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May 9, 2013

If you want to become an entrepreneur but are not sure what kind of business you would like to start, what framework can you use to help you decide? There are two things to consider that will provide you with a strong advantage:

1. Starting a business to create a solution that you will be a customer for

This is sometimes called "eating your own dog-food". To be successful, all businesses have to deliver value to customers: they have to make something that people want. If you use the product or service that your company makes, it helps you understand whether it is providing value.

2. Starting a business in an industry that you understand

Industry experience provides valuable knowledge about the opportunities and constraints that your business will face. Some examples of industry knowledge are:
  • knowing where your potential customers shop
  • understanding why they buy
  • knowing how potential distributors or affiliates work
  • understanding what the major concerns of key contacts for your business are
If you don't make something that you yourself would be a customer for and you don't have a good understanding of the industry, you are flying blind. Try to develop a business where you have at least one of these two advantages. Also, try to increase your awareness of the aspect that is missing.
107 What Kind of Business Should I Start?