Congratulations! You’ve made the monumental decision to forge your own path and start a small business. Now comes the big question: what type of small business will you start? Whether you plan to offer physical products and services or run an online business, you need to nail down exactly what you plan to do. The more narrow your focus, the better your chances of success as a new business owner.
What Type of Small Business Should You Start?
You likely have a good idea of what kind of business you want to start. However, if you haven’t already, narrow down the focus of your business idea as much as possible. What’s the state of the industry of your new business? Make sure the industry has good potential to turn a profit for a new business.
What Kind of Problem Can You Solve?
Regardless of what kind of business you plan to start, your goal should be to solve an existing problem. As long as a problem exists, there will always be a market for a solution. Your business idea might not be brand new. There might be a lot of competition in that niche. However, consumers are always on the hunt for a better or more efficient way of solving a problem and that’s where your business can find its footing.
Since you should be passionate about your business, you should also be passionate about the problem you want to solve. Your primary research when planning your new business should focus on the issue and your solution.
Once you identify the problem your business will address, focus on how your business will solve the problem in a unique way. How will you set your service apart from your competitors? How can you tackle the biggest pain points in an effective manner?
What Do You Need to Know Before Starting a Small Business?
No matter how good your idea, your business will fail to thrive without careful planning. Many entrepreneurs have the passion and courage it takes to strike out on their own. However, 20% of new businesses fail in their first year and 50% fail in their fifth year.
It’s not that these entrepreneurs didn’t have what it takes to make it as a successful business owner. Rather, it’s more likely that their businesses failed due to poor and inadequate preparation.
Before you launch your business, ask yourself the following questions:
- How much capital do you need to get your business up and running?
- What operating expenses will you incur?
- How will you structure the business? You can form your business as a sole proprietor, a partnership, or a corporation, just to name a few.
- Will you hire a team, outsource, or work solo?
- Do you plan to quit your job to focus on the business full-time or work on it during your free time?
- Do you have someone you can go to for advice who has experience in small business ownership?
- How will you maintain a work-life balance?
- Will your business require a physical location? If so, have you done the necessary research to ensure your target customer base will have access to the business?
- What, if any, government compliances apply to your new business? These could be at the municipal, state, or federal level.
As you can see, there is a lot of planning that needs to go into operating a successful small business. It’s crucial that you work methodically and do your research to avoid frustration and burnout.
Successful small business owners not only have a solid plan for their business, but they also have a strong support system. Avoid burnout by surrounding yourself with positive influences who are excited for you and your new adventure.
What Should You Research Before Starting a Business?
With extensive research on your target markets and a detailed marketing strategy, you can start your business off on the right foot. During your planning phase, devote a good chunk of time to research and brainstorm ideas that will help your new venture succeed.
Research is a crucial step before starting any new project. However, it’s especially important that you take the time to research the following aspects before launching a new business:
The most common types of business structures are sole proprietorships, partnerships, Limited Liability Companies (LLCs), and corporations. Although it is possible to convert to a different business structure at a later time, you’ll save yourself time in the long run if you research which business structure is best for you.
What business structure you choose will affect many aspects of your business. The most notable of these is how much you will pay in taxes. Think carefully about how you want to structure your business. Each structure comes with its own set of benefits and protections, so research at this stage is especially important.
How to Conduct Market Research
One of the best types of research to conduct prior to starting a new business is market research. Market research entails gathering and analyzing data about the market for your particular product or service. Through market research, you’ll gain insights into the past, present, and potential future customers, their buying habits, locations, demographics, and much more.
There are two types of information that come from market research:
- Primary information: This is research you conduct yourself (or hire someone else to do it for you). You can gather primary information through the following methods:
- Focus groups
- Field trials
- Secondary information: Secondary information has already been conducted, whether by competitors, government agencies, educational institutions, or other businesses.
Gather as much market research as you can and then analyze it to give your business an edge over the competition. Find out what’s worked for other businesses, what hasn’t worked, and try to find gaps in the competition. Your market research should help you narrow down your buyers’ persona as much as possible so you can tailor your marketing strategy accordingly.
It’s not enough to have a good business idea. You need to put in the legwork before you launch to give your business the best chance of survival and success. Between selecting how you’ll structure your business to defining your target customers, there’s a lot to think about. To ensure you’re not missing any important registrations, licenses, or tax forms, talk to an accountant who can guide you through the process.
Ready to take the next step? Check out our article on how to create a solid business plan.