Before starting your own business, ask: Why will customers choose you?
Many people on this planet dream of starting their own businesses, and some of them bring those dreams to me. My key first question is usually: “Which business are you thinking of?”
I’ve lost count of the number of times the answer is this: “I want to open a restaurant or a farm, because everyone needs to eat. You can’t go wrong with food.”
Or this one: “I’m thinking of getting into apparel. People will always need to wear clothes! And you don’t need much to get into the clothing business in a small way.”
You may insert a face-palm or head-slap emoji here.
It is absolutely true: food and clothing are basic human needs. All the people on earth will always need those things, every day of their lives. But is that really sufficient reason to get into those lines of business?
It is also true: many can get into those lines of business without too much prohibitive capital investment, or too much scarce expertise. Plenty of demand, easy entry – what’s not to like?
The answer is of course in the question. Everyone likes the idea! And everyone piles in!
Everyone’s uncle tries to open a restaurant, for example. Quite literally so in many cases – I know I have uncles who have dabbled (painfully) with eateries. The reason is always the same – people gotta eat! But here’s the thing, folks – they don’t gotta eat from you. The restaurant trade is always over-supplied – precisely because of the relatively low entry costs and the strong demand. Customers have enormous choice. They don’t have to buy from you. They have to choose to.
Will you have something that will make them choose you? Will your food offerings be that distinctive? Will your service experience or ambience be a class apart? Is your location going to be so strategic that you are assured of captive footfall? Because if you’re going to open a middling restaurant offering up mediocre dishes with meh service in an unremarkable location, your demise is all but assured.
This doesn’t even account for the fact that actually running restaurants is one tough enterprise. Ungodly hours just to stay afloat; high staff turnover; fickle customers with too many choices; not to mention a strange new world that is currently loading, where data-led delivery apps rule the trade by sourcing from delivery-only dark kitchens…
Farming: another enterprise with many pitfalls, many of them coming from the vagaries of nature; another enterprise where it is difficult to differentiate the product. What will be so different about your avocados? The wow taste? Supply reliability? Organic certification? Sustainably low prices? What?
Or you could just make trousers. Many do. Get hold of a few low-skilled tailors and invest in some basic equipment, and hey, Bob’s your apparel-making uncle. Again: how will you compete against container-loads of dirt-cheap imports, new and second-hand? It won’t be on price, so what will it be? Style? Local relevance and availability? Tailored fit? Look-at-me envy-inducing quality?
The bottom line: go into business, by all means. But not on a whim or a prayer, please. Don’t just look at the strength of demand; pay equal attention to the nature of supply. How easy is it to enter this industry? How many players already have? Who has cornered most of the profits, and why? What is the route to distinction in this market? What needs do customers have that are never met? Do you have a way of being one of the unique ones, or are you just going to be playing me-too in a field already too crowded?
Or: is this industry ripe for disruption? Is it complacent, stuck in its ways, stuck in the past? Is there a game-changing innovation that might upturn the apple cart and and give you a sudden advantage? Again, pause. Most innovations need to be scaled up fast to have any discernible effect. Do you have those deep pockets or well-heeled backers? Will you have a long enough runway to allow your new aircraft to take off one day?
Tough questions. But then business is a tough ask. No one should go into it lightly. My aim is not to discourage you; it is to stop you from joining the majority of entrants who fold quickly. It is to help you think about what it takes to be in the minority that creates distinction and uniqueness; that stands out from the crowd; that clock the volumes or the margins – or, once in a blue moon, both.
The world does not need more predictable business losers. It needs more unpredictable business winners. That’s a different game.
(Sunday Nation, 21 February 2021)