First and foremost, keep in mind that you want to pick a business or a product that has as many potential customers as possible, ask yourself “how large is my sales universe”? This is a precursor to deciding what kind of product or service you want to sell, this is vastly important to you especially to a new start up business because it lends itself to how much startup capital you will need. If you have a physical product that you have to make or buy, then you have a totally different set of issues than if you pick a service or information product both require little or no physical space or location.
Once you have picked a product or a service that fits you, and why do I say “fits you” because you want to enjoy your work because it could or will consume the majority of your lifespan… your time. Then objectively sit back and consider who your customer is, think through the sales process and consider who will be buying your product or service… go all the way from the beginning to end, brainstorm the complete process. Do this with others if you can. As you do this keep something open to take notes on, laptop, notepad and pen, or whatever, these notes are great to refer back to as you consider the sales channel.
Do the same for the purchase channel, you say what is the purchase channel? Well in most cases if you want be in business you will have expenses… things you have to buy to run your business and to provide your product or service. At the end of doing this you should have less money expensed in the purchase channel then you have money coming in the sales channel or you need to reevaluate what you have chosen to sell or do. This is called ROI or Return on Investment, the greater the ROI the better off you will be.
Don’t get bogged down with this to start with, if you can figure out exactly what your ROI is great, but just know that money needs to be greater coming in than going out on a reasonable or living scale. Your ROI percentage is not as important as the investment capital, or the setup cost you have to make to get started. Once you get your initial working capital in place the turning of the customers or sales volume will increase your ROI, and yield you what you need and more as long as you were true to the original start up goal. That is picking a business or a product that has as many potential customers as possible.
In an Aerospace company they only have 5% or less ROI, but you have to remember that that’s 5% or less of several hundred million dollars, if not billions. So over each 90 day accounting cycle the company makes quit a lot of money.
The other side of the reasonable or living scale idea, demands you keep this in mind as you build your business on facts not false hopes… truly consider and pick the largest sales universe as possible. The Lemonade Stand business has a high ROI but it is not a living wage for a head of household. Suzy’s Dad provided the free lemons, sugar, water, and cups for Suzy to make $2 selling .25 cent a class Lemonade on one day, but how quickly will Suzy saturate her customer base of those who drive up and down her street? This is an issue of economy of scale that has bearing on everything you do in the decision phase of starting a new business.
• Pick a business or a product that has as many potential customers as possible, ask yourself “how large is my sales universe”?
• How much startup capital will I need?
• What kind of product or service do I want to sell?
• Have I picked a product or a service that fits me?
• The sales process, who will be buying your product or service?
• In the business I have chosen what will be my expenses?
• What ROI can I expect in the business I have chosen?
• Are the facts I based my initial business decision on going to produce income enough for my needs?
• Is my revenue based on the economy today, which way is my market moving, and will it grow or decline?