Great Small Business Ideas to Start: Market testing
The finest place to develop a profitable business, and the best way of building success, is often when you are already operating a business. Lessons can be taken directly from the market and your customers to give you an instant guide on what is working—and what isn’t.
The idea
Julian Metcalfe and Sinclair Beecham founded the successful Pret A Manger chain of sandwich shops in 1986. It has gained substantial profits, been credited with “reinventing the sandwich,” and become familiar in Britain, New York, and Hong Kong.
Yet their business did not start out as a sandwich shop; the original store was an off-licence (liquor store) in Fulham, London, called “Hair of the Dog.” However, they soon realized this was not a winning formula. Although takings were high, the profit margin was not—Sinclair Beecham stated, “We decided there was more scope in low-priced, high-margin foods like sandwiches.” By listening to clients and having a bold readiness to drastically alter the customer offering when necessary, they became successful.
This was a lesson they learned firsthand while actively doing business in the market. Because any marketplace will always have a degree of unpredictability, the best way to learn the formula for a high-profit business is by “learning as you go.” This is not a lesson that Sinclair Beecham has forgotten. In late 2006, when preparing to launch the Hoxton, an innovative “budget luxury” hotel in central London, he commented, “The Hoxton is an experiment. We’ll see if it works. There’ll be things that we need to change, and we’ll listen to our customers if we need to do so.”
In practice
- When starting a new business, do not expect to achieve a flawless formula instantly. No matter how much abstract preparation is done beforehand, there will always be lessons that can only be learned on the “shop floor.”
- Do not be discouraged when problems are encountered. View them not as obstacles or failures but as invaluable opportunities for learning. Analyze why they occurred, their significance, and their impact.
- Be prepared to make drastic changes to your business. Although it can be tempting to hold onto a particular formula, it may have to be altered, or in extreme cases discarded, for a more profitable alternative.
- Combine abstract learning with hands-on experience. The two concepts do not have to be mutually exclusive.