Steve Meisenheimer has a great entrepreneurial advice newsletter – I regularly find helpful info and ways to improve my business from his ideas. The latest issue prompted me to write because he talks about going into the "right" business. As entrepreneurs, we have the potential to re-invent our businesses to suit our interests at the time, and one of the keys to doing it successfully is to make sure you're going in the right direction.
Steve has graciously given his permission to reprint the article for you here. Thanks, Steve! You'll find his contact info at the end of the article.
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HOW TO IDENTIFY THE “RIGHT” BUSINESS TO START
"Life isn't about finding yourself. Life is about creating yourself."
– George Bernard Shaw
Would you like to either start or buy a business? If you’re an entrepreneur at heart, the answer is always, “Absolutely!” But how do you identify which business you should be in?
A client told me he wanted to start a new business. I asked him my “Two Critical Questions” for those interested in starting a new business, and it became clear that he had not yet qualified it as the “right” business for him.
The decision to get into a business is one you will either relish for years, or one you will regret for years. The difference is in how you think through the decision of which business to start.
Most people limit themselves to a field in which they feel technically strong or comfortable, however, you should choose a business based on your specific interests, skills, and resources. When you have satisfactorily answered my Two Critical Questions, you are far more likely to start a superior business in every way – one that will grow easier, be more profitable, fit your lifestyle, and be more enjoyable for you to manage.
The Two Critical Questions are:
- What will be the purpose of this company?
- What will be the characteristics of this company?
When a financial advisor makes a recommendation for a particular investment, it will be to balance the client’s ambitions with the client’s tolerance for risk. Starting a company requires a similar approach. For instance, one might prefer slow, steady growth that produces a retirement income with low risk, while another prefers rapid growth for a quick sale, tolerating higher risk. There are many reasons why people start companies; your particular motivations should be what guide the many decisions that lie ahead.
What will be the characteristics of this company?
Skipping this step increases the likelihood that you'll just end up with a “job” – but a “job” where you also happen to own the company and assume all the risk!!!
For example, let's say that you want this list of characteristics in a company before you would consider moving forward:
- A proven franchise not yet developed in your local marketA minimal number of employees Requires minimal employee supervision Easy expansion into multiple locations
- High gross margins
- At least a 20% annual return on your investment
- A maximum of a one year break-even point for each location
- Success to depend on existing local traffic (e.g., busy street corner or a popular mall), not a large investment in marketing
By each item, you should write down if it’s a “preference” or a “non-negotiable”. Each item on your list will likely be tested as you begin shopping and negotiating the deal. You should decide in advance what the “deal breakers” are.
The secret to this step is to begin your list before you're already infatuated with a particular business. Otherwise, you default to wanting what that business will provide, and not what you really want. The above is an aggressive list, but you must admit, there are businesses out there that can satisfy it.
Lastly, consider my Three-Option Rule: “Commit to not making a final decision until you locate at least three businesses that satisfy your list.” The power of the Three-Option Rule is that it might be your only real ally in making your final (and best) decision. You might see great potential and get very excited about every business you investigate. You will feel time pressures imposed by everyone involved for you to move forward quickly. But when you have three qualified opportunities to choose from (based on your list), you will understand the power of this rule.
The value of the Two Critical Questions and the Three-Option Rule is to help you customize your business so it can serve your interests, while optimizing your skills, and resources. Then you will know the exhilaration of being one of the few business owners who just “luckily” find themselves in the right place at the right time. That, you will find, will make your success made to order.
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Steve Meisenheimer
Steve@MeisenheimerInc.com
www.MeisenheimerInc.com
602.889.0155
Visit Steve's website to subscribe to his newsletter, "Your Strategic Advantage", or to order his books:
* "The Business Owner's Handbook: Volumes I&II"
* "Where Are You Taking Us: A Leader's Guide to Vision and Mission"
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End reprinted article.
