Once you've decided to walk the entrepreneurial path, the next question to ask yourself is, "What type of business do I want to start?" There are thousands of choices. Even things you might think are out of your reach may not be. Short of something like pharmaceuticals that requires enormous research & development budgets, there are virtually no limits: automobile manufacturing, food products, import/export, and many others are open to even the individual entrepreneur.
The Traditional Approach
The traditional approach to entrepreneurship is a methodical, scientific process. Generally speaking, the approach consists of researching the market, identifying a need, and creating a business to fill it:
- Identify the industry you're interested in.
- Research the kinds of businesses and various business models within that industry.
- Perform market research to see where there is an unmet need -- geographically, price wise, complementary products and services, etc.
- Analyze the competition.
- Develop a preliminary business plan for a business to meet that need.
- Conduct more market research to assess the realistic market potential for your business.
- Revise the business plan and determine your funding requirements.
- If needed, seek out lenders or investors.
- Start the business.
Needless to say, this is not something you just knock out in a weekend. The most obvious problem with this approach is that it's extremely labor-intensive and potentially expensive to even decide whether or not to go into business. Of course, that time spent on the front end reduces the risk of failure down the road.
The other problem is that you may very well end up realizing far too late that you're doing something you really don't want to be doing, just because you figured you could make some decent money at it. Even when you're the boss, you can still end up feeling stuck and unfulfilled.
Do What You Love, and the Money Will Follow
In recent years, this philosophy has become increasingly popular following the success of the book Do What You Love, The Money Will Follow, by Marsha Sinetar. While the approach sounds great, as career coach Dr. Marty Nemko puts it:
Millions of people have followed their passion and still haven't earned enough money to even pay back their student loans, let alone make even a bare middle-class living doing what they love.
It's not the book's fault. It's a very fine book that will take you through a number of exercises to help you discover your true life purpose and find a number of different ways in which you can fulfill that purpose in your work. It will teach you to distinguish the true inner voice from the flash-in-the-pan ideas that constantly run through your head. Maybe it will help you be one of the few to beat the odds and pursue your dream career.
The problem is that most people don't read the book and go through the intensive self-discovery exercises it prescribes. When it gets boiled down to a mere slogan, it's more likely to become, "Do what you love until you go broke and can't do it anymore."
- No one wants to buy it. You're passionate about it, but apparently, no one else is. You can't sell people something they don't want to buy.
- Someone else already thought of it. You have a great idea, but it's a niche market, and someone already beat you to it. If they're better funded, they may be doing it better/faster/cheaper.
- A lot of people already thought of it. Highly competitive markets are no fun. If you're constantly having to go head-to-head with competitors, it will get old very quickly.
- There's more to it than you realized. You underestimated the costs, or the development time, or the incubation period for the marketing to take effect, or the amount of energy required, or the toll it would take on your personal life.
While pursuing your passion is an admirable goal, doing so to the exclusion of all reason and responsibility isn't.
Best of Both Worlds
These approaches are not entirely mutually exclusive. Let's start with the idea, rather than with formal research. Some of the possible sources for business ideas include:
- Self-discovery. Find out what you're truly passionate about and figure out how to make it a business.
- Inspiration. That idea that just popped into your head one day may not be so crazy after all.
- Observation. Be constantly looking for unmet needs. Is there a product or service that you would buy if it were accessible and affordable?
- Imitation. One way to increase your odds of success is to find a proven business model and replicate it in a different market. Consider buying a franchise, where you'll have a proven business model and outside support for your business.
It doesn't matter where the idea comes from. What matters is what you do with it. And no matter how brilliant you think the idea is, you need some external input - a "sanity check", if you will. Even if you don't have the time or money for extensive formal market research or business planning, do the informal research yourself to find out if there's a market for your idea and to assess the viability of your business concept.
You can ask your friends and family, but when you do, make sure to let them know exactly what you are looking for -- honest, detailed feedback on the idea. True friends will be supportive of your ability to succeed, but they will also be honest with you.
The Next Steps
If you make it past the friends and family round and still think you've got a viable business concept, put together a basic business plan. It doesn't have to be incredibly detailed -- you're not going to the bank or investors with it.
Think of the three to five most successful entrepreneurs you know. Contact them and see if they'll take a look at your business plan and meet you for coffee or lunch to discuss it. Now would also be a good time to find a mentor.
If you feel you need some market research, turn to an online community in which you participate regularly, or find an online community of people who match your target market. Ask a few questions in the discussion forums, preferably open-ended ones that will get you qualitative information, rather than just quantitative data. It may not be as statistically accurate as formal market research, but if you're not talking about risking huge sums of money, it's probably good enough. The higher the risk, the more formal research you need.