The United States is a nation of small businesses. In fact, according to the U.S. Small Business Administration, there are 29.6 million of them, and they employ 57.9 million workers.
Most of these companies are doing pretty well these days, too. A recent survey of 16,000 small businesses by the New York Fed found that more than 60 percent are expecting higher revenues this year than last. About 40 percent are planning to expand their workforce as a result.
While the government defines “small business” as a company with fewer than 500 employees, many of these organizations began as sole proprietorships. While the Tex Foundation found there were 23 million sole proprietorships in the U.S. in 2014, a survey by Upwork found there are currently 55 million Americans working as freelancers. This accounts for an impressive 35 percent of the total U.S. workforce.
If you’d like to join the ranks of these entrepreneurs, you aren’t alone. Thousands of driven professionals start small businesses, sole proprietorships, and freelance endeavors every year because they want to make extra money, dream of working for themselves, need a career that supports a more flexible schedule, or desire a way to continue earning a living post-retirement. However, while their reasons for leaving the traditional workforce vary, they all have one thing in common: a good small business idea.
Here are a few questions you should answer if you’d like to come up with an idea of your own.
Unless you have time and money to invest in the education and experiences necessary to develop a new skill set, the best small business ideas for you are going to be those that take advantage of talents you already possess. These talents may be directly related to your past or current careers (such as managing a team, working with spreadsheets, or writing) or can even be skills you use at home (keeping things neat and tidy, cooking, running errands) or during your leisure time (exercising, taking photos, making friends with animals). If you find it difficult to list your talents, ask your friends and family for help. The people who know you best may identify talents you’ve overlooked in yourself.
Once you have a list of all the things you do well, prioritize it by the skills you enjoy using the most. Running your own small business can be as hard—if not even harder—than working for someone else, so most good business ideas will allow you to do something you love. This will make it easier to maintain the day-to-day motivation that’s essential to success.
If you are having trouble figuring out what you might actually enjoy doing for years on end, spend some time thinking about what you liked best about the jobs you’ve had in the past. It may be helpful to pull out your old resumes, list your previous responsibilities, and circle those that you found the most fun or rewarding. There’s a good chance you used some of your greatest strengths to accomplish these tasks. Note those strengths on your list of valuable skills.
You can also take a look at the ways in which you use your free time, as it’s natural to spend the majority of whatever time you have totally to yourself doing things you enjoy. List your favorite free-time pursuits, identify the skills you’re using when you engage in them, and add those skills to the top of your talent list.
Finally, whether they take place at home or at the office, don’t overlook the activities or responsibilities that so fully occupy your attention you actually lose track of time. Losing yourself in a task is a good indication that you’re using your natural talents. Note the associated skills at the top of your list.
Business ideas that result in products or services nobody wants—or that require you to compete in an already oversaturated market—are destined to fail. On the other hand, ideas with the potential to be successful will solve real problems, satisfy immediate or long-term needs, or provide desirable commodities.
Take a look at your list of talents and think about how you can utilize them to create a business. For example, if you love to exercise and are good at motivating others, you can sell your skills as a personal trainer or fitness coach. If you’re a good listener, skilled at solving problems, and enjoy helping others, you might make a good life coach. If your social media posts are always popular with your followers, your skills may be in demand as a social media consultant. If you are adept at juggling complex schedules and running errands, you can market yourself as a personal assistant. If your favorite place is the kitchen and everyone says you’re an excellent cook, you might start a catering or personal chef business.
Next, think about who will need your product or services. Are there enough of these individuals (or businesses) in your area? How many other entrepreneurs are already addressing their needs? If you’ll be facing competition for business, is there a way you can differentiate your product or service from all of the rest? If the answers to these questions are not favorable, you may want to go back to your list of new business ideas and choose an alternative.
