My thoughts on business types.🤔
When people ask me for advice on which business type they should start, they usually expect a specific response. Maybe even a list of business ideas that are “hot” or worth considering.
The reality is that there isn’t a perfect answer for everyone, because everyone has different interests, skills, needs, and goals in life.
Only you can determine which business model works for YOU.
Here’s my own thought process on evaluating businesses for myself. It’s based on decades of discoveries, mistakes, and wasted money and years of time.
I start with the end in mind.
1. What do I want my lifestyle to look like?
2. How much time freedom will I be able to realistically create from this business idea? Does it require set business hours and 40+ hour weeks?
3. How much location freedom will it allow; Will I be able to work anywhere in the world, or will I have to show up to an address each day?
4. Does this business idea have the potential to scale to arrive at my own financial goals? How much do I need to profit in order to live my desired lifestyle?
5. Does this business model carry enough profit margin to sustain economic cycles going up and down? Is it something that potentially thousands of customers need, and will always need?
6. Most importantly: Will I be happy and fulfilled doing what I do? Is this something I’m actually passionate about, and have a lot of energy to pursue? Is there purpose behind my performance?
Most business owners start something without truly asking themselves these questions. The majority of them I’ve spoken with, pursued something primarily to earn enough money to avoid having a W2 job for themselves.
Too many start businesses that will never be able to scale in order to reach their financial goals, or their time freedom goals. They are self-employed but run a company that has no value if they ever wanted to sell it.
Others start businesses within industries that have a razor thin profit margins, working insane hours weekly just to keep their head above water. They can’t ever seem to get ahead. Business feels like a trap.
Some start businesses around their hobbies, only to discover the financial limits and time restrictions a couple years into the business. They didn’t think far enough ahead…
There are endless ways to make money. There are only a few that do so, while also creating enterprise value and keeping your sanity, and potentially your time freedom.
If the business idea passes the sniff test on those initial questions, I’ll then assess the idea with these further questions:
7. Is this business idea within a growing industry, or at least a long-term stable industry that won’t easily be replaced by technology or shut down due to risky govt regulations or changes to laws?
8. Is there potential to operate with a prepaid, positive cash flow business model? Bonus if there is monthly or annual recurring revenue (MRR or ARR).
9. Does the potential exist to scale profit at a higher percentage than increasing overhead costs? Meaning, does it scale profit faster relative to adding employees? Few employees, higher output.
There are other questions to consider, but these are where I start when it comes to assessing ideas. If it doesn’t make it past the first group of questions, I’m not interested. If it makes it past the second group, I’m increasingly interested.
Tony