“Hello Ife. I am thinking of starting a small business and I honestly don’t know what to do. My husband suggested I ask you based on trends I have noticed in your line of work. What profitable business options would you suggest?”
I got the above message from a friend. Given what I do, this is a question I am often asked. Here’s how I usually respond:What is the immediate goal for starting a small business? Why do you want to start one? There are different reasons people start a business. For some, it is simply to make ends meet. It is okay if you provide a simple service to get money in return, or if it is just you and your business for a while – not everyone starts with a big bang. Don’t let motivational quotes make you feel otherwise; many great businesses started this way. You start making ends meet, and then begin to reinvest the extras you get, and just keep growing. Clarity begins to come from doing and growing.
For others, they start with the long-term in mind, and this would be irrespective of if the business is immediately profitable or not. Usually, these people have identified a need or gap in the market and are resolved to provide the solution. For others, it may be to finance a cause they are passionate about.
There are also divergent views regarding the type of business to start or what industry to venture into. Some say (or believe) they can do any business as long as it is profitable, and that’s enough motivation for them. But my question to them would be, “what if there is a season when the business is not profitable? Would the staying power be there, or would the business be abandoned?”
Some would rather start a business that excites them irrespective of whether profits are made early or not. Some also want to build something around their professional assets, but they, of course, want the business to be profitable. It is important to note that not all businesses make money in their first (few) year(s) of operations. Some businesses that start out being immediately profitable in year one can become unprofitable in the following years. This is due to several factors – from growth to challenges faced, and some eventually breakthrough.
I have seen profitability at different levels with small businesses across several industries. Some industries are definitely more profitable than others, but no two businesses in the same industry are alike. This is simply because companies have different business models and people who run them. Some questions to consider are, ‘what is the cost structure?’ ‘How much is the person/business spending to make a sale?’ ‘How is the business funded?’ ‘What is the funding cost?’
My friend replied with, “you have gbe lo ibi giga o,” meaning that I had taken the conversation to an advanced level. Her reason for wanting to start a small business is to fund a cause. So I suggested she considers the investing route. She can place her funds in different classes of assets that can generate returns. The returns (or a part) can then fund a passion/cause. This way, she can also diversify investments, so all her eggs are not in a basket. It can further help in the period of uncertainty while she tests the waters on the type of business to do. If she decides not to start a business, the investments could easily keep funding her passionate cause. The good thing is there are many investment options available, and with the help of a professional advisor, good returns can be made.
If starting a business is what you want and don’t know which, you may need to try things yourself. You can try out freelancing, volunteering, listening to others’ experiences, including their challenges. These can also help in deciding if that sort of business is really what you want to do.
What are your thoughts on these? As a business owner, what were your considerations when you started your business? If you are just thinking of starting one, what are the things you’ll watch out for?