Q: I definitely want to start a business, but I have no idea what type of business I should choose.
A: Wait. Take your time slowly thinking through different possibilities. Be realistic about how much time and money you want to invest in your business. Hold on to your job until after you have firmly decided on a particular business and established a solid plan for starting your business. You will be investing a large amount of money, time, and energy in this business, so don’t rush the process. Make sure you are not going to say, “I wish I had started a bowling alley instead,” six weeks after you open a pizza parlor!
Q: I want a nice income from my business, but not huge risks . . . any ideas?
A: Consider a service business. Generally, service businesses require less investment than other kinds of businesses. Retail, wholesale, and manufacturing or product businesses require large investments in some combination of inventory, raw materials, finished goods, receivables, equipment, space leases, and/or leasehold improvements.
Service businesses are also less likely to get clobbered by powerful national firms. Profit margins can be sky-high, even with a relatively small level of sales. With a service business you are less likely to become a billionaire, but you are also less likely to end up working for the hamburger chain that sells billions of burgers after your business fails!
Q: I have a new business idea that is so great I don’t want to tell anyone about it. Should I keep it a secret?
A: First, let me assure you that there are literally millions of ideas for new businesses floating around and you can’t be paranoid about people stealing your particular idea. It is unlikely that anyone hearing of your idea will become so excited about it that they will junk their current work to pursue it. Also, you should be asking for feedback on your ideas, preferably from potential customers, before you invest your life savings in a new business. If you keep your idea a secret you won’t be able to share it with potential investors, lenders, employers, and suppliers.
Although it is conceivable that your idea is so strong that you may create the next Facebook or Walmart, chances are overwhelming that a company based on your idea is going to be a lot riskier than a company based on an existing business that you are trying to execute with a new twist.
Q: How can I quickly learn more about a business I am considering starting?
A: There is no substitute for working in the business. Even if you work for a very short period of time in an entry-level capacity you are going to get a much better grasp of how that business works than you would through research or reading. For example, I decided to start a newspaper while I was in college. Instead of waiting several years to work my way through each position on a newspaper staff, I worked for five days as a proofreader. Proofreading a newspaper is not much different or more fun than proofing a term paper, but it placed me in the middle of a working newspaper office. It allowed me the time to observe the more interesting and important work that everyone else was doing. I was able to start up my newspaper with a working knowledge base, as well as the help of some very motivated but equally inexperienced friends.
An alternative approach, if you are buying a business, is to have the seller work with you for a short period of time to show you how things are run. Be sure to write any such understanding into the purchase and sales agreement, including holding back part of the payment until you have learned how to run the business. You can also contact the trade association connected with your industry and see if it offers any seminars or has information packets about getting started in that particular business.
Q: Should I keep my full-time job when I start a new business?
A: If you have a good job and are starting a relatively small and simple business, I would strongly suggest you keep your existing job while starting your business. In a fairly uncomplicated business, such as a lawn care service or local retail store, you can hire hourly workers to do the core work during business hours for less than you are earning in your full-time job. Then you can do the more critical work, such as quoting jobs or developing promotional schemes, at night or on weekends. The cash flow of a new business invariably starts slowly and tends to be more erratic than most people anticipate. Holding on to a salaried job can really help you make it through the slow seasons typical of a new business. My grandfather actually started his shoe factory, by no means a simple business, while retaining his full-time job as a sales manager for another shoe firm. He even got his boss to finance his new venture!
Q: Is starting a business a good time to relocate?
A: Even if you’re not that happy where you are living currently, trying to both move to a new location and start a business at the same time is not something that I would recommend. I would prioritize one or the other to do first.
Starting a business is generally a socially isolating experience. After the long hours and hard work you are unlikely to have lots of energy for building a new network of friends and non-work activities in a new setting. In addition, moving can by more psychologically taxing than most people think it will be.
However, you really want to start a business in a place you want to be for a long period of time. Relocating a business can be very expensive in terms of both cash outlay and disruption to the operation of the business.
If you are starting a firm that will serve a national market, you may want to relocate to a state that is hospitable to business in general. While taxes, utility rates, and bureaucratic red tape may not be a big factor as you start your business, they could become more significant as your business grows.