When considering whether or not to start a business or which one to start, it really pays to do a little thinking and research about what makes a new venture good, and whether any particular endeavor might be a good fit for you. Here are 5 things I consider before expending any energy or resources on any new project.

Factor 1: How Am I Going to Get Paid and When?

Owning or starting a company is about making money. The first question I say to myself before anything else is, “Show me the money!” If I can’t figure out how customers are going to pay me, or if I feel like I will have no leverage in receiving payment for services rendered… we’re done. Moving on to the next idea.

How do I apply this line of thinking? Well consider an online business selling eBooks. Once the user has downloaded an eBook – they have no incentive to pay you, right? If I can’t control access to the eBook prior to receiving payment – then I ain’t gonna get paid, get it? So if I can’t solve the problem of restricting access to my digital media file, then I can’t expect to collect payment and my business idea is not going to result in me making (collecting) any money. On the other hand, if I have security measures in place to control access to my digital content (like this tool – requires paypal), then I can continue to consider starting this eBook business.

Factor 2: Are There Existing Products or Services Already Serving This Market?

The second thing I want to know before launching a new biz or service is whether or not other businesses are already competing in this market. If there are businesses out there competing, I want to have a good look at what they are already doing and make an assessment as to whether some segment of the market isn’t being served, or if they are being served… is that service so poor that a new entrant into the marketplace (presumably my new biz) will quickly take over that segment? If I feel like there are customers I can reach – then I want to start looking at what I might be able to do to serve them.

Factor 3: Can I Create a Product or Service Worth Paying for?

So presumably I have found some underserved customers in a market in which I feel I can have some control over whether or not I get paid for the work I do or products I deliver – then I need to figure out what kinds of things I might do to generate sales in this segment. For example, maybe one of the competitors I researched in factor 2 above has great products but lousy delivery service. Can I get access to the same products and simply hire better drivers or use alternative methods of delivery? If my place is open for longer hours will that service working families which my competitor ignores by closing at 4pm? At this point I am looking for angles to see where I can create a competitive edge.

Factor 4: If I Get a Leg Up Will I Be Able to Sustain My Advantage?

In the example we just discussed, if I open my doors an hour earlier and two hours later, will my business get blown out of the water if the guy next door simply matches my hours? Odds are his cost structure (being older and more established) are likely to be better than mine. Will my business survive if he matches me tactic for tactic? If I do establish a business and sustain it, is it hard for someone else to come along and start a similar venture nearby with a better cost structure? If someone comes along with a Facebook business page and some good copyrighting am I going to survive the competition? If the answer to any of these is no, then I either need to have a quick exit strategy or I need to come up with a better idea.

Factor 5: Do I Have the Will and Resources to Finish What I Started?

If I have gotten this far in my analysis and have decided there is a market to serve, which I can successfully enter and am likely to sustain once I open the doors, I then need to have confidence that I have all the tools, capital, and manpower to reach the point of getting my first sale. Everything hinges on being able to absorb all the costs in terms of time, money and other resources prior to collecting dollar one of sales revenue. If I can’t absorb the costs up front, then I need to not start. Equally importantly – will the business I start continue to consume a large amount of my time and energy once I reach sales dollar #1? If yes, then I really better love what I am starting because I am going to be doing a lot of it…

Conclusion: What Do I Think Is a Good Business to Start?

OK well at this point you should have an idea of how I tend to think:

1. Make it easy to collect
2. No (or few… or bad) competing products or services
3. Industry is within my skillset
4. Sustainable edge
5. Consumes few or little resources either initially or long-term (preferably both)

So what sorts of ventures lend themselves to the above criteria? Clearly the business needs to have price points which are low enough for cash transactions or credit cards – a.k.a. impulse purchases. Ideally you need there to not be a high-profile competitor already winning this market. I need to know if this business or the products I would need to make are within my skillset. I prefer to start businesses that add products to existing distribution channels (such as Amazon and Clickbank) – so I can leverage the efforts of existing infrastructure and affiliates (sales people). Lastly – and most importantly – I want to create business income streams that I setup once and basically run themselves with little managerial energy from me. True it takes a lot of small income streams to make a living – but the freedom (of time) is well worth it in the long run.