I get a lot of questions on Quora about starting a business. But all of them are phrased around what business should I open to make a million bucks. That not the question you should ba asking yourself. For a business to make you rich it has to survive, and if it’s not something you love like you own baby you will quit when it gets hard. And make no mistake it is going to get harder and harder.
For those who think they are going to open a business that will make them rich in its first year, allow me to bust your bubble IT’S NOT GOING TO HAPPEN. To be profitable a business has to exist at least 3 to 5 years, during this time you will face most of the challenges and make very little profit. The experience you’re going to make during this time is both highly specialised and unique. Meaning you can’t learn this material any other way.
Assuming you made it past those 3 to 5 years, now comes your Pareto stage. Meaning now you know your business and field well enough to understand what’s profitable and what’s not. There will always be around 20% of your inventory that provides you 80% of your profit. While the other 80% provides you with only 20% of your profit, you have to dump that part like yesterday’s garbage. It’s going to be the same with your clients, some will just take up your time and some will be profitable. This 80/20 analysis will help you multiply your businesses profit many times over.
So why can’t you perform this analysis your first year? You don’t know enough about your business and your clients. The goal is to dump the less profitable inventory and clients to make room to get more of the profitable kind. But in the first year or two, you don’t know who you should keep and who you should dump. And trying to go through this analysis without understanding your business inside out, you will cause a lot more problems than you solve.
So take your time, your business is meant to support you your entire life. So treat it like a fine wine not like junk food.