Usually, the best business for you is the one in which you are most skilled and interested. Secondly and most importantly, others must perceive a real need for your product or service. For example, if you grew up in Owensboro, Kentucky you would love barbequed mutton since you probably ate it almost every day. However, if you moved elsewhere, you might be an expert on how to barbeque mutton but it would be difficult to find a customer that cared. As you review your options, you may wish to consult local experts and business people about the growth potential of various businesses in your area. Matching your background and willingness to adapt to the business's requirements will increase your chance of success.
What are some of the characteristics of the different types of businesses that I should consider?
A business might target it's primary customers at the retail (individual consumers) market or wholesale (other businesses), it may be primarily a service business or sell a product, if it sells a product then it might make the product or simply resell someone else's product, and the market might be high volume with low value or low volume with high value:
Retail vs Wholesale
Clients: Individual Businesses
Hours of Operation: Extended 9-5; five days a week
Geography: Anywhere Large Metropolitan preferred
The retail market is made of individual consumers. It generally has extended hours from early morning until late at night for six to seven days per week. Whereas, selling to other business is generally from 9:00 am until 5:00 pm. The location of the retail establishment is very important and must be where the customer lives or works. Generally, the location of your business to serve other business customers is not as important and can more consider the convenience and cost to the entrepreneur.
PRODUCT VS SERVICE
Capital Required: Mod - High Low – Med
Inventory Theft/Loss: Space, count and track None
Growth’s Impact on Profit Margins Probable ‘decreases’ Increases
Selling a product vs a service has many advantages and disadvantages to consider. Unless your supplier is willing to extend credit, significant capital is required to buy products. When you do, you will need a place to put it. You will need to count it, track it, and provide enough security to ensure that it doesn't get stolen. A significant advantage is that if sales are going beyond expectations, you can easily and quickly get more. However, in order to compete in the very high-volume market (for example Wal-Mart) generally the profit margin is under severe constraints.
Make vs Buy (Technology vs Deal Maker):
Technology Deal Maker
Obsolescence Risk: High Low to Moderate
If you decide to sell a product, the next choice may be of whether to make it or buy it from someone else. If you manufacture it then profit may be greater by lowering the cost of acquiring the product but you are always at risk that, in this global economy, someone may technologically obsolete your manufacturing process or, worse yet, your product. Even if you own the patent rights to the product, you may still consider having someone else make the product that has the facilities and equipment to do so. This will minimizes your initial capital requirements.
Volume vs Value
Profitability: Cost-Plus Value Pricing
Sell: 1,000,000@$1 (e.g., mustard sauce) 1@$1,000,000 (e.g., building)
Another consideration is whether your business will involve selling lots of low value things (such as jars of family's secret recipe of mustard sauce) or a few large items at high value (such as an office building or airplanes). If you decide that your product is the high-volume-low-cost item then you should determine how many must be sold in order to make it worth your while. Envision the physical requirements that such a volume would require. For example, if you've decided to make your family's secret recipe of mustard sauce and have determined that you must sell 100,000 pints per month (21 weekdays) to make a decent living then you should ask yourself if kitchen can produce 4,762 pints of mustard sauce in one day. If not, then you're either not done with the plan or the plan should end before you waste a lot of money on a false start.
Global vs Local
Competition: Global Eye-to-Eye (Home field advantage)
Every entrepreneur wants his/her business to be world-wide. However, be careful of what you wish for. Global competition means that you need an awareness of what your competition is doing, on the other side of the globe, while you sleep. Staying local, such as a doctor or lawyer or shoe shine stand, keeps the worry of competition to a minimum. You will be able to more easily learn what they are doing and they're probably sleeping when you are.