Should startups care about profitability?

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There are so many different kinds of businesses — and so many different kinds of people — that it’s impossible to give specific advice on the particular type of business you should start. Only you will be able to answer that question, but to maximize your chances of success, you should:

  • Choose something you enjoy doing. It’s much more difficult (and a lot less fun) to make a success of a small business that doesn’t interest you — for instance, running an auto parts store when your heart is really in graphic design.
  • Choose a business you know intimately. Trying to learn a new industry or skill at the same time you’re getting your business up and running will add a lot of unnecessary stress to your new venture and lower your chances of success. Sure, it might be fun to run a hair salon, but if you’ve spent the last ten years baking pastries and don’t have any experience cutting hair, you might be better off starting a catering business or opening your own bakery. That’s not to say that you can’t learn a new business — but you should learn how to run a pizza parlor before you blow Aunt Sadie’s retirement money on a wood-burning pizza oven.
  • Choose a business that has a good chance of turning a profit. The best way to determine your business’s potential profitability is to prepare a “break-even analysis,” a financial projection that will estimate how easy or difficult it will be to turn a profit. (For more information on performing a break-even analysis and determining the financial viability of your idea, see Will My Business Make Money?)

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