Thinking of starting a business? The 6 types of business you can choose from…

“Every choice you make has an end result”

– Zig Ziglar

Pre-start work

A lot of people seem to think that a Startup is an investor funded high-growth business.

But as you already know this could not be further from the truth. As we have discussed in our last post, in reality a startup is just: “a company that is confused about – 1. What its product is, 2. Who its customers are. 3. How to make money.

Put differently, a startup is a stage and NOT a type of business!

Another key consideration before embarking the entrepreneurial journey is the decision on what type of business you’d like to go after.

That’s right, as both you and I know not all companies are created equal‘.

In fact, there are a number of different business types that are vastly different from each other and our job before taking the plunge is to ensure that we select the one that match better OUR personal (and business) aspirations.

Without any further delay ‘let’s do the breakdown’ and see what are the main 6 types of businesses…

The (business) types

1st type: Solo Business

As the name suggests, here we’re talking about companies built and operated as ‘one-man-bands’.

Even though there is hardly any talk about this model in the news, in reality not only is steadily growing in popularity among new entrepreneurs but in fact such “non-employer business” (companies that have no paid employees) are still the majority*.

Structure-wise a big chunk of them are registered as sole proprietorships and cover a wide range of sectors, from marketers, trainers, consultants, artists, to programmers, IT specialists, designers, copywriters etc.

So, why people are typically choosing this entity?

Mainly because of 2 reasons:

a) You are in complete control of the decision-making and can build a business YOUR way

b) You have lower cost-base, more flexible business structure, and larger cut per sale, all by-products of you having no other people “to share the mattress.”

2nd type: Traditional (offline) businesses

Traditional (offline) businesses are mainly the ones that that help the local community function. Is what many call Main street enterprises.

As Professor Henrik Mariendal Andersen rightly adds about them: “The way the service or product is made is more or less the same way as yesterday and the way it will be made tomorrow.”

This kind of businesses are usually family-run, require relatively small amount of upfront investment for getting off the ground and are often labelled by politicians as, “the backbone of the economy”.

Typical examples of such companies are: restaurants, real estate agents, bakeries, bars, hair dressers, grocery store, mechanics, coffee stores, travel agents, plumbers etc.

And what’s the why behind the owners’ decision go on their own?

Well, largely is peoples’ aspiration to have their own business and support their family this way rather than waiting for somebody else (e.g., an employer) to give them a pay check.

3rd type: Internet-based microbusinesses

Any business that exclusively sells what it produces online without the need to have an offline presence can be described as an online business (aka as an internet-based business).

And what makes it micro?

That’s right – it’s size. Under EU classifications a microbusiness: “is a business which employs fewer than 10 persons and whose annual turnover does not exceed 2 million Euros.

The main driver behind this model popularity?

– Unlike the past, with today’s availability of tools, software and platforms setting up an online company has become easier than ever

Online spending globally continues its trend of double digit growth

– Typically with this type of business, if you play your cards right, the risk of ‘losing your shirt’ can be minimal

Internet companies can take pretty much any form: from e-commerce shops, marketing agencies, educational platforms, to travel sites, news portals and e-training centres…

The reason why people “vote” for this business type?

Apart from what was mentioned earlier, a key contributing factor is the fact that due to it’s nature it enables you: to “start off small, work on it part-time or even view it as a hobby before you decide whether to commit to it.

4th type: Social Enterprise

A social enterprise is a company that exists to benefit the society rather than its owners.

According to Steve Blank: “Social entrepreneurs are no less ambitious, passionate or driven to make an impact than any other type of founder… Their goal is to make the world a better place, not to take market share or to create wealth for the founders.”  

And unlike most people think, even though the majority of such organisations are still non-profits, there are many that have a for-profit, or hybrid nature.

Nonetheless, any business to qualify for the ‘social title’ needs to reinvest most of its profits to their social mission.

Even though the most popular areas for such enterprises traditionally have been around social issues such as poverty, environmental conservation, reforming education, healthcare, human rights, etc. the last couple of years they have begun moving into a wide range of new more contemporary problems today’s citizens face.

So, the why behind this entrepreneurs’ decision for ‘going social’ is to turn their social mission into a success and as a result make the world a better place.

5th type: Lifestyle Business

A lifestyle business is a company carefully designed: a) around something you enjoying doing (i.e. passion, hobby, interest), b) to provide something people want or need, c) in a way that the owners don’t need to sacrifice having a healthy and pleasant work-life balance.

Even though there is a lot of sh*t written about this model from serial BSers that promote the notion that is a kind of ‘set it and forget’ type of business that produces passive cash and exists to fund a ‘Bahamas lifestyle’ in reality is a REAL business with the only difference that is created with the intention to provide you an enjoyable living – both in and out of the office.

Examples of lifestyle business can be anything, from a supplement providers, e-course creators, fashion designers to marketing specialists, professional bloggers, web-designers.

And as mentioned earlier, the reason why this type of founders typically start such a business in the first place, is NOT because they aspire building a massive business that shoots for an exit but instead having a business just big enough to sustain their target lifestyle.

6th type: High-growth Business

This type of companies are high-potential ventures that aim to disrupt an industry and capture sizeable market share on the fast (e.g. Uber, Airbnb, Netflix).

But you already know that…since this kind of ventures grab all the headlines.

Moreover, according to Steve Blank a big proponent of this model: “From day one, the founders believe that their vision can change the world. Unlike small-business entrepreneurs, their interest is not in earning a living but rather in creating equity in a company that eventually will become publicly traded or acquired, generating a multi-million-dollar payoff.

And the “experts” recipe for crafting such entities is by: a) coming up with a disruptive product that has an unfair advantage, b) that appeals to a BIG market, c) has the ability to grow very fast, d) and is also highly scalable

High-potential businesses cover a wide range of fields but clearly the most popular “applications” are in software development, mobile apps, robotics, big data, cybersecurity, fintech…

The founders’ motivation in 6 words?

Putting a dent in the universe!

Conclusion

So, at this point I hope you understand the basic premise behind each type and acknowledge the different implications they can have on a founder’s personal and business life.

So, if I could give one advice, I’d say: if you’re starting a new company, do yourself a favour and take some time deciding what you really want to get out of this business and carefully consider which of the aforementioned pathways is more likely to get you there.

Don’t forget, that turning an idea into a success takes hard work, tenacity and drive and it’s critical to pick a business that fits YOU and is sync with who you are for helping you endure that windy and often lonely journey for making things happen.

But is your life, you call the shots!

***

Ok guys, that’s all from me for today.

If you enjoyed today’s post, check out my brand new book, The Aspiring Entrepreneur Entry Strategy: A practical Step-by-step guide for finding a validated, winning business idea that stays true to who you are, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“You can’t build a reputation on what you’re going to do.”

– Henry Ford

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