1. Do You Want to Start a Business?
2. Strategy for Choosing Your Business

Knowing how to decide what business to start is a very complicated issue. Before choosing what type of business you will launch, for example, there are numerous factors you need to consider, including if you actually have the desire to start a business and the amount of money you will need to get your company off the ground.

Do You Want to Start a Business?

If you've been thinking about starting a business, there are a few questions you need to ask yourself before you invest any of your money. In particular, you need to decide if you're actually equipped for business ownership and operation. Do you have the skills necessary to be a successful entrepreneur? Starting a business can be very risky, but also extremely rewarding.

When you start your business, your entire net worth can be at stake. In addition to the monetary risk, running a business comes with a great deal of stress and will almost certainly eliminate all the free time you formerly spent on your friends, family, and hobbies. You should prepare to face obstacles at every turn when launching your company, including being told “no” numerous times by potential investors and other funding sources. If you want your business to be successful, you cannot take these rejections personally or let them deter you from your long-term goal.

Luckily, there are several ways you can reduce the risk inherent in starting a new business:

  • Don't be afraid to ask for help.
  • Carefully consider every step you need to take to start your business.
  • Keep asking yourself questions throughout the process.

Risk assessment should be an ongoing task for new business owners. Think about what you'll need to sacrifice to start your business, and consider what you stand to lose if your business fails. Never risk more than you afford to lose. You shouldn't sacrifice your health or happiness when starting your company.

Strategy for Choosing Your Business

If you're trying to decide what type of business to start, there are several strategies you can use to help you choose your idea. First and foremost, you need to figure out the industry you find the most interesting and potentially rewarding. You should remember that businesses that specialize in a specific industry tend to be more successful than business that aren't specialized. Once you've chosen your industry, you should research businesses in the field, as well as their models.

Examine the market, and decide if there is a need that isn't currently being met by other businesses. Unmet needs can include issues such as:

  • Location
  • Pricing
  • Services and products

Your goal should be to have your business last for many years, so it's important to pick a business idea that has the potential for both long-term and short-term economic growth.

Learning more about your potential competitors is another important part of choosing a business idea. If pricing is the only way to compete with other businesses in your industry, you may want to move on to another idea. To compete on price, you'll need to have the lowest costs in your field, which is incredibly difficult for new businesses.

Businesses in the service field are typically a good choice, as you will have pricing power, meaning you can attract customers without having the lowest prices because your quality service will be enough to draw business away from your competitors. If you've identified an unmet need in the marketplace, you should write a basic business plan that will serve as a roadmap for how your company will meet that need.

You should avoid choosing a business idea that will be overly challenging. For example, product manufacturing can be very difficult on your own, and will generally require you to find an affordable supplier and possibly to outsource your manufacturing tasks. If you are interested in creating a product, you may want to establish a hollow corporation. Essentially, a hollow corporation is a business that makes a product, but uses subcontractors for the actual manufacturing of the product.

Some businesses focus on marketing patents and inventions, and if you want to start one of these businesses, there are a few things you should consider:

  • Are there any registered patents similar to the invention you are planning on marketing?
  • Are you involved with a marketing firm that requires up-front fees? If so, you should look for a new firm.
  • Has the product received positive feedback?

If you need help with how to decide what business to start, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.