Categories: Business & Start-ups

Factors to consider when starting a small business

When you finally discover that you will never make it big working for someone else, the idea of starting a business comes up. What should you look at as the best small business to start?  Most entrepreneurs give up at the first step-finding the right small business to start. The following are some of the things that can help you make an informed decision:

Business Start-up

Get ideas for small businesses 

Sit down with your business partners and brainstorm. Read inspirational accounts of those entrepreneurs that started small and have made it big like Bill Gates, the late Steve Jobs, Richard Branson, to get your creativity flowing. Start out small by keeping your ideas as simple as possible at first. You should focus on margins – the best businesses sell a high volume of high-margin products. Common high margin products tend to look and feel cheap. If you are offering a service such as auto repair-make sure that your company has something that sets it apart from its competitors. 

Criteria to consider

Test your ideas against the following criteria:

Starting Capital

  • How much cash do you have on hand to devote to your new business?
  • How is your credit rating?
  • How much more capital will you need from venture capitalists. angel investors, family, friends or the bank to get started?
  • How many years are you willing to dedicate to clawing your way back to profitability?

Location

  • Where will your business flourish?
  • What are the income levels of the average person in the area?
  • Will they find your product too expensive?

Market Saturation

  • Are there similar businesses in the immediate area?
  • What are the advantages and disadvantages your company has compared to competitors?
  • Are there any businesses that your company can complement?

Market Demand

  • Has there been a proven demand for your product or service in the area?
  • Have companies offering the same products attempted and failed before you?
  • Make sure you do a thorough market research both qualitative and quantitative to get an accurate gauge of demand for your proposed product or service .

Growth Potential

  • Find out how long it will take to achieve profitability?
  • Will your business last longer than 5 or 10 years?
  • Once profitability is achieved, how do you plan to grow? like through Expansion, Outsourcing or acquisitions?

Barriers to Entry

  • Can your product or service be easily mimicked or is it a niche product possibly protected by patents or trade secrets?
  • How hard will it be for prospective competitors to chip away at your business?
  • How can you build a protective moat around your company with side businesses to insure that your company business is protected?

Your idea should be able to go through all of the above criteria. Your idea must be sustainable in the long run. Shrewd planning, careful market timing and long-distance foresight are the keys to establishing a successful small business.

You can also read: Important steps to a start-up

John Mulindi

John writes on a variety of topics. He blogs on topics ranging from social media marketing (SMM), search engine optimization (SEO), search engine marketing (SEM), email marketing, business, personal finance tech, entrepreneurship to personal development. In free time he likes watching football, reading, listening to music and taking nature walks.

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