It’s become so easy to build a startup: all it takes is a $100 or an intro to a group of well connected entrepreneurs to get your juices flowing. It’s no longer a question about how to start a company, but rather, what type of company should you start.
The following are the different types of companies you can start and the pros and cons associated with each one.
Internet Startup
Internet startups are the Facebook’s and Twitter’s of the world. These are the startups that get all the press on Techcrunch and raise millions of dollars to hopefully score a multi-million dollar exit or IPO 5-7 years down the line. We’ve all fantasized about being the next Mark Zuckerberg and building a company that changes an industry and solidifies your legacy in this world.
Pros:
- It’s the big vision — the big exit potential
- Impact an entire industry and change the way people previously did things
- You’ll need to raise money from angels or venture capitalists to get your company off the ground
- If you’re not an engineer, then you’re out of luck
- The vast majority of internet startups fail
- Can consume your life, so it’s easier to run an internet startup while you’re young as oppose to when you have a family to take care of and a mortgage
Agency
Marketing, advertising, SEO, and PR agencies are so easy to start. All you need is a skill that somebody else needs: you can drive traffic to a website, you can get a company press, or you can improve conversion rates for a site. Though it’s your company, you’re always working to make someone else’s company better; you always have a boss, which is your client.
Pros:
- The more clients you get, the more money you make
- No startup cost — all you need is a client
- Results based: make your client money and the more money they’ll pay you and the longer they’ll keep you as their preferred agency
- Though it’s your company, you still have a boss — your client
- Churn: companies come and go, even if you’ve done a great job, projects end
- Hours worked can be excruciatingly long (like an internet startup), except you’re working to make someone else’s company succeed
E-commerce
E-commerce stores have recently boomed (Refinery29, Nasty Gal, Fab), many of which are raising millions of dollars and being run like internet startups. In addition, with innovative platforms like Shopify and Storenvy, it’s never been easier to build an e-commerce store and start selling immediately.
Pros:
- Super easy to start a store — just sell your own clothing
- Complete control of your own brand
- Costs money to purchase inventory (if you choose to go that route)
- Fashion e-commerce stores are about building a brand, which means SEO and Adwords don’t help
Affiliate
This is my favorite type of business. In an affiliate business, you sell another company’s product. For example, my sites sell tours to South America and Asia. I drive traffic to a site, close a deal, collect the money, and hand the tourist off to my partnered agency that handles all the rest. I have no costs unless I pay for advertisements — it’s a great business model as long as you have the right, trustworthy partners.
Pros:
- No cost to start as you’re selling someone else’s product or service
- If you create the right systems, then you can easily remove yourself from the equation and achieve passive income
- All you need to do is focus on two things: driving traffic and converting the traffic
- Can be difficult to find the right industry and the right partner
- It can be difficult to track conversions and closed deals, so a dishonest partner may skip your commissions
Coaching
Coaching is teaching individuals how to do things. For example, you can coach people about fitness, how to start a company, how to get out of debt, or picking up women. It’s easy to start this type of business, all you need is an expertise, but it can also be difficult to make it a very lucrative business.
Pros:
- Super easy to start
- Marketing approach is straight forward: build a blog, write good content, become an expert
- Make your own hours and work from anywhere
Cons:
- Can be difficult to establish expertise
- It’s easy to start a blog; it’s difficult to drive traffic and keep consistency with writing
What type of startup will you start?
Author:
Jun Loayza is the founder of How to go to North Korea, an innovative travel company focused on taking to new locations. In his startup experience, Jun has sold 2 companies, raised over $1 million in funding, and lead online marketing campaigns for Sephora, Whole Foods Market, and the Los Angeles Clippers.