Note: When evaluating your market, you need to identify both your direct and indirect competitors. While direct competitors will be offering similar products or services and are generally easier to identify, indirect competitors can also impact your chances of success because their products or services—though different than yours—may satisfy the same customer need. For example, let’s say you are opening a sandwich shop. Your direct competitors are other sandwich shops. Your indirect competitors include noodle shops, fried chicken restaurants, pizza delivery places—basically any other similarly priced restaurant in your market.
A simple Google search is a good place to start when trying to determine how much market competition exists for your product or service. You can also search social media—such as Facebook, Twitter, LinkedIn and Instagram—for competitors, attend industry trade shows and conferences, and talk to potential suppliers about the other companies they are working with.
Biting off more than you can chew is a common mistake when starting out as an entrepreneur. Some people try to tackle problems that are too big. Others lack the experience they need to actually provide the service they have in mind. Others know nothing about what actually goes in to producing a product. Whatever the case, it doesn’t make sense to chase ideas—even those that could be considered excellent ideas given your market—if bringing them to fruition is going to be a massive uphill battle against the odds.
While you’re taking an objective look at the task you’re planning to set for yourself and the related experience and knowledge you possess, consider your personality as well. Successful entrepreneurs are self-confident and competitive. They are driven to succeed and persevere when they encounter a setback. They are also organized, excellent communicators, and comfortable with uncertainty. If these are not traits that come naturally to you, there’s no shame in continuing to work a traditional job.
Do you need to buy equipment, invest in software, or pay for the help of other vendors in order to create your product or provide the intended service? Will you need to acquire a license or join a professional association? What will it cost to get your business off the ground?
Depending on the business you’ve decided to launch, the required resources may be substantial. However, thanks to technology, other ideas may not require any purchases at all. For example, if you want to start a freelance writing business from home, all you’ll really need is a computer, word processing software, an Internet connection, and a means of marketing yourself to potential customers. Some of these resources can be had totally free, such as the online word processing software of Google Docs as well as advertising through Craigslist.
Note: Even the best small business ideas may come with risks, so don’t forget to protect yourself financially with business insurance. Talk to a reputable agent about the right policies for you, from online retailers’ insurance, stock insurance, business equipment insurance, and tools insurance, to public or product liability insurance, professional indemnity insurance, personal accident insurance, and business interruption insurance. Get started learning about your various insurance options here. [AR1]
Running your own business usually comes with more financial stresses than you find at a typical 9-to-5 job working for someone else. For one thing, they don’t often come with regular paychecks. Instead, you have to invest hours searching for customers, invoicing for services rendered or products delivered,and then following up on those invoices to make sure they’ve been paid. Sometimes clients may get months behind, or fail to pay you at all. In fact, a survey by Freelancers Union found 70 percent of freelancers dealt with late or non-payment issues last year. Non-payment issues have actually become so troublesome that local governments have had to get involved. In May of this year, for example, Mayor of New York City, Bill de Blasio, announced the Freelance Isn’t Free Act, the first law of its kind in the country. The law protects freelancers in New York City by giving them the legal right to timely payment.
When you have a mortgage, rent, or bills to pay, slow payment on the part of your customers can be a terrifying prospect. In addition to saving up for any resources you need to purchase, it’s never a bad plan to sock away several months’ worth of expenses before you make the leap into your own business full time. Fortunately, it’s possible to start many good business ideas while continuing in your current career on at least a part-time basis. You can also look at ways to borrow funds to get you started. These may include a cash-out refinance if you own a home, small business loans, or investments from family and friends.
Once you’ve answered the questions above, you should have the information you need to choose your best option from the virtually limitless number of business ideas possible. Take your time and don’t rush the process. Whatever you end up doing, it should be a business you can envision yourself running for many years to come.
After coming up with your small business idea, don’t forget to get a business insurance quote to ensure you're covered.
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I love writing about the small business experience because I happen to be a small business owner - I've had a freelance copywriting business for over 10 years. In addition to that, I also head up the content strategy here at Simply Business. Reach out if you have a great idea for an article or just want to say hi!
This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer
28 November 2018 • 6-minute read
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