Business Discovery - Part 2

 This is Part 2 of multi-part series to help budding entrepreneurs create a business discovery roadmap. Subscribe to receive future updates.

• Financials
• Lifestyle Integration
• Internet/Service/Retail

• Business Model
• Staffing Model 

Business Model 

In order to help narrow down the business selection develop a "business model checklist". Once you develop a list, rank them in order of importance. Here's a few of mine to get you started:

• To consumer (B2C) - deal with the public
• To business (B2B) - deal with other business owners

When selling to consumers you've got a huge potential customer base BUT you may have more competition which requires more marketing & have to be cautious of price sensitivity.

When selling to businesses you've got a smaller customer base who could become very loyal. Your challenge will be convincing business to switch from the current vendor or start spending money on a new product/service. There's generally less price sensitivity unless you are in a commodity business.

• Not seasonal or weather dependent
• Recession resistant

If you're going "all in" on the business and it's not a side hustle pay close attention to the sales cycle. Better to have a stable sales cycle vs. one that's feast or famine.

Also be careful or avoid weather-dependent businesses unless they compliment another component of your business. Hard to make money snow plowing when it doesn't snow.

Recession resistant businesses provide a product or service that people need in good and bad economies. If your toilet or sink is clogged you're calling a plumber. If you're brakes don't work you're getting it fixed so you can go to work/grocery/pickup kids. If your family pet gets sick you're taking them to the vet.

What is the long term outlook of the business? Will it still be viable in 10 years? 

"Boring businesses" with a slow rate of change are the best for stability.

A few years ago Froyo was all the rage and shops were popping up all over the place. When was the last time you visited one?

I also don't want a business that can be replaced by a robot 🤖.

Sales or Operations Driven

Businesses can be broken down into 2 categories: sales driven or operations driven

In the solar business there's tons of door-to-door sales company who are excellent at selling and sub out the actual work to an installation company. The problem for the sales company is they have no control of the quality or reliability of the sub.

Many of the other installers also do their own door-to-door sales and prioritize those higher-margin customers over the "wholesale" sub work.

I've a friend who's taking advantage of this by creating an installation company that's 100% dedicate to the sub work. He partners with multiple sales companies that feed them work every day. These relationships allow him to focus on consistent execution.

Find a business that matches your skillset. Are better at driving a sales team or ops team?

Staffing Model

There is nothing more important than the staffing model of a business -- unless you're a solopreneur.

Skilled vs. Unskilled

What type of people do you want to hire, train & manage?

Skilled

• Higher pay
• Smaller applicant pool
• Harder to hire
• Easier to retain
• Better margin 

Think plumbers, mechanics, carpenters, contractors, etc. 

Unskilled

• Lower pay
• Bigger applicant pool
• Easier to hire
• Harder to retain
• Lower margin 

Think cleaner, landscaper, cashier, fast food worker, driver, etc. 

Management

• Can the business afford to pay a good manager $70k to 100k per year?

• If the business can only afford a less experienced manager at $40-50k you, the owner, are going to have step in and deal with more issues.

To generate $1,000,000 sales per year would you rather have:

• 20 part-timers ($50k per person)
• 5 full timers ($200k per person) 

Years ago we were looking at buying a pizza franchise until we learned you need 20 part time minimum wage (kids) to operate a below average store. For me, that sounds terrible. For you, it may be a perfect fit. 

TLDR;

• B2C or B2B
• Recession resistant, not seasonal
• Stable, long-term business
• Sales or Ops driven
• Skilled vs. Unskilled
• Management: $50k or $100k
• Sales per Person