve a mixture of both, but this dichotomy can help narrow the focus.

Ultimately, considering doing something you love is a start, but it has to be further analyzed by examining the market potential, competition, resources required to enter the market, consumer/buyer demand, and uniqueness of the idea.

Work Smart The best place to start in picking a small business is with consumers (including other businesses that may want your product or service). What do consumers or businesses want that's not being provided to them? Ultimately, whether you succeed will depend upon whether you are able to meet some unmet need in the market. In fact, if you love to cook, you're more likely to succeed if you open an interior decorating service — even if you know nothing about interior decoration — than you are if you open a catering service, if there is a demand for interior decorating services but not for another catering company in your area. It's far easier to hire someone who knows something about interior decoration than it is to sell consumers something that they don't want.

Of course, you don't necessarily have to sell a new or different product or service in order to succeed; you can succeed if you can improve what is already being sold. In the above example, you should open a catering business if you can provide a better service than other catering businesses, such as a wider menu or lower prices. But that's still a function of what consumers want. Your research would have told you that there is a demand for a new catering business if prices were lower or if the menu were more varied.

Next Steps

Now that you have an idea of what you need, here's how to get it:

• Market research. A comprehensive study and analysis of all your potential markets is something most small business owners either don't know how to do themselves because they lack the training or can't afford to pay someone else to do because it's so expensive. But there are a few less expensive (and, admittedly, less scientifically exact) techniques that you can use to find out what consumers want.
• Self-assessment. Once you have some idea of what the market wants, now is the time to begin looking at your skills and experiences. You'll need to match your skills with what the market wants. Once you match your skills to what's available, you should be well on your way to picking the small business that's right for you.
• As we all know, a lot of new small businesses fail each year. In most of those cases, the small business owners were probably convinced that their idea for a business was a perfect match for their skills. They were wrong. But you can learn from their errors by avoiding the mistakes they made. In fact, there are some common mistakes that many failed small businesses make.