How To Be In The Right Business?

I'm really good at art, so I should open an art studio! Or, I really love to bake, so I should open up a bakery! There is a real demand for custom t-shirts, so I should open an online t-shirt store. There isn't any herbal tea shop in the neighborhood, so I should open one up!

There is a number of reasons that inspire entrepreneurs to start a business. Only 50% of businesses survive past first 5 years and only 35% survive past 10 years. In case of restaurants, 60% shut down within the first year.

So, what is going on here? Entrepreneurs, by nature, are risk-takers, biased toward action, smart and driven. All the qualities that are well respected in the business world. So, could it be that I'm just in the wrong place (business) at the wrong time?

Perhaps all the points going through your head are right at some level. The answer lies in the success recipe of a business.

Customer need is different from customer's willingness to buy. You know, customers are willing to buy something, even if they don't need it (think celebrity endorsed novelty items). And customers are not willing to buy even if they really need it (think healthy food options). It is likely that a boxing training school opened by Mike Tyson would succeed while opened by you at the same spot might not work out.

Let's break it down.

Market's capability to buy and then market's willingness to buy are far more important factors compared to market need, that should drive your first data point in selecting a business. Evaluating your resources and capabilities against your competition (and not against yourself) is second. Let's not be hasty in opening up a restaurant next to Ramsey's. Extra points if you can find an empty space like AirBnB.

Adding your interest (love) in a business, though not required, but definitely part of the recipe, will give you that extra kick for long-term success.

And did I tell you that in order to go past that 10-year survival mark, you need to keep adapting to the market's evolution or if you are lucky, then drive that evolution?

Good luck, real small businesses, I’m rooting for you.