A couple of years ago, my wife started a donut business. Her purpose was simple: make delicious vegan and gluten-free food that people liked for a reasonable price. She test marketed batches of donuts, did some product-market fit work by selling in batches to friends, and then opened a market stall in a farmer’s market with her business partner. The business did well – they got repeat customers, sold lots of donuts, and became known at several farmer’s markets around Seattle. Yet the business wasn’t making money.
Donuts, it turns, out, are expensive when you don’t mass-produce them (and even then, you have to price them to match the expectations of the market). The component ingredients – fair trade cocoa, non-GMO soybean oil, organic sugar – and the permit fees and daily costs made the business more expensive to run than people wanted to pay for the end product. We still enjoy the donuts when my wife chooses to make them (like today). But she decided to end the business because running a business wasn’t the reason she got started making donuts, and the choices that she had to make to sell more product required changing the business so much it wasn’t recognizable.
Successful businesses deliver delight to their customers while managing to adapt to the changing business itself. When you look at the example of producing specialty donuts, you have a challenging environment (special ingredients, limited product life, and specialized demand from a certain kind of customer). If you focus on the variables you can control – how to cap the costs of the special ingredients, what to do to extend the product life, and how to market the product to a wider audience and get mass appeal – you can make that business bigger.
The business of producing frozen donuts in a mass-produced model didn’t match the original vision of delivering delicious food in person to a clientele that didn’t have a place to get tasty treats. My wife wanted to look the customer in the eye and hear their stories in person – and they were great stories! But you can only eat so many donuts. Donuts do make everything better, but you can’t eat them every day.
If the original model had looked more like a frozen food business, it might have been more successful as a business, but wouldn’t have been anything like the experience of hand crafting food delights to an underserved customer that really appreciated that product (and told you so in person). Adapting to the changing business is the real challenge – maintaining the spirit of the idea while scaling the delight.