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There are millions of ways to make money; how do you choose which one is right for you? Well first off, don’t get trapped into thinking there is only one right way for you — there are probably hundreds that fit your temperament, skills and interests. Your real challenge is selecting the best from among the many options you have to choose from. Sometimes it comes down to trial and error learning, but there are ways to judge some of the relevant factors in advance.

Is it Right for Me?

The first step is to do a little introspection. A simple tool to facilitate this process is the basic good/bad list: draw a line down the middle of a blank sheet of paper, and on one side write the good points, on the other write the bad. Evaluation isn’t a simple matter of counting the good vs bad — you need to decide how important each factor is, how much ‘weight’ it carries — but putting it in writing helps.

Make a list of possible money-making opportunities, and evaluate each of the following factors, using the good/bad analysis described in the preceding paragraph:

1. Can I sustain enthusiastic interest in this?
2. Do I have the capacity to learn all I’ll need to know or particular skills to do this?
3. Will I need further education or experience to learn the practical ins-and-outs of running such a business?
4. Do I have the experience and knowledge required already?

Can I Make Enough Money?

I’ve heard people preach ‘Do what you love and the money will follow … ‘ — but that’s just what it is ‘preaching’ — a matter of faith that, in this case, is not supported by reality. It all depends on what you love! You may be the finest sand-castle builder on the beach, but there just ain’t no money in sandcastles honey…

You need to look at not just how profitable the venture is likely to be, but note how the cash-flow goes. Will it take time to build-up momentum before you begin to see a profit? If your starting out part-time to supplement existing income, or are living in your parent’s basement, you might be able to get by with that. But if it requires full-time commitment and you have a family to feed and little or no savings, it’s just not an option. So it all depends on your personal situation.

How much do you need to invest in such things as stock, advertising, etc., to get started? Will you be able to finance replenishing stock from income earned on the initial purchases, and how much does that leave for you? Will you need to hire employees, and what do you do with them if there isn’t enough business to keep them busy?

The usual way to determine the potential profitability of a potential business is to create a business plan. Far too many businesses skip this essential phase, which is one reason so many start-up businesses fail. Don’t think of the business plan as a sales pitch to potential investors, think of it as an investigative tool to help you clarify the details of your business intentions. Don’t farm it out to someone else to do — it is in researching the details you need to know to complete a plan that you learn about your own business. There are good software programs that will walk you through the questions you need to answer. Finding realistic answers to those questions will help you know if a business is feasible or not.

Do I have an Exit Strategy?

Something few people think about when starting a business, but a factor that may make the difference between a good idea and a great idea, is what happens once you have built your business into a thriving concern. What happens when you decide to leave: because you have to for health reasons, or because you want to for personal reasons? There are three possible scenarios, based on the type of business, and how it was structured to begin with:

1) The Business Dies (This is bad)

The business was entirely dependent on your personal efforts, so when you quit working, the business ceases to exist. You never really had a business — you just had a job where you were your own boss.

2) You Sell the Business or Business Assets (Can be good if you get enough)

You find someone to buy out your business, or you sell off your business assets, hopefully at a huge profit. That gives you money to live on while you build another business, or enough for permanent retirement if your business was highly profitable when you sold it. If you feel good with the value you receive when considering how much work you put into building the business, then this fine.

3) The business keeps going without your input, and you continue to reap the profits (This is great)

In the ideal situation, you have structured your business to keep running without you. Perhaps you incorporated, and kept 51% of the stock. Or perhaps you just have trusted employees (with some equity stake in the business, one would hope) that know how to run the business, train new employees, and continue on without your active participation.

Knowing your exit strategy has an effect on how you build your business from the very start. When choosing a business, be sure to look for one that allows you to build in a successful exit strategy, rather than just creating your own job.