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Which business should I open?

Which business should I open?

13 August CoverThis article was written by Ed Hatton, the Start Up Coach for Entrepreneur Magazine (South African edition), as the My Mentor column published in August 2013 and is posted here by their kind permission

 

 

What is the right type of a new business for young people?

 

 

A young relative asked me: “If you were 23 what sort of business would you open?” I realised what an interesting question this is. Imagine being 23, with the experience to know what to consider and where the opportunities lie. Thanks for the great question entrepreneur-to-be Jean!

The first answer is that if you want to be business owner you should become one. Starting a business is nowhere near as difficult as people suggest. Even desperately poor and illiterate people open sustainable businesses all over the world without business advice, bank loans or advertising. It is more difficult to launch and develop a business that can grow out of the survival phase to provide employment and value or wealth to the entrepreneur, and if that is your dream choose a business that can grow, as opposed to lifestyle entrepreneur businesses like a photographer.

Be capable of running it

You should be capable of operating the business. At 23 you may lack business experience but business owners need to be able to handle finances, marketing, sales, HR and administration. Don’t choose a very complicated business or one in a highly regulated sector, like food or medical supplies. Choose an area you know or have a passion about. Many people have built good business from their passions and interests. Pick ‘n Pay and Nandos are two of those, where a belief in food mass retailing and a love of Portuguese peri-peri chicken built great business empires.

Should you sell services or products? Service businesses are easier and less expensive to start, but are often harder to grow out of the survival stage. Look beyond the initial launch phase; a mix of products and services may be ideal.

Beware of cutting corners or operating illegally. We hear of wealthy people whose businesses are of dubious legality, but we do not hear much about the thousands that are insolvent, jailed, banned from government business, have had their stock confiscated or are blacklisted. It is not worth the risk. Pay taxes, register and be an honourable employer.

Making money

To make money from this business it should not be the same as dozens of others around. On many street corners, hawkers sell sunglasses, cellphone chargers and coat hangers in competition with each other, and very few make more than survival income. You don’t want to be like them, so be different from the competition. Whatever business you open you have to be able to answer the question ‘why would customers switch from their current suppliers to me?’ Good service or low prices alone will not do that – you need real differences.

At 23, with low commitments you can take risks that people in their 40’s with a bond and children in school could never take, so use this opportunity. Despite your fears it is OK to fail – many great entrepreneurs have. The most adventurous businesses are the riskiest, but also the most rewarding.

Seek out developing rather than declining business. For example on-line sales versus appliance repair – broken appliances are becoming throw away items, but anything involving time saving and convenience is growing.

How to succeed

In any field the business most likely to succeed is the one that provides goods or services that people would like but have difficulty finding. In your chosen field the way to do this is to ask everyone you meet what their biggest pain is. Then when you find lots of people with the same pain you pitch a business there.

Once you have an idea for the type of business that would be right for you, use available, often free resources to discuss this with experienced entrepreneurs or mentors. Many business mentors and coaches will offer a free initial consultation, there are magazines, advice columns on-line and in print and entrepreneurs who can advise you. Use them.

© copyright Entrepreneur Media SA (Pty) Ltd. All rights reserved. No part of this article may be reproduced, stored in a retrieval system or transmitted in any form without prior permission of Entrepreneur Media (Pty) Ltd. Permission is only deemed valid if approval is in writing.

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