Which company would you rather own: One in an niche industry or trade where more than half of business owners fail to make a profit, or one with 100, 1,000, even 10,000 percent growth over a period of three to five years, and stunning profitability?
Deer Park Home Insurance
Ask a group of unsuccessful business owners why their business ventures failed and most will probably cite "undercapitalization." But there is often a more fundamental reason for business failure -- selecting products, services and a business niche for which there aren't enough paying customers! Of course such companies find themselves undercapitalized. In fact, one can never find enough capital to keep a company afloat if it has a shortage of customers!
Buggy whips aren't the only product in low demand. Today, product life cycles are typically short, and getting shorter. Entering a market that has matured (and for which you don't have a highly innovative plan to substantially increase demand, lower costs or differentiate your offering) likely will lead to financial disaster. So will entering a market that is oversaturated with reasonably competent competitors.
Why do most business start-up books and business assistance specialists focus little, if any, attention on the most important question an entrepreneur will ever ask: What business should I be in?
In part, because most owners, often unwisely, have already made up their minds about the business they should start. Many entrepreneurs incorrectly assume this decision should be based largely on the existing technical skills, interests and experience they bring to the equation. Or they may have a friend or relative who claims, often inaccurately, that the business they own is a raving success, and simply decide to follow their lead. But there are far better ways to plan for success.
La Porte Home Insurance
An entrepreneur with 10 years experience working for someone else in the dog breeding field may enjoy the work, have great technical skills, and love dogs. But before starting up a dog breeding enterprise, wouldn't it be important to know that more than 65 percent of dog breeding companies are unprofitable. There are many other popular small business categories that share a record of high risk and low profitability. Now, for an individual who is financially independent and for whom earning an income (and a profit) from their new venture is secondary, this may be fine. But few planning a new business enjoy that luxury.
Another reason most small business authors and specialists focus so little on business selection is that they know little about the subject. Though vitally important, market research and analysis are topics most business authors, counselors, brokers and advisors have failed to study. Even some business planning consultants gloss over this crucial aspect of entrepreneurial success.
Our entrepreneur with the dog breeding background can use research to discover that there are many companies in the dog products and services arena that are experiencing dramatic growth. One sells dog biscuits containing only organically grown ingredients via category killer pet stores. A franchise operation teaches dog owners to manage their pets' behavior, anxiety and frustration using behavioral science methods. A third company offers health insurance for dogs. Dogs bred and trained for explosives detection are also in high demand. Many of our dog breeder's skills may readily transfer to an enterprise in such a niche area, where with thoughtful research and planning, opportunities for success should prove far better than those for a risk-plagued breeding business.
Does this mean no one ever succeeds in dog breeding? No, but entrepreneurs seeking high income and growth know which odds to defy and which to respect.
How do successful entrepreneurs brainstorm and research high demand, low competition, highly profitable business ideas?
Many start by listing and analyzing their skills, interests and competencies. But they don't hesitate to apply these broadly to business ideas they consider. For example, management experience is often transferable to many industries and niches.
Alvin Home Insurance
Smart entrepreneurs also search for screaming success stories. More than a dozen business publications, including Inc. Magazine, Business Week, and Fortune rank the fastest growing large and small companies in the U.S. Some target hot growth businesses in Canada, Europe, South America, Asia or other countries and regions. Deloitte Touche Tohmatsu ranks companies with growth as high as 20,000 percent across the globe. Links to these high growth companies' websites are typically listed, too. There are similar ranking sources for top selling consumer products.
