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Top 10 Ways to Decide What Type of Startup is Right for You : Page 2

If you're building a new business, heed the advice in this article from our startup expert.


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.

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

Alex Genadinik is a software engineer and a serial web entrepreneur, currently starting a number of projects in the manner he suggests in the article. The projects are anarthritis and bone health content-only site, and two "brokering" business model ideas: one for Bringing Bay Area Hikers Together and creating a stronger women's community in San Francisco. All these are in very initial stages, and Alex will follow up in upcoming articles and discuss how these ideas are progressing.
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