Reviewing your list and sorting out your ideas according to type of business activity will help you decide which business idea you will eventually entertain.
Ask yourself this question: “Do I want to manufacture a product, deliver a service, or go into trading?”
o A manufacturer produces a product and sells it. Making new jewelry from beads, baking cookies, making quilted linen are some examples of a manufacturing activity.
o A service-oriented business offers a specialized kind of service to customers. The service can either be creative and technical or professional in nature. An auto repair shop, a music lounge, laundry shop, internet café, and a tailoring shop are among the more popular businesses in the first category. A medical clinic, an accounting firm, and a law office are examples of professional service providers.
o A trading business, on the other hand, is basically a buy-and-sell type. One can be a retailer, wholesaler, or even both. The sari-sari store still remains to be the most common form of a trading business. Another example that is fast gaining popularity is the distribution of goods. Nowadays a number of small entrepreneurs are in the business of supplying beverages like soft drinks and beer to restaurants and grocery stores, an activity that used to be done by the beverage manufacturers themselves in the past.
One can always combine activities, say, manufacture a product and trade in related goods as well. A candle maker, for example, can also carry on such wares as candleholders and candle accessories to go with the candles. A technician can sell electronics spare parts and related items such as speakers and amplifiers. An interior decorator can also sell decorative items such as vases, lamps, and wall accessories. The owner of an internet café can accept computer service jobs on the side.
Then choose an industry. Pick a sector where you are interested in, one that you enjoy doing, or one that you think you have some knowledge and experience.
Setting up a business does not always mean starting from scratch. You can also start by getting a franchise. The next decision you will make is whether you want to set up an independent business or get a franchise. An independent business is something that you start and nurture on your own. A franchise essentially involves buying the right to sell the parent company’s goods or services in a specific area.
HOW DO YOU START?
Know yourself. You are off to a good start when you set up a business that matches your interests and your own personality.
The following chart will guide you in choosing the business that will suit you. It will help you match your skills and experiences to the business ideas that appear in your shortlist. You will initially find this task too boring and simple. But you will be surprised at how writing down your ideas this way will help you put together what it is that you want from your small business.
If it cannot help you make the final choice, the chart will at least narrow your choices further.
Follow these three steps in filling out the chart. Be objective and do not be emotional.
o In the far left-hand column, list the business ideas you’re considering by order of interest.
The idea that you are most interested in will appear on the top left-hand blank space. Put the next idea below the first one in the same first column and continue until you have written down all the ideas in the shortlist. There are only five blank rows. If you have more than five business ideas in your shortlist, you may add additional spaces but the list should not be more than 10; otherwise this will not be a shortlist anymore.
Suppose you come up with a list like this one:
Now take each business idea and rate it on a scale of 0 – 3 in all criteria appearing in the succeeding columns (your knowledge, your experience, your skills, ease of entry, and uniqueness). Use a rating scale of 0 to 3; with 0 meaning none, 1 below average, 2 average, and 3 above average.
The criteria and their scope are defined below:
o Knowledge of the business. This will measure how much you know about the business idea. Let these questions be your guide in rating the business idea:
1. Will I need some time and money to know more about the business?
2. Would I rather take on a partner to fill in my lack of knowledge of the business?
Let us say you want to set up a dress shop but you do not know how to sew. Your rating will be based on your willingness and readiness to acquire sewing skills or ask a skilled person to join you.
Rating Guide: 0 – no knowledge of the business; 1 – some indirect knowledge of the business; 2 – limited knowledge; 3 – working knowledge.
o Experience in the field. You may know a lot about the business but do not have enough experience. The rating will depend on your answers to the following questions:
1. Have you ever owned or worked in this type of business in the past?
2. To what extent is hands-on experience critical to this type of business?
You may have worked as a helper in an auto repair shop for a couple of years and now intend to put up your own repair shop. Your rating will depend on how you will assess the importance of actual experience on the nature of the jobs you will be offering.
Rating Guide: 0 – no experience; 1 – indirect experience; 2 – limited experience; 3 – familiar with the business.
o Skills. Focus on the skills that are unique to the particular business. This category will measure the extent of the skills you have that are useful to the business and how hard or easy it will be for you to learn and acquire such
For example, you want to cash in on your scented candles that made a big hit among your friends and family. Are you ready and able to make a business out of this hobby? How good are you at taking bulk orders, calculating costs and expenses, setting prices, and collecting payments?
Rating Guide: 0 – none; 1 – limited skills; 2 – some skills; 3 – extensive skills.
o Ease of entry. This refers to the costs of entering the business and the blocks or hindrances that might exist. For example, a car wash that you can run from your own home could be relatively inexpensive to start, but if there are others already providing that service in your area, you may hesitate to offer the same type of business.
Rating Guide: 0 – crowded field, very difficult to enter; 1 – limited entry available; 2 – mix of large and small competitors; 3 – unrestricted entry for any business size.
o Uniqueness. This does not necessarily mean that no one else is providing the product or service. It can also mean that no one else is providing the product or service in the same way you intend to provide it. It can also mean that no one else is providing that product or service in that specific area. This category will help you find out some ways of distinguishing your product or service from the others already in the market.
Uniqueness is not limited to the product or service itself. Sometimes going “the extra mile” or giving your clients some convenience will provide the distinctive mark of your product or service. Ever wondered how free delivery has become a widely acceptable practice among food outlets?
Rating Guide: 0 – product or service widely available; 1 – a few to several others offering your produce or service; 2 – about one or two others; 3 – no other one providing your product or service.
o Total up the numbers. These tips will help you interpret the scores:
1. Forget any idea that scored less than 10
2. Discard any idea that did not score at least a 2 in every category
3. Let go of any idea that did not score at least a 3 in the uniqueness category.
How many ideas are left? If there is none and you really want to pursue any of the ideas in your shortlist, then use the selection result to identify where you need to improve on. Then develop a strategy for raising the “1s” to “2s” or “3s.” Your goal here is to trim your choices to a maximum of five.
SCREENING YOUR IDEAS
Getting a good match between your skills, talents and experiences, and your business idea may indeed be a good start. But you cannot just as yet put your life savings, loan, parents’ money, inheritance, or retirement fund into the business. Try to have a look at the macro environment affecting your business. This time, limit your choice to the five ideas that got the highest rating in the checklist. Screening will narrow the five choices to just three that will meet your needs, strengths, and business goals. In this screening, you need to find out how profitable the business will be.
This requires you to do some business analysis. Doing so will help you evaluate the chances for survival and eventual growth of your prospective business.
Look at each of the remaining choices of business ideas along the four functional areas, namely, marketing, technical, organization, and finance.
Market assessment. This generally concerns the presence or absence of buyers for your product or users of your service and how much income you can expect to derive from it.
Technical assessment. This examines your capability to be in the particular business. You will need to answer such questions as:
o What technology does this business need and how will I acquire it?
o Will I be able to acquire the materials, equipment, and technical skills that the business will require?
Organizational assessment. This measures your familiarity with the type of business or how well you know the ins-and-outs. It also concerns your ability to put together all the resources you will use in the business.
Financial assessment. This gives you an idea of how much it will cost to start the business and keep it going at least until the revenues start coming in. It will test how deep your pockets are as well as your patience in identifying and getting the necessary financing. Can you withstand periods, particularly following start-up, when little or no revenue will come in?
Source: Your Guide to Starting a Small Enterprise -dti.gov.ph