Regardless of what many supposed business gurus say, “following your passion” is not necessarily the greatest business advice out there.
This isn’t to say you shouldn’t follow your passion. Ideally, we would all be doing what we love, to earn a living.
But, when kids scream for food, or you just can’t afford to get that new awesome gadget because you’re a few hundred quid too tight, “following your passion” in business starts to take on a bit of an unpleasant taste.
In successful business, a good rule of thumb is to “follow the money” instead.
Ideally, you would balance “following your passion” with a profitable business idea so that you can keep following your passion without going broke. If your business is not profitable — which basically means it is earning more than it is paying — then you won’t be following any passion for a very long time.
Profitable Ideas = Longevity
When starting a business, it’s imperative to consider lucrative business ideas as a priority. This does not make you a sellout. It makes you logical.
Bank managers will want to know if your small business idea has a hope of being profitable before loaning you any money. Venture capitalists want the same.
Businesses with a potentially high profit margin are much more likely to get the initial funding they need than new, quirky business ideas without a specific target market.
By focusing on profitability right from the start, you are laying the groundwork for the longevity of your business. That commensurately increases your chances of finally being able to “follow your passion” in that business (or another business) because you will have more means to do it.
Let’s say your passion is baking cakes. But there are twenty bakers already in your neighbourhood (many of which are suffering because the market is too glutted). To jump in and start a new cake-baking business in that neighbourhood is unlikely to be profitable. That means your business will go down, and you will stop baking cakes.
By “following your passion” with no regard for the profitability of the business idea means you get neither profit nor passion!
But, let’s say the neighbourhood is completely lacking plumbers. They are so desperate for decent plumbers that people are willing to pay twice as much for decent service! You’re more likely to bake cakes on the weekend for the next twenty years if you have your bills covered and are making decent money during the week than if you’re broke and looking for a job.
So, by following a lucrative business idea as a priority, you automatically open the door to following your passion as well.
You could even use some of the profits of your plumbing business to invest in a boutique baking service in the future.
Again, “following the money” opens the door to “following your passion.”
Low investment and high margin
If profit is what you take home after expenses, you might think that the ideas with the lowest investment and highest margin would be the right way to go.
Well, you would be mostly right, and it’s a good rule of thumb.
But remember that it’s all a question of scale. A million quid for a billionaire is “low investment”. But, to others, it might be a lifetime’s earnings.
So, “low investment” really depends on what you have at your disposal, and what you can get.
It’s important to work out the expenditure versus the income when deciding what is the most profitable business idea for you.
“Expenditure” doesn’t only have to be financial. It can also be time. In our example above, plumbing might be the most profitable business idea in that neighbourhood. But if you’ve never done any plumbing, it might take too long for you to get that business started. That would be too high an investment of time to make that business immediately profitable.
Chasing specific industries is useless.
Looking through a bunch of “most profitable business ideas” articles, you quickly come across professions such as:
- Website design
- Auto repairs
- Real estate
- Logo design
- IT Support
- Bookkeeping and accounting
Such lists are utterly and completely useless. Two website designers on the same street could charge wildly different rates, one of them broke and the other in clover. Just go take a look at the cheap rates being charged on Fiverr (sometimes for dubious work), and you’ll quickly see that telling someone to “become a logo designer to get rich” is like telling them to jump in a crocodile-infested lake to learn how to swim.
No matter what industry you’re in, working out the most profitable business idea has more to do with market-related factors than it does with the industry sector.
So, instead of giving you some useless list about “which industries are most profitable”, we’ll give you some actionable tips for you to work out the most profitable business idea for your business no matter the industry.
Here they are:
Actionable tips for the most profitable business ideas
- Ascertain demand. What do people need in the areas you can reach (local and online)? Make a long list.
- Work out what service/product could fill that need.
- Work out what service/product needs to be created to fill that need (e.g. electric vehicles, Uber, Airbnb, and other disruptive business ideas).
- List out what would be needed for you to personally deliver that service/product.
- Establish how much investment (time and money) is required to start each of the ideas listed above.
- Work out how you could get that time and/or money.
- For any ideas that require far more time and/or money than you could possibly obtain in the near future, move them to a separate list called “Future Potential Business Ideas”.
- Of the list you are left with, work out which ideas balance most with (a) what would be more profitable and (b) where your passion lies. Learn more about profitability. You can always become passionate about something that regularly pays the bills! But there’s no harm trying to marry profitability with passion at this early stage if it’s possible.
- You should have a fairly shortlist by now. Is it possible to merge any items on the list and create a hybrid service so as to increase your new business’s potential profitability? If yes, then do it.
There you go. You have your business ideas! (You can always get more by discovering some new thing that people need and then following the steps above again.)
There’s no need to pick one item only. Pick several and start working on them together. See where they go.
“Luck” and “chance” very definitely play a role in business. It’s true that luck strikes more often when people work hard, but it’s still luck!
It might be that you get lucky on one or two of the items on your list — a particularly eager client, a new government grant, an unexpected business partner, etc. — and that you decide to stick with that particular idea and dump the others. That’s fine.
Then, once you get rolling and start turning a regular profit, you can always go back to your initial list and see if you now have the time and/or money to invest in those other business ideas you initially couldn’t work on.
By balancing profits with passion, jockeying the two and always trying to merge them closer as you grow more successful, you will eventually be doing something you truly love — and earning some great cash while doing it!
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.