Good market research can be the difference between success and failure. Start-up author Kevin Duncan explains how to find out more about your competitors, potential customers and – crucially – their reaction to your prices.
What's the main danger with business ideas?
If you believe you have an excellent idea for a business, don't get fooled into a false sense of optimism. Test it thoroughly by doing some basic market research. Only then can you move forward on any sound basis.
We're talking customers?
Customers are what it's all about so find out how much demand there is for your product or service. Ask yourself:
- Which types of people or businesses will buy from you?
- Do they fall into different categories?
It's wiser to focus on specific types of customers, rather than hoping you appeal to everyone, unless your products and services have genuine mass-market appeal. You need to find out who needs what you are offering.
What about my prices?
Together with how much they would buy, reaction to price is the most important information of all. Then you’ll be able to determine whether or not you have a viable idea for a business.
What about competitors?
Identify the other players in the market and find out:
- What they offer
- Are they successful, and if so – why?
- What are their strengths and weaknesses How do these compare with your own?
- How much do they charge and can you afford to compete? If you can't, do you have a Plan B?
Be prepared – you might have to cut your costs or change your proposition to make sure there's enough room in the market for you.
What about external influences such as the economy?
If people are simply not spending on the things you're planning to sell, you'll struggle. Ploughing a lot of money into a business on that basis is ill-advised – the risk is too great. Also, find out whether you’re faced with any legislative restrictions. If you are, you must consider their likely impact on your plans.
It's easy to get carried away…
Starting a new business is a dream that many people have, but try to assess your idea through another person’s eyes. If you were them, would you embark on such a venture? Be honest. One of the best pieces of advice I can give is to be like an inquisitive child. Ask 'Why?' in relation to every crucial factor. You must be able to justify your thinking.
I'm hard-working and have bags of enthusiasm!
Enthusiasm alone is not a sound basis on which to set up a business and nor is a commitment to hard work. You must be realistic and consider many other factors.
How do I get started?
Because of the internet, a huge amount of valuable information can be gleaned from your desktop in the comfort of your own home. Simple online searches can reveal much about potential customers and suppliers – and your competitors. However, there really is no substitute for getting out and talking to prospective customers. And it's not just asking them whether they like your idea for a business, it's whether they will buy from you and pay your prices – that’s the crux.