If you’re thinking about starting a new business venture, there are many things to consider. This article will walk you through five questions intended to help you devise a business idea that might be best for you. Note that this discussion contemplates a business that you expect to play an active role in. In other words, this article assumes that you’re not choosing a business purely for passive investment purposes.
The very first question you should ask yourself is, “What am I passionate about?” In other words, what sorts of hobbies or activities could you spend your entire day doing, without being paid or coerced? Contrary to how it might sound, the reason that the answer to this question is so important isn’t fanciful or ideological. The fact is, that passion leads to the purest form of motivation; in turn, motivation generates productivity, and productivity is one of the main drivers of a business’ success. Starting a small business can take a lot of work, and if your motivation is inspired by something other than financial gain (enjoyment, for example), then you’re already starting your business with an advantage, from an enthusiasm and productivity perspective.
Sometimes, it’s fairly obvious how to turn something you enjoy doing into a money-making endeavor. But depending on what you’re passionate about, you might need some creativity to figure out how to make this a reality.
For example, if you’ve honed your skills over the years as a disc jockey (a DJ) and would like to convert that talent into a business as a DJ/music producer, then there would be a number of options for doing so. You could charge fees for performing at events or teaching students your craft. You could sell your original compositions to artists and record companies. You could also invest in the building of a recording studio that you could both rent out and also use for personal use.
Furthermore, always keep in mind that the Internet and social media have greatly expanded our abilities to think outside the box commercially and exploit the activities that stimulate us. Using the DJ/producer example above, you could use social media (YouTube or Facebook, for example) to gain exposure for your musical talents and assist your marketing efforts. Ideally, you could further supplement your income by having enough of a social media following to have YouTube or corporate sponsors pay for ads on your pages. These are just a few examples of how you can use a little creativity to turn your passion into a viable going concern. It is at that moment that your business idea is born.
Setting aside the passion aspect for a moment, the next question you should ask yourself is, “What are the skill sets and core competencies that I can bring to support my business venture?” Furthermore, do you have people in your network who have particular talents that would be useful to your business? These could be friends, former colleagues, or anyone else you feel could contribute to the venture in one way or another. Always keep in mind that in order to have your business benefit from the skills and knowledge of another person, you don’t need to necessarily make them a formal owner of your business. Always remember that equity ownership in your company is the last thing that you ever want to give away, from both a control and profit perspective. You can use a number of alternatives to incentivize others to support your cause, including (without limitation) paying them for a service that they already provide to other clients or making them an employee, consultant, or independent contractor of the new business.
Let’s be clear — you can always start a business based on whatever captivates you. But, you’re almost guaranteed to fail if your business lacks the relevant expertise to operate efficiently and profitably. An ideal starting point for your business is to find a way to combine passion with proficiency.
For example, you could have been trained as a lawyer, but cooking is your joy. You also have no desire to continue practicing law. Thus, if you start your own law firm, you’d have the skills to pull it off, but you’d be miserable. If you’re a corporate attorney, then you might have enough business savvy to exploit your passion by opening up a restaurant of your own — problem solved. On the other hand, if you’re an environmental attorney (with little business acumen), then you can make up for whatever skills you might lack personally by recruiting a restauranteur to walk you through the process. In other words, find expertise from as many sources as you might need to properly run your company. Your business shouldn’t have any gaps in proficiency.
Almost all new businesses require some form of investment. The most efficient way to calculate your estimated start-up capital is to create a detailed budget or a business plan. Business plans are typically more appropriate in cases when you are trying to obtain capital from an outside investor or a financial institution. This requires more work because a business plan must not only include your proposed initial budget, but also budget forecasts, a description of the business, management details, risk factors, barriers to entry, a market analysis, and a plethora of other information that a serious investor would want to review. To be 100% clear, whether or not your situation compels you to develop a formal business plan, you should always research all of the foregoing considerations before initiating your business venture.
On the other hand, if you are able to self-fund your new business, then preparing a comprehensive budget for yourself is the best way to assess your potential financial exposure. Remember that the budget should include any existing assets that you can contribute to the business, because they will lessen your start-up costs (using the DJ/producer example above, you could already have much of the equipment you will need, but some of it might have to be upgraded or replaced with new or leased equipment). Before spending a dime on your new business, you should have your budget reviewed by an entrepreneur, venture capitalist, accountant, or any other person who can give you competent and honest feedback on the robustness of your calculations, particularly if they have specific industry knowledge.
For additional advice on choosing a business type and starting a small business (including how to prepare a business plan), see Start the Right New Business for You and The Small Business Start-Up Kit.