Why we need to have the right business in the right place

Driving back from breakfast networking I passed through an area generally populated by stores and shops run by small businesses. There are many specialist goods stores including chinaware and dress shops, and restaurants as well as a baker and a bank. It is a place I know quite well passing through, but not somewhere I have lingered very often recently.

I stopped the car near a newsagent’s shop where I used to buy a morning newspaper if in the area. I found that the shop had closed down. I was surprised, but remembered that there had been at least two more within five minutes’ walk in this quite densely populated town. I discovered that both the other shops had also gone. I had been pre-occupied but now began to wonder why all these shops had apparently gone out of business. Soon I spotted the answer. Two well-known supermarket chains had opened stores close by. They are small by comparison with the huge stores they have out of town, but nevertheless they carry a wide range of food and other convenient supplies as well as the newspapers, magazines and confectionery that the newsagents sold.

It was clear why the newsagents had gone; they simply could not compete with the supermarkets’ wider offerings and lower prices due to the latter’s greater purchasing power. Of course one could criticize the local authorities for allowing the supermarkets to damage small businesses, but the reality is that change is inevitable. The newsagents in larger towns cannot adapt even though in smaller towns and villages they still provide a focus for local communities. I am sorry for the families who have lost their businesses, but there are also very few viable businesses delivering milk or making bespoke furniture; they have had their day.

Nevertheless, people still want to start businesses, and who would deny that it can be far more rewarding than working for someone else? Being in business means that we benefit directly from our own endeavours rather than relying on a fixed agreed payment from someone else and not having a final say in how things should be done. Many of us find it hugely rewarding and enjoyable.

Of course being in business for oneself carries greater risk too, both financial and in terms of pressure to succeed, which some people find too stressful.

However, we must have the right business in the right place in terms of physical location if we have a shop, and the right place in terms of the market and services we provide whether directly with our clients and customers or through our website. We must ask ourselves whether people will want what we are offering and look beyond whether we think we will enjoy running a particular type of business. Even if our business fulfills our dream to start with, it will become a nightmare if it fails because we chose the wrong path or the wrong place.

If we have a restaurant, will we offer what the potential customers need? Are we looking for passing trade, or are we in a niche which will draw customers more widely? Are we up-market with gourmet food which will attract those with more money to spend? Market position is everything, both in terms of location for a restaurant or shop, and in terms of need and demand for every sort of business.

Do we need to adapt to a known demand? Once upon a time if we needed our horses shod we went to the village blacksmith. Now the farrier usually goes to his or her customers, driving a van to the stable. I try to visit all my clients at least once a year. It makes them feel comfortable and it is good for our business relationships. Decades ago, people in my business sat in their offices and expected clients to come to them and preferably not too often.

If you want to start a business, think whether others of its type are successful and whether they will continue to be. Twenty years ago having a shop renting or selling videotapes was a great idea, but now DVDs can be bought or rented by post and movies and TV mini-series can be downloaded to your computer or TV set-top box.

If you have a novel idea, ask friends you can trust whether they see a demand. Try out your idea on a small scale without committing to large overheads and paying rents. Have a plan, put your toe in the water perhaps with a small website and a PayPal button and see what happens. Do sit down and think it all through first.

What do you think? Do you agree? I would welcome your comments.

© Jon Stow 2010