Small Businesses Benefit From the On-Demand Economy
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In an age when more consumers are demanding instantaneous service, it’s easy to see why many small business owners are considering adopting an on-demand model. If you happen to be one of them, the pros, cons and helpful tips provided here can help you decide if it’s a smart move for you.
Pro: The Concept is Simple | Con: Executing Can Be Costly
Adopting an on-demand model doesn’t require a PhD in economics. Simply put, it means being there for the customer the instant he or she needs your product or service. This simple concept, however, can be a costly proposition.
Delivering instant gratification, whether you’re providing a ride to the airport, like Uber, or a dog-walking service, such as Swifto, means harnessing the technology and resources to do so. For Uber, it meant developing an app allowing users to access a network of drivers instantaneously from their smartphone or device. By most accounts, this required more than $1.25 million in start-up costs.
Tip for Funding your On-Demand Business
Today, there are more ways to fund your on-demand venture than ever before, ranging from crowdsourcing to angel investors – individuals who believe in your dream and are willing to invest in it for a small cut. One company in particular, Dispatch, is devoted to helping on-demand start-ups by offering an inexpensive platform that can be tailored to your needs.
Pro: Any Business Can Do It | Con: Any Business Can Do It
When you consider the on-demand rideshare business, Uber and Lyft are the clear frontrunners. In the travel business, Airbnb and HomeAway own the lion’s share of the market. The point here is that while any businesses can adopt an on-demand model, only a few who do it well tend to dominate.
While this doesn’t mean you should abandon the idea, it does mean you should thoroughly consider if you wish to compete in the on-demand space. The Ubers and Airbnbs of the world have two factors working in their favor: one, they were ostensibly first to market; and, two, their established position makes it difficult for others to break through without considerable funding and effort.
Tip for Evaluating Whether you Should Compete in an On-Demand Market
While it’s easy to get excited about the benefits of doing business in an on-demand economy, the prospect should be weighed like any other business opportunity. Ask yourself whether the product or service you provide makes sense. Find out if your customers want instant gratification before assuming this is the case. And, most importantly, see if anyone else is already doing it well, since they represent your stiffest competition.
In many regards, the on-demand phenomenon is similar to the online bubble in the 1990s, when companies scrambled to build full-service websites, only to learn that not everyone cared to do business online.
So, whether you make the leap to an on-demand model or not, the decision to deliver instant gratification should be made in the opposite fashion: carefully and deliberately.