DISCLAIMER: Below is an article with ideas or a personal stance about finances. This article is not financial advice. Investing is risky. Please consult with a financial advisor before investing.
This article is part of a trilogy containing everything you need to get started with your own business, manage your portfolio, and amass generational wealth:
Part 1: Deciding What Type of Online Business to Start: 4 Deciding Factors
Part 2: Portfolio Management for Online Lifestyle Entrepreneurs: the 10triple30 portfolio
Part 3: 5 Layers of Wealth
When deciding to become an online entrepreneur there’s soon an important existential question we have to answer: What type of business should I start? Which is the best one?
We soon get stuck in analysis paralysis, some people even never get past it. To get you unstuck, we’ll be introducing four factors to help you make your decision. These are cashflowness, scalability, position in the marketing funnel, and last but not least, time.
Read on till the end and we’ll cure your analysis paralysis once and forever.
Unless you collected some money bags during your career to get a wealthy sponsor you might not have a big budget to spend on your new business. You want something that starts generating cash flow quickly without needing to throw money at it. What you need first is a business that’s high in cashflowness.
Factor two any online business needs is scalability, you want to reach as many people as possible and as easily as possible, giving you to option to make magical internet money while you’re sleeping. If you wanted to sell your time for money you would’ve just stayed with your career, right? We want our business to also be passive and scalable.
Cashflowness vs Scalability
So ideally you have a business that’s high in both cashflowness & scalability. It will generate cash flow quickly due to its high cashflowness and later on showcasing its high scalability in scaling to the moon.
When we compare 6 popular types of online business when it comes to cashflowness and scalability, we get the following chart. Each aspect is rated from 0 to 3 with 0 being the lowest and 3 being the highest cashflowness/scalability:
|Type of Asset||Cashflowness||Scalability||Total|
We then quickly come to the following conclusions:
- No unicorns: the highest scoring type of business only scores 3 out of a maximum of 6 points.
- Similar scores: with 2 businesses scoring 2 points and the other 4 scoring 3 points there’s hardly any difference between all six of them.
Conclusion: there is no ideal online business, they all have their positives and negatives at the same time so instead of asking “What business should I start?”, a better question would be “What business should I start NOW?” or “When should I start business x/y/z?”
Position in Marketing Funnel
All business is marketing and all marketing is business.
A third criterium to sort the business by is their position in the marketing funnel: top, middle, bottom, or “How close to the actual sale are we?“. Are we just piquing the audience’s curiosity or close to selling a product/service?
|BoFu (product-focused)||SaaS Service|
We see a content business is highest in the funnel, it’s mostly used to capture an audience, inform them, and get them interested in purchasing along the way. SaaS & service businesses are much closer to the sale, they’re way post-peaking interest. The other 3 are stuck in the middle.
Of course, nobody is stopping you from combining types. Many SaaS & service businesses will produce SEO-friendly content to get additional leads or have affiliate programs to get access to the audience of content-based businesses.
On the other hand, many online entrepreneurs have started out with a content website in a vertical they like and pivoted later on into creating products/services to sell to their audience.
Don’t ask what but when
By now it should be clear. It’s not about what business to start but about when to start it.
Online businesses are extremely flexible. Much more than traditional brick-and-mortar businesses. It gives you the option to start out with a business that’s high in cashflowness but not necessarily high in scalability and flip the two later on.
This gets much clearer when we rank our six usual suspects on a timeline:
Don’t think about what type of business to start, think about when to pivot or add a new business to your portfolio. Many great online businesses, whether they’re SaaS or E-commerce, started off as a simple blog informing their audience, helping their audience, and talking to them. Many great ideas came from people freelancing or providing services to others, seeing the problems they get stuck on, and building solutions to them.
Don’t ask what, ask when.