by Peter Hupalo
Contributing Author

1. Will the company be able to maintain high profit margins? Low profit margins are dangerous to your company's survival. If you only have a tenuous 2% net profit margin and prices rise a few percent, you are in trouble. Higher profit margins allow room for error and changing cost structures. When you think of low profit margins, imagine a guy standing at the edge of Niagara Falls with a little tin cup. He is trying to reach into the torrent of water to pull out a little drink. It is dangerous to place yourself under tons and tons of water to get a little cup full. Similarly, who cares if your business generates millions of dollars in revenue, but only can earn $10,000? It is what you keep that matters. 

2. Good Revenue per sale. This is often missed by many. It is difficult to succeed if you are selling a one-dollar product. To make a million dollars means you must sell one million of your product. That's a lot of sales. If you are selling a $1,000 product then to make a million dollars you only need a thousand sales. Guess which level of sales is an easier to process and fulfill for a smaller company?  

3. A proprietary product. Or, at least, a tremendously growing area where all the companies in the field can't keep up with demand. A proprietary product is one which your company exclusively controls. This means another company can't just begin producing and selling your product. Patents and copyrights are two ways to secure a proprietary product.   

4. Something that you love to do. It is difficult to do something well if you don't feel passionate about it. Choose to build a business in a field that you love, and you will find yourself enjoying it. This will help lead to success. Never just enter a business because the financial numbers seem to indicate a great business. To really make money demands growing a business, and this will take years. Be sure it's something you want to do. Something related to a life-long hobby or interest is ideal.  

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5. Will the business have good cash flow? It is possible for a business to be generating excellent sales and profits, and yet be losing cash. You need cash to pay bills. A cash strapped business is a business that will struggle to grow. Do a cash flow projection for your start-up business.  

6. What are the growth prospects for your business? What will be required for you to grow the company? Many entrepreneurs start a business and are happy when they see it making money. They are often not as happy when they realize that profits have plateaued. Think about how you will grow. If you start a restaurant, for example, your profits will certainly level off. You will only have so many customers eating at your restaurant in any given year. To grow would require adding a second restaurant. But you cannot run two restaurants as you do one restaurant. You can be on top of everything at one location, but you must be away at least part of the time when you have two restaurants. And what if you had ten? As you grow you will need to learn to delegate. You will need multiple locations. Compare this to a mail-order business. It can be run from one location. Yet, sales are essentially potentially unlimited with only small structural changes to the business. Doing more of the same thing in the same way is easier than changing the way you operate.  

7. The business must be something you are psychologically suited to do. This is not the same as loving the area. Some people are more outgoing and social than others. Other people are more reserved. Each is suited to building different types of businesses. Needless to say, a business that demands much personal selling and personal customer contact might not be ideal for the more reserved person. Yet, such a person could very successfully run a mail-order or Internet-based company.