If you’re a typical entrepreneur, you’re a creative person, and you frequently come up with new ideas for how to do business. So often, in fact, that you need to learn how to choose wisely about which ideas are worth your while to pursue.
Making the right choice about a new angle for your business requires more than just determining its potential profitability, although that’s a good place to start. You also need to make sure you choose paths for your business that are a good fit for the kind of person you are. Here are five factors I often recommend to my coaching clients to use in evaluating any new business idea.
1. Profitability: Assess not only how much money you might earn from this idea, but how much money you want. Are you trying to build an empire or just make enough to live on? Project your estimated sales, marketing expenses, and all other costs to implement your idea, and see how well its profit potential matches your financial goals.
Please don’t leave this step out, even if you don’t consider yourself a “numbers person.” No business idea is so good that it’s worth doing without first checking to see if it can be done profitably.
2. Capabilities: For every business idea you implement, you must wear three hats — managing the business end, selling the product or service, and producing or delivering the product or service.
If you’re light on business management skills, you may want to stick to simpler concepts, like personally delivering a service, rather than complex business models involving many people or detailed logistics. If you aren’t fond of sales, you may ant to consider ideas where less personal selling is required, such as products or services that can be successfully sold online.
You can hire people to help with the areas where you lack skills, of course, but then you’ll need to include those costs in your profitability estimate. In general, your new ideas will succeed more quickly when you choose to offer products and services you already know a great deal about. Having to learn on the job will slow you down, and take time and energy away from your ability to deal with the other challenges of launching a new line of business.
3. Interest Level: What do you want to be doing all day? Do you enjoy working alone with your computer, do you like talking on the phone, or do you prefer being with people in person? Choosing ways of doing business that conflict with your natural preferences can set you up for failure.
What kind of people do you enjoy spending time with? If your customers are people you like, doing business becomes much easier.
What will hold your interest over the long haul? If your business idea is successful, you don’t want to get tired of it.
4. Lifestyle: Consider the daily or weekly schedule you want to work, how much you want to travel, the kind of clothes you like to wear, and the physical environment you want to spend your time in. If you like to stay up late and sleep in, you don’t want to be in a business that requires you to be on call early in the morning. If you don’t like being on the road, you’ll want to avoid business ideas that require a lot of travel.
Decisions like these may sound obvious, but many entrepreneurs forget to think about their lifestyle preferences in choosing how to work.
5. Goals: Make sure that this business idea will also further your personal goals. Financial goals are important, but so are others.
What kind of relationships do you want to have with the individuals and communities your business touches? When would you like to retire? Would you like to be able to sell this business at some point? What would you like to be known for? What contributions do you want to make to a particular cause or the world as a whole?
What would you most like to accomplish in your life?
Before launching into your next business idea, stop to consider all of these factors. When your business plans are a good match for your personal goals and preferences, you’ll find it much more possible to build a successful business and a rewarding life at the same time.