How to choose the perfect business

* The calculations use the average data for the World

Where to start a business? With an idea! 90% of the solutions you are looking for already exist. As Thomas Edison said, “If you want to come up with great ideas, know the best ones you can borrow.”

As the legendary inventor Thomas Edison said, "If you want to come up with great ideas, know the best of them you can borrow." Indeed, 90% of the solutions you are looking for already exist. Someone must have already looked for them before you, which means you can either go all the way to finding a solution on your own or collect information about an existing solution. Copy other people's ideas, use them, apply them. Anything that can benefit your business is worth it.

Determine for yourself the criteria by which you will celebrate the most interesting: personal predisposition, the amount of start-up capital, quick payback, low level of competition and so on. The main thing is not to try to immediately run away each option through a set of criteria - in this case, not one can reach the final. It is best to choose one or two (a personal interest and prior knowledge of the business sphere is necessary - do not open a meat business if you are a vegetarian) - you will still have time to weed out questionable directions.

At one time, the National Independent Business Federation of the United States conducted a survey on where entrepreneurs who decided to start a business get ideas for. The results were as follows:

  • Previous place of work - 42%

  • Personal interest - 18%

  • Accident - 10%

  • Received offer - 8%

  • Friends or relatives - 6%

  • Family business - 6%

  • Education - 6%

  • Other factors - 6%

(source: N.Siropolis "Small Business Management")

But back to the selection of options. Now that you have in your hands an impressive list of seemingly interesting options, it is time to start collecting more specific information about each of them. And here the Internet is no longer so convenient. However, you can still find the necessary information in it. This time, you will have to deliberately search for such characteristics as: profitability of each of the selected types of business, average payback period, minimum size of initial investments, industry prospects, main competitors (in your city). Already at the stage of collecting this material, the favorites will be determined.

When you have only one or two possible directions to start a business, go to the last stage of collecting preliminary information.

First of all, collect complete information about potential competitors. And not only about them, but about their relatives and acquaintances: it is quite possible that they have such serious connections in administrative bodies that it would be more expensive for them to get involved in this business - they are tortured with checks. It is very useful to visit the offices of competitors and / or their stores: only intelligence on the ground will give you a complete picture of the enemy. It is important to determine for themselves their strengths, but the most important thing is to identify punctures in the work of competitors. The more weaknesses in the work you notice, the more chances you have to win against their background, which means to attract market attention.

With this, it’s worth starting an exploration business. If competitors have stores, visit each of them, pay attention to the average amount of purchases and the most popular products. Take the time and take an observation post at the entrance to the store - coupled with knowledge of the average amount of checks this will provide an opportunity to calculate the approximate income of the company (but do not forget that not all visitors make purchases). I especially recommend meeting someone from the staff - this is an invaluable storehouse of business information. And, of course, advertising: pay attention to where your competitors are advertising, what positions they offer and what marketing campaigns they carry out. Explore their suppliers, take an interest in the terms of procurement and minimum volumes of supplies.

Be sure to put the location of all competitors on the city map - it is quite possible that your eyes will open unreached areas, which will make it possible to choose the most favorable place for opening a store (office).

As you know, one of the most significant expense items of any business, as a rule, is rent, which means that it is worth calculating its cost in different areas of the city. Important tip: before you start a business, be prepared to pay rent immediately for six months in advance: start-up entrepreneurs often fall into the trap of cash shortages. To avoid it, ensure that at least these recurring expenses are paid for. It is especially important to fulfill your obligations on time if your main competitor has extensive connections and leverage.

If the business you are planning to start is specific enough or largely depends on the human factor (as a rule, this is a service sector), think about where you will recruit qualified personnel. Take an interest in the average salaries of the specialists you need.

And of course, work with the customers themselves. Make a list of questions that interest you and while you occupy an observant position at a competitor’s store, interview customers leaving them as a sociological service employee (most importantly, do not do this at the store’s door — you run the risk of running into trouble with security guards). Ask questions why this customer chose this particular store (company), what he likes about the service, so that he changes what he adds.

Try using the respondents to create the image of an ideal company, to identify all their needs and expectations in your chosen field.

Now that you know all, or almost all, of the proposed business, it is time to begin to systematize this knowledge. For each of the factors listed below, evaluate the approximate probability of its occurrence, think about how it will affect your business, and whether you can cope with the new situation.

Let's start by studying the influence of the external environment:

  • Does government policy affect your business? If so, is it expected to pass laws that can change the rules of work in your chosen market?

  • Do social trends (fashion for a healthy lifestyle, for example) affect the situation in your chosen field.

  • Can there be pressure from influential people on you if you really compete with other companies (the case of relatives of competitors in influential structures)?

The influence of market factors:

  • The total market capacity in your chosen field (look for this information on the Internet). If you can only find information about capacity in Moscow (as often happens), multiply this figure by the coefficient of the ratio of residents of your city to the capital and the coefficient of their purchasing power (not in all cities the level of salaries, which means opportunities inhabitants, high).

  • The profitability of this type of business

  • Industry growth rate

  • Seasonality

  • Dependence on suppliers and their quantity

  • Market sensitivity to price, quality of service and the influence of external factors

The influence of financial factors:

  • Market entry barriers

  • Potential profit

  • Capacity utilization and equipment purchase costs

  • Payback period

  • Cost of attracting a loan

  • The effect of economies of scale (large companies may require exclusive discounts from suppliers, which means they have the opportunity to sell goods at the lowest prices).

Competition :

  • What competitors exist in the market, their quantity and market share

  • Strengths of each competitor

  • Weaknesses of each competitor

  • The degree of concentration of competitors in the market

  • Tendency of competitors to unite for joint projects

  • The list of indirect competitors in the market, their share and possible impact on your business

  • The likelihood of substitute goods or services

  • The likelihood of new competitors (for example, the arrival of Moscow networks in the regions)

Only by answering all questions, you can be sure that you finally have an idea about the chosen field, and are ready to start a business. And although, of course, it will not be possible to calculate all the options for the development of events, the answer to the above questions will help to avoid most of the business traps.

Tatyana Nikitina,

Founder of clogicsecure.com. Entrepreneur. Business trainer.

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