Top 10 Ways to Decide What Type of Startup is Right for You

Top 10 Ways to Decide What Type of Startup is Right for You

Before suggesting what type of business is right for you, I should say that there is no right or wrong here, and that there are exceptions for every rule. Many gems can be uncovered only after defying every rule in the book and the person who tells you “no you can’t or won’t.” No one should discourage an entrepreneur who is guided by a vision. It is their journey, and no one should be myopic enough to stop them (unless they are recklessly putting loved ones at financial risk — which is different because it’s also irresponsible). So, in true entrepreneurial spirit, I encourage you to go after your ideas and hope this article will help you make some decisions along your journey.

1) Pursue a Passion

This is often overlooked but should not be. Creating a business out of a passion or a hobby will help you through the difficult times (and there will be tough times). Having an interest in a topic will leave you waking up, craving to work on your business, and pushing it forward. Also, you’ll have a degree of expertise in the field and will have to do less on the job learning, not to mention that it might just be more fun that way.

2) No Tech Skills and Need to Pay Rent? You Can Still Start a Business

You might have to work on your business part time by yourself for a while, but it can still be very rewarding. In fact, some of the more fun businesses out there may be a good match for this scenario. You just have to be viewed it differently. You won’t be the next Google, and that is OK because one person doesn’t need to be. You can go after a small niche market of your choosing and focus on a business that does not require too much work or technical skills. A blog or a video blog are perfect examples. Just write and create content consistently in reasonable amounts about something you love. You’ll learn more about the topic through research and get to interact with others with your interests. This type of a business can be built slowly, over time, and you can work on it as a fun side project while increasing the number of blog visitors and making a little money through ads or other easy monetization scenarios.

3) If You Do Have Tech Skills but Still Need to Pay Rent

You will still need to focus on a part-time model, but you are no longer limited to blogging and purely content-based ideas. As a simple example, there are plenty of what I call “brokering models” that you can pursue. For example, it might take a total of 100-200 total programming hours to put together a simple php site to bring together (broker) people in San Francisco who need college or high school level homework help with locals who can offer the help. Just don’t go after something huge like selling computers or clothing because that space is too crowded and you will need to do a lot more marketing, programming and biz dev work to be successful at it than you have available to you. Pick a small niche and do a good job in it. If you do, you can grow in geographical scope or increase the number of homework topics, etc. Just remember, you have few resources, so think small, uncompetitive and easy. Also, consider that if you are doing something part-time, you are much more free to choose business types that will blossom over time, and have an advantage over people who are working full-time because they have time pressure to succeed since that is usually their main source of income. While you probably would have a job, and can out-compete your competitors over time.
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4) Are You a Techie Who Doesn’t Understand ‘Business?’

It happens. Sometimes people are just not cut out for some types of activities and are mature enough to admit it. It’s OK. If you are in this category and don’t want to think about SEO, SEM, biz dev, social media, etc, then you may be well off by partnering up with someone who like these things. Good candidates might be people who are already doing something that might fit into items #1 or #2 in this article because they already “get it” in terms of how to create a project from the ground up and may want to add more technical resources to their projects.In this scenario, business models open up slightly, but so does the amount of work. There are now two or even three of you, which means you have to communicate, collaborate, meet, brain storm, and be a cohesive team, and write some legal documents to outline the contract of your collaboration. All this is in addition to actually creating the business. What does it spell out? You need to put more time into the project which implies that you may have to go more than part-time to full-time. Keep in mind, some business models that would have been able to financially support one person may not support a team, so you lose some of your options. Plus going full-time and quitting your regular job adds risk. If you are sane, you should be at least a little bit averse to risk and think twice, but if you are ok with it, #5 is for you.

