Starting the Right Business for You

If you want to work foryourself, but don't have a particular business in mind, you're probablywondering what kind of business you should start. Fortunately, theanswer is always the same: Start a venture you know intimately.

Know the ins and outs of the business

Don't fall into the trap of starting a particular businessjust because someone tells you, "It's a sure thing." Potentialcustomers will part with their hard-earned money only if you convincethem that they're getting their money's worth, so you'll need to knowwhat you're doing, no matter what the task.

Choosing a business you know

Starting a business in which you already have experience hasmany advantages: You can use your knowledge about the industry, yourtraining and skills, and your network of contacts, who might help youfind financing, suppliers and customers.

If you're interested in turning something you know and love into abusiness, talk to people you've worked with about what it takes to runthat kind of business. Learn all you can about start-up costs, overheadand expenses and how much revenue you can expect to make.

If you have several interests, but aren't sure which would make thebest business, consider how you can translate your strengths, educationand skills into business opportunities, and research the marketplace tosee which types of business are presently needed in your area.

Starting a business in an unfamiliar industry

Unfortunately, the lure of quick profits convinces manypeople to start businesses in areas they know little or nothing about.This is a sure recipe for failure.

If you don't know much about the business you want to start, but areset on it, be prepared to spend enough time learning it before youbegin.

Research and evaluate your business idea

Here's a step-by-step guide to evaluating whether you andyour chosen business are a good fit.

1. Try it out. Before you start a business of yourown, get some experience in the industry or profession that interestsyou -- even if you work for free. Learn everything you can about everyaspect of the business.

For example, if you want to start a pasta shop, but don't know raviolifrom cannelloni, go out and get a job with a pasta maker. After a fewmonths, you should be an expert in every aspect of pasta prep, frommixing eggs and flour to flattening the dough and slicing it intostrips.

2. Evaluate whether you enjoy the work and excel at it.If not, find a new venture. It's a lot harder to make a success of abusiness you don't like, and it's unlikely you'll like something you'renot good at. If you enjoyed the work and determined you were skilledenough to base your own business on it, go on to the next step.

3. Judge your ability and desire to handle every aspect of thebusiness. If you don't want to or can't pitch in wherever andwhenever something needs to be done -- whether it involvesmanufacturing a product, dealing with customers or keeping the books --you should think twice about starting that kind of business.

4. Determine whether the business has a solid chance ofturning a profit. After working in the field for a fewmonths, you should have a good idea of whether the business is apotential moneymaker. To be sure, you should analyze your market andconduct a break-even analysis, a preliminary financial projection thatshows you the amount of revenue you'll need to bring in to cover yourexpenses (this amount is called your break-even point). If you're ableto bring in more revenues than your break-even point, you'll be in theblack (that is, you'll make a profit).

5. Evaluate the risk this particular business requires.Even the best-laid plans can sour if you pick an unusually riskybusiness. For instance, the following businesses have higher thanaverage failure rates: