Your business score

During this new year some of you may consider starting a business. Starting a business on a part-time or full-time basis can be a risky undertaking even during the best of times. Unless you look at all your alternatives and base your decision on carefully chosen criteria to match your goals, your enterprise may cost more than you make.

We developed a 15-point formula that you can use or adapt to minimize your risk and maximize your return on investment. The criteria below spells “perfect business”. If you already own a business or you are an employee, you might want to see how your business scores. Rate each area below from 1 to 5, with 1 being very unfavorable, 3 meaning average or neutral, and 5 being a very favorable situation. If you score a perfect 75, please contact us right away and tell us what you do. All of our business interests must earn a 65 or better and a couple are above 70, but we have yet to discover that elusive perfect business.

Product – It is important that you have an outstanding product or service to sell. If you give a low rating on this criterion, then you should look for another business unless you can have a monopoly and rank high in the next two areas.

Essential – Is the product or service essential to a target market? The more essential the higher you would score. If it is nonessential and readily available, then your score would be lower.

Renewable/Consumable – Do people need your product or service regularly. For example, if own a barbershop you know that your services will be needed again within a few weeks.

Fun/Flexible – Would you enjoy working with this business and does it allow you the flexibility to do other things you enjoy?

Employees – Will your business be able to attract and keep the best people? Or even better, can you run the business with no or minimum employees through a virtual company where most of the labor is contracted to others?

Compensation – Score high if the business has no limit on your return on investment, if your earnings are residual (ongoing), and/or your sales are highly likely to significantly increase for many years.

Trends/Timing – If current environmental factors indicate that your business is on the verge of a growth curve, then it would rank high.

Barrier to Entry – Is it difficult for competition to start and compete against the business? This barrier can come in many forms such as proprietary knowledge, patents, cost to start, technology, etc.

Unique Markets – Does the business lend itself to a niche market that is not limited by geographic boundaries? The business should serve the needs of a specific market that is large enough to sustain growth.

Supply – If you require raw materials or inventory, then it should be readily available and not have future limitations. Or if you are a supplier, your business should have multiple distribution methods.

Investment – Can you get started with a low relative investment, or easily obtain capital to grow the business?

No/Low Liability – It is practically impossible to have no liability in this litigious world we live in; however, an ideal business would cause little or no harm, damage, or offense to others.

Ethical – The business should fit your values and allow you to have pride in what you do. It goes without saying that it should benefit customers and encourage you to be totally honest in your dealings with others.

Saleable – Can you easily sell the business later when you decide to retire or move on to something else?

Support – This is one of the most important areas, but few business owners have the assistance they need to optimize their efforts. Strong support is typical in a franchised business, family-owned venture, or with the right kinds of investors.

How did you do? Steer clear of any business venture that yields a score between 1-29. You’ll end up losing your shirt or become part of the “miserable many” that wish they would have kept their day job.

A score between 30- 49 is where the majority of businesses would be ranked. This type of business typically uses a low price to compete and it could earn a decent profit, but it may have limited potential.

Scoring between 50-64 means that this business ranks higher than average, and you should give it serious consideration. However, examine those areas that were scored low and determine if any point would be a hindrance to achieving your goals.

Congratulations if your score is over 65 because you have a definite winning opportunity, or an existing business that is serving you well. If your score is 70 or more, you have an “A+” grade and should seriously consider starting the business. If you currently own such an outstanding business, you are one of the “fortunate few”.

(Rik is a business instructor at NMC and Janel is the owner of Positively Outrageous Results. They can be contacted at: biz_results@yahoo.com)