What kind of business should I start?

John W. Schoen • Profile • E-mail

This week, Sara in Beirut has found a flourishing site for a new business — but

she's looking to get started on a shoestring. And S.T. — a second grader in Oklahoma — is curious about investing in pricey stocks.

I am planning for my own profitable small business. The region will be a flourishing village. The characteristics of this village are:

• It has three schools, one hospital, three pharmacies.
• It is developing rapidly.
• It has a central location near a city, populated in summer more than in winter.
• It is calm, quiet and beautiful.
• Expenses such as renting and wages are cheap.
• People are mostly middle class in addition to some rich people from nearby villages.
• It has a promising future due to its increasing development.

My plan is to open a business that needs low capital. What kind of project do you advise me to implement?
— Sara, Beirut, Lebanon

This kind of “top-down” analysis is very useful: you need to know if the conditions are right to support your business. But, since there are many different businesses you could choose from, you need to ask yourself a few other questions first.

The most important question is: what do you bring to the business? What are your skills? What do you like to do (because until your business gets on its feet you’re probably going to be spending every waking hour doing it)? What other businesses do you have experience with or knowledge of?

Once you narrow down the list, do some homework about your new business. Some people, for example, love the idea of owning a restaurant — even though they’ve never worked in one. It turns out that running a restaurant is extremely hard work. Before you get started, you might want to work in one for awhile, ask a lot of questions and watch how it all works. You may be surprised to find that it’s not a very profitable way to make a living. Does that matter? Do you care more about making money — or owning a business that lets you do something you love to do?

Restaurants are also an example of a business that is risky — the failure rate is pretty high. Are you a risk taker? Are you prepared to try something, invest a year or more of time and hard work — and not succeed? Many small business owners fail a few times before they get it right.

Once you’ve picked a business — keep doing your homework. Is there a market for your product or service? Are there competitors out there? Are they thriving and well established or are they vulnerable to competition from people like you? Do you like the idea of competing against other businesses? Or is the market for your product or service growing so fast there’s room for than one company?

As for the question of capital, one way to approach funding is to find a business that “scales” well — something you can start on your own and then build up. You can start a catering business out of your kitchen and then, as you get more customers, hire more people or get a larger space to work from. If you're selling a product, you can set up shop on the Internet for very little money and then find more distributors as you grow. But the chances are you’ll reach a point where you’ll need to borrow money to get you through a tough patch or pay up front costs to expand. Once you have an idea of your business plan, you may want to find a banker who can review it and let you know what your options are for borrowing money if you need to. You may want to open a line of credit — a kind of standby loan — that you can draw on if you need to. So that’s one more thing to add to your list.

There’s no “right” or “wrong“ business — but there are businesses that are right or wrong for you. Unfortunately, you’re the only one who can figure out the answer to that question.

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