Q. Dear Zenagos, I’ve been running a couple of side-hustles for about two years, but I haven’t really put a lot of focused energy into either of them. I think it’s time for me to try. How do I choose which business to really go for?
You are already ahead of the game if you have been operating your side-hustles for a couple of years. You will already have knowledge about how easy it is to find new customers, how challenging it is to deliver effectively, and what you do and don’t enjoy about the work. There are many ways to approach a decision about where to invest your time and money going forward. Here are some things to consider:
Choosing Based on Market Trends
Some entrepreneurs prefer to make decisions about where to invest their money (“capital allocation”) based on market trends. Do you see a trend in the market that supports your idea? For example, are people increasingly looking for ways to save time, and your product helps them to save time? It obviously makes less sense to invest in something that is part of a fading technology or trend. For example, now wouldn’t be the time to invest in filing cabinets, since fewer and fewer people store their information in paper files. It is easier to build a business that rides an increasing trend, so consider whether either of your businesses follows a better trend.
Choosing Based on Revenue Potential
It is an important exercise to figure out your maximum revenue potential – how much money you could make with your business if absolutely everything went right. It may be that one of your two businesses has a much higher maximum revenue potential than the other. Take some time to calculate the absolute maximum that you could deliver (your “capacity”), and then calculate how much money you would make if you could sell everything you could deliver. Sometimes, this can help you make the decision really quickly.
Choosing Based on Lifestyle
For some entrepreneurs, the most important consideration is lifestyle. What is your motivation for running your own business? For some, it is to have control over their schedule, so they can be available to attend their children’s activities. For others, it is to make sure they do not have to travel, so they can attend to issues at home. If your highest priority is your lifestyle, then you need to look at the two options and consider how they compare from a lifestyle perspective.
Choosing Based on Budget
Some businesses are much more expensive to start and grow than other businesses. If you need to manage a location (or multiple locations), or if you need to buy a lot of equipment to run your business, then start-up costs can be high. Some businesses require a great deal of up-front marketing before momentum begins to build. It is wise to build a financial plan for each of your options before you choose one. If you prefer to self-finance, then one business may be much better than the other.
Choosing Based on Competition
One consideration when starting a business is how much competition you will experience. Some entrepreneurs prefer to go after a field where they can be the dominant player. If that describes you, then review the competitive landscape for each of your options. If you have a lot of confidence, then you may be comfortable entering a crowded field. If you out-compete the other options, then you can win, even in a very competitive space. However, if there are any big players (“gorillas”) in the field you wish to enter, do examine whether they have the power to keep you out of the market.
Perhaps the most important consideration is what you really love to do. Write down what you most enjoy about each business and what causes you to struggle the most. Then, for each business, write down how much time you spend on things you enjoy and on things that cause you to struggle. If you are having trouble deciding between two options, this comparison may help. If you love your work, then your days will go quickly, and problem-solving will be challenging and fun. If it’s still tough to decide, choose the business that most follows your passion.
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