5) A Balanced Team Working Full Time

This item is not about business models but rather considerations and good practices because at this point you are “all in.” You have decided to find great partners and spend full-time pursuing your dream business which will make you happy and rich. Few considerations:

    * Expect to spend 2-3 years without much salary.
    * Don’t hope for an investor to save you at the right time. They only save themselves.
    * Focus on building a business rather than aligning it to get investment. It will make your business stronger and more independent.
    * Be honest and choose only hard-working, talented and honest people for partners.
    * Don’t spend too much money and don’t choose anything too big or grand as your goal (this rarely works although when it does it gets lots of press, making it seem that it is more common that it works).
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6) Niche Business Models to Consider

Companies like Ebay, Amazon, Google, and Apple go after huge markets with tremendous potential. They get investment, their CEOs are some of the most connected people in the world and these companies get a lot of press. Yet it is difficult to start out wanting to be the next Amazon. Contrary to what may seem, it might be easier to pick a small niche. Instead of selling all clothes, it might be easier to focus on selling children’s clothing for formal events. It is possible to tailor a fun and entertaining user experience that is better than Zappos or Amazon can provide for that niche. If you are successful, you can grow out of that to other categories.Another example could be to focus on creating a community of mothers who can trade “hand-me-down” clothing for free. It is not as glorious or lucrative as selling all types of clothing, but it gives you a way to narrow your focus, and create a loyal community from which you can grow organically, and monetize slowly over time via sales of some new clothing, ads, membership models, etc.Your company may not see investment until it becomes large enough to attract a very large portion of the hand-me-down market, at which point you may not even want the investment. And it will take years before or if that sort of a project succeeds. So entrepreneurs have to consider a path that is right for them and be realistic about their time horizons and styles of competition that is right for them. Slow and long-term vs. highly competitive make or break sprint.

7) Grandiose Business Models to Consider

So you still want to be the next Google, huh? If so, you must have enough savvy or connections to not only get in front of tens of different investors, but also convince some of them to give you cash. Such ambitious projects also require lots of time, and an even more united and talented team. If you don’t have such team or connections, you might want to scale down to something simpler, succeed at that, and through that success, gain connections and talented people who want to be led by you, and then maybe give the grandiose idea a try.

8) Will it Take You $100 or $100,000 to Complete the Same Project?

If you need to hire a full-time engineer for 6 months, market the company, fly to meetings, etc., and add the time that you will work on it full-time and won’t be paid (losing money you could have made at a job) it might take you more than $100,000 to complete just the initial stage of a project. Needless to say, that is expensive. On the other hand, if you are an engineer, can create the site and the backend, do your own SEO marketing, a little biz dev and can make some savvy business decisions, to create exactly the same company it might take you $100 to just pay for the hosting (and whatever you potentially lost by not working at a job during this time) — cheaper by literally 100 times.If you are the former, you may want to scale down in the ambition of your project. If you are the ladder, you may be a do-it-yourself kind of person and you may also want to scale down to put less pressure on yourself and do a better job at the narrowed number of tasks you have left. In any case, don’t over-do things and focus on incremental, small but achievable wins.
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9) Risk Tolerance and Recklessness

Entrepreneurs are risk-taking people driven by vision and all that romantic kind of stuff. But the reality of life is that while the entrepreneur might be inclined to take risks, she may not be able to because of family or other obligations. Risk is OK, but recklessness is not. You should never start a business that may put you in such financial hardship that you may not be able to help your family, and damage their opportunity. So if you know that if your business will probably take 2-3 years and it will cause significant financial strain, it may not be right for you because the balance between risk and recklessness is being shifted.Similarly, be aware of the time requirements of the business. If you plan to work 14-hour days, your spouse or loved ones may be unhappy, making the business with that type of a commitment not the right type of business for you.Have a plan to meet your and your family’s financial and social goals even in the worst case scenario for your business and it may help to have an exit point where you cut your losses. You may have to decline a number of business opportunities, but you will get to keep your family and savings.

10) Access to Products, Information, and People

If you are building a new type of ecommerce search, make sure you have the inventory to run your search on and sell. You may use a 3rd party API, but it will impose a number of restrictions and workarounds that will cripple your architecture. If you do not have a clear way of getting good inventory, it may take a really long time to get that inventory (if ever) and cripple the company.If you are creating content, it helps greatly if you are an expert in the content. If you plan to sell to businesses, make sure you have enough good connections in the space your business will be in, so you can get your foot in the right doors. Also, if you plan to sell to companies, do make sure you are able to build a product of extremely high quality that scales (enterprise software is really tough), and be ready to wait two years before your first revenue — while keeping yourself and your team motivated and not starved.Most importantly, good luck. No matter how difficult it may be, good luck, work really hard, and knock ’em dead! Would love to hear feedback or success stories @genadinik


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