Just because nobody is doing it is not a reason to start a business

“I’ve got a great idea for a business.  I know it will work because nobody is doing it!  I need to move quickly before someone else does it first.”

As someone who works with entrepreneurs for a living and hears a lot of business ideas, this type of business pitch puts up a big red flag for me.

Just because nobody has started a particular type of business is by no means an indication that the market needs that type of business.

When starting a new business it is always best to start with a clear and compelling need in the market, not with a great idea for some new product or service for which there may or may not be customers ready to purchase.

In many ways, starting a business that already has competitors in the market can actually be an advantage.  That is why businesses tend to cluster together. 

Where is a good place to start a new gas station?  On a corner that already has three gas stations.  People already go to that location to buy their gas.  Where is a good place to start a restaurant?  In an area with other restaurants, where people are already going when they want to dine out.

By pursuing a strategy of going into an existing market, your goal is do things better, faster, and/or cheaper.  So being visible with the competition so the market can see that you offer advantages helps bring in customers.

When you start a business based on a completely new idea, attracting customers is a costly and time consuming process.

First, you will need to educate the market about what your product or service and the benefits it offers.  This will generally require extensive advertising, which can be quite expensive.  And if you try to do it without advertising, you are faced with a long slow process of building word of mouth.  Either way, you will need to have a substantial budget.

Next, once you have the attention of the market, you need to convince people that they actually have a need for your product or service.  Again, it will take time and money to accomplish this.

A great example of all of this comes from the dot.com era.  Pets.com argued to investors that they had come up with a great idea.  They were going to sell pet food over the Internet.  Nobody else was doing it, so with an aggressive advertising budget they could capture and dominate this market.  They convinced investors and ran very expensive ads for their new concept during the Super Bowl.

The company and its investors soon found out that there were two very important reasons nobody was selling pet food over the Internet.  First, nobody wants to buy dog food over the Internet as it tends to be an impulse item – “Hey, we are out of dog food so we better go pick some up.” And second, it ended up being just too expensive to ship big bulky bags one at a time to each customer’s home.  Pets.com soon failed.

So if you discover a business idea that nobody else is doing, take your time.  Do the research and test the business model to make sure it really is a viable business.