This chapter helps you determine whether you have chosen the “right” business for you—one that you know, like, and will work hard for and that makes economic sense. Most experienced business people complete several steps as a rough and ready template to decide whether to complete a plan. If your business passes all these steps with flying colors, it means it’s a good idea to write a full business plan (although it doesn’t guarantee success). On the other hand, if your proposal doesn’t pass, you’ll probably want to modify or change your plans altogether.
If you’re like most people, chances are your business will pass some tests easily and fail some of the others. Antoinette faces just that problem in this chapter. Pay careful attention to how she approaches that dilemma; her method of proceeding may help you in your decision.
1. Know Your Business
One of the most common questions people ask me is this: What business should I start? My answer is always the same—start a venture that you know intimately already. I don’t believe any business exists that is so foolproof that anyone can enter and make a sure profit. On the other hand, a skilled, dedicated owner often can make a venture successful when others have failed. Remember, your potential customers will exchange their money only for the conviction that you are giving them their money’s worth. And that means you’ll need to know what you’re doing. While this point should appear obvious, sadly—it isn’t.
Many people enter businesses they know little or nothing about. I did it once myself. I opened an automobile tune-up shop at a time when, seemingly, they couldn’t miss. I knew a good deal about running a small business, had a personality well suited for it, and could borrow enough money to begin. The end of what turned out to be a very sad story is that it took me two years and $30,000 to get rid of the business. Why? Because in my hurry to make a profit, I overlooked several crucial facts. The most important of these was that I knew virtually nothing about cars and I didn’t really want to learn. Not only was I unable to roll up my sleeves and pitch in when it was needed, I didn’t even know enough to properly hire and supervise mechanics. In short, I made a classic mistake—I started a business in a “hot” field because someone was foolish enough to lend me the money. How can you apply my lesson to your situation? Let’s say you’ve heard pasta shops make lots of money and you want to start one. First, if at all possible, get a job working in one, even if you work for free. Learn everything you can about every aspect of the business. After a few months, you should be an expert in every aspect of pasta making, from mixing eggs and flour, flattening the dough, and slicing it into strips. Ask yourself whether you enjoy the work and whether you are good at it. If you answer “Yes,” go on to the second important question: Is the business a potential money maker? You should have a pretty good answer to this question after working in the field for a few months.
If you’re unable to find employment in the pasta business, make a tour of delicatessens and shops that make their own pasta. Interview the owners. To get reliable answers, it’s best to do this in a different locale from the one in which you plan to locate. Small business owners are often quite willing to share their knowledge once they are sure you will not compete with them.
I remember reading a management philosophy that said that a good manager doesn’t have to know every job, only how to get other people to do them. That approach may work well in a large corporation, but for a small business, it’s dangerously naive. In short, don’t start your small venture until you know it from the ground up. I mean this literally. If you’re opening a print shop, you should be able to run the presses and do paste-up and layout, as well as keep a coherent set of books. If it’s your elegant little restaurant and the food isn’t perfect, you’re the one who either improves it in a hurry or goes broke. If you don’t like getting your hands dirty, choose a clean business.
Are You Choosing a Risky Business?
When considering the businesses you know, it is helpful to know how well they typically fare. For instance, these businesses have higher than average failure rates:
- computer stores
- laundries and dry cleaners
- florists
- used car dealerships
- gas stations
- local trucking firms
- restaurants
- infant clothing stores
- bakeries
- machine shops
- car washes
- e-commerce
- grocery and meat stores.
If your business idea is on this list, it doesn’t mean you should abandon it automatically. However, it should remind you to be extra critical and careful when preparing your plan. I’ve known successful business people in every category listed, just as I have known people who have failed in each of them.
2. Be Sure You Like Your Business
Does the business you want to own require skills and talents you already possess? If you have the necessary skills, do you enjoy exercising them? Think about this for a good long time. The average small business owner spends more time with his venture than with his family. This being so, it makes sense to be at least as careful about choosing your endeavor as you are about picking your mate. A few of us are sufficiently blessed that we can meet someone on a blind date, settle down a week later, and have it work out wonderfully. However, in relationships, as in business, most of us make better decisions if we approach them with a little more care.
Be sure you aren’t so blinded by one part of a small business that you overlook all others. For example, suppose you love music and making musical instruments. Running your own guitar shop sounds like it would be great fun. Maybe it would be, but if you see yourself contentedly making guitars all day in a cozy little workroom, you’d better think again. Who is going to meet customers, keep the books, answer the phone, and let potential customers know you are in business? If you hate all these activities, you either have to work with someone who can handle them, or do something else.
Here’s one last thing to think about when considering how much you like your business idea. In fact, it’s a danger that threatens almost every potential entrepreneur. Precisely because your business idea is yours, you have an emotional attachment to it. You should. Your belief in your idea will help you wade through all the unavoidable muck and mire that lies between a good idea and a profitable business. However, your ego involvement can also entail a loss of perspective. I’ve seen people start hopeless endeavors and lose small fortunes because they were so enamored with their “brilliant ideas” that they never examined honestly the negative factors that doomed their ventures from the start.