Buying and selling is the bread and butter of small business, indeed probably any business. As any entrepreneur knows the key to it all is to find something to sell both that other people want, and that not too many other people are selling. If that all sounds a bit obvious, that is perhaps because we often have a tendency to over-complicate things.
Unless you are the owner of a general store this broadly means that you will begin by identifying a specific niche. And niches inevitably bring challenges of their own, most noticeably whether to err in the direction of the popular or of the obscure. The dilemma is a classic one – popular products are by definition hugely in demand, but this leads of course to an unseemly rush to supply. An obscure product, by contrast, will probably be available only from a relatively small number of outlets, but that is only because they are not widely in demand. This tends to lead us to a place in which items that are of use only to a select few people generally fetch a much higher price, and are thus more profitable, than items sought after by everybody.
The Paradox of Demand and Supply
To understand how this works we could do worse than consider what is called the Diamond-Water Paradox identified by the free-market economist Adam Smith. Smith noted that water, which is essential to life, has more or less no commercial value whilst diamonds, which have little practical use to most people, have high value. This, he explained, was because diamonds had a higher “marginal utility”, in other words they are simply more scarce. Or as the well-informed Quora puts it: “Marginal utility is the additional satisfaction someone gets by consuming an extra unit of a good”.
To frame it another way, if you want to buy sunglasses at an Algarve beach and you don’t like what is offer from one vendor there will be another along in a minute with some more. But if your interest is in Steel Framed Mats/Rig Mats – Northern Mat and Bridge will have something on their website which may be of interest, perhaps somebody else will too, but competition will be limited.
Try to Find the Most Popular Product That Is in the Scarcest Supply
Perfection lies in finding the popular product or service that is nonetheless not in plentiful supply, but in practice this rarely if ever happens and as such the target has to be to find the most over-demanded and under-supplied item possible. Usually the difference exists only at the margins and this is why other factors such as marketing skills and the entrepreneur’s own business acumen come neatly into play.
The is no magic formula, no guaranteed route to success. Unless, of course, you re lucky enough to discover a diamond mine in the bottom of your garden, which will surely make you rich. Of course you are far more likely to discover water, but that will only make you wet.