Choosing a Business: Common Mistakes

Although there are many reasons why small businesses fail, one of the most common is in choosing a small business. A lot of people simply make the wrong choice. To help you avoid that error, here's a look at three of the top reasons why wrong choices are made

• Error #1: Converting a hobby or interest into a small business without first finding out if there is sufficient demand for the product or service to be provided.
• Error #2: Starting the business without adequate planning. Your success is not guaranteed just because you've found a market opportunity that also takes advantage of your skills and experience. There are many other considerations. For example, you still have to figure out if you can raise enough money to get started and whether you can withstand periods in which little or no revenue is coming in.
• Error #3: Resisting the urge to ask for help. Since you're reading this material, you may have already avoided this pitfall. A lot of people, however, are reluctant to ask others for advice in choosing a business, either because they're too proud or because they don't know that help is available. Help is out there, and, if you shop wisely, it won't cost you an arm and leg to get it.

Now, consider the ways to avoid making a bad decision:

• Talk to others who operate the same or similar businesses. You may be surprised about how many small business owners will be willing to share their insights with you. Provided that you're not asking for trade secrets - and especially if you won't be a direct competitor - you may pick up some valuable information. The local Chamber of Commerce or other business association meetings may provide access to business owners that you can talk to. If you don't make any headway by attending such meetings or by directly approaching business owners, you may wish to offer a business owner a consulting fee. This may seem like a dubious expense to pay, since you're not yet in business. But, if you are able to find out what you need to know about the day-to-day operation of your prospective business, this one-time expense will probably be money well spent.
• Work for someone else for a while. A time-honored way of learning a business is to work in a similar business as an employee. Not only will you be getting on-the-job training, but you'll be getting a paycheck, and will be avoiding overhead expenses. When scouting out potential "employer-trainers," it's best to look for one that is successful and well run. Even though you may be able to learn as much about your particular business from a poorly run, inefficient, business - the idea being, "see their mistakes, and don't repeat them" - this can be frustrating and time consuming. Although there may be a few different ways to do any job successfully, there are probably a thousand ways to mess it up! You need not learn all of these "don'ts" in order to figure out the "do's."