Business Criteria

Yesterday I reviewed in detail some of the research I performed prior to starting up a business. I studied several business models from different industries and identified some favorable characteristics.

It was around this time that I read Tim Ferris’s The 4-Hour Workweek. This book was a source of huge inspiration, and I combined it with the business model research conducted in my previous post. I had already identified certain characteristics of different businesses that I really liked, so my next step was to come up with a list of criteria that my business absolutely had to incorporate.

Essential Business Criteria.

• Passive
• Scalable
• Something I enjoy and am knowledgeable about
• Low startup cost

Passive – I consider my time pretty valuable, and given the choice between work and play, I choose play every time. As a person that already works 40+ hours a week, I didn’t want this side “hobby” to consume significant portions of my time. In addition, I’ve always found systems of automation highly appealing. The 4-Hour Workweek really exposes that in today’s global economy, you don’t really have much reason not to outsource and automate as much as possible. So even if outsourcing certain aspects of the business means lower margins of profit, I am A-OK with that.

Scalable – A big aspect of a passive side job is that my business is not based on a service model. Service industries such as consulting, tutoring, restaurant table waiting etc… are all paid at an hourly rate. While this model certainly works for some people – as you gain experience, you move up in pay as you bill at a higher hourly rate -  the potential income from a service type business model is really limited by the number of hours you can work in a given day. The whole idea behind passive income is to make more by doing less – to give me the freedom to enjoy the things I actually enjoy doing – so any service based model was a big turn off. I wanted my business to be scalable, where one unit sold = X dollars of profit. If I sold 10 units in an hour, I could make 10X dollars/hour. If I sold 100 units in an hour, I would make 100X dollars/hour.

Enjoyable – I was watching a documentary on CNBC about Warren Buffet the other day, and one of his pearls of wisdom was that – if you’re passionate about what you’re doing, you’ll be successful no matter what it is you’re doing. I really believe this. I plan on spending majority of my time during the startup aspect of this project, so if I hated what I was doing, life would suck. I also believe that if you are truly passionate about your job, the quality of your work will stand out, and this in turn will make you more successful than your peers.

Low Startup Cost – A big turn off from getting started in real estate was the huge risk involved because it requires so much startup money. I’m currently saving a big chunk of my income to pay for graduate school in a few years, so I would hate to risk any of my hard-earned savings to startup a business, no matter how great the potential reward is. You may have already noticed, but I’m really risk adverse, so ideally I’d like to get started in a business that hardly costs any money to startup at all.

So this completes the list of essential factors that my new business absolutely has to incorporate. Tomorrow, I’ll be taking you through my brainstorming process as well as revealing out some of the incredible failures I suffered along the way.

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