One of the best ways to avoid starting a new
business that’s doomed to failure is to test your business idea
rigorously before you launch.
Just because you’re good at something, enjoy doing
it or dream of becoming a successful entrepreneur doesn’t mean you have a sound
business idea.
If your new business is to succeed, there must be
sufficient demand for your products or services at the prices you intend
to charge. It doesn’t matter how much knowledge, personality and drive you
bring to your new business. If people don’t want what you’re offering at the
price you charge – your new business will fail. Simple.
How To Do Basic Market Research
Although the very words ‘market research’ conjure
up images of clipboards, questionnaires and a small army of researchers
pestering shoppers on a busy high street, for most small businesses the
solution is much more basic.
The key to success can be to spot a gap in the
market and tailor your business to fill that ‘niche’, so you become the number
one supplier within that market. Even if you’re a ‘me-too’ business or if you
plan to sell something that’s already proved popular, you should still carry
out some market research to seek honest feedback from potential customers.
Pre-start market research for most new
businesses need not be sophisticated or expensive, you simply need to know who
your customers are and what they think about your products or services.
Don’t make the mistake of simply canvassing friends
and family, because most will be reluctant to criticise. Plus, they probably
only represent a small proportion of your market, at most, it won't be reliable
market research by any means.
Speak to potential customers you don’t know. Find
out their opinions about what you plan to offer. Do some real-life product
testing. Crucially – ask whether they’d buy your product/service at the price
you’re asking. If the answer’s no, you need to reconsider.
For small businesses that sell to few customers
(possibly other businesses), market research will involve meeting potential
buyers to discuss products/services and prices. For those aiming for
mass-market appeal, the answer might well involve asking questions to people on
the high street, where free samples always come in handy. You might do some
door-to-door market research. Write down all responses and learn from
them.
Weigh Up Your Competitors
Effective market research also involves assessing
the competition and web-based searches are a good place to start. Also flick
through the pages of business directories and local papers/magazines. Even
walking around the area in which you’re thinking of setting up will reveal much
about the competition you will face.
Find out how many businesses in your market offer
products/services similar to yours. Determine how much they charge and what
terms they offer (eg buy now, pay later, etc).
If there are too many competitors or some whose
prices/terms you cannot match, your business idea might not be viable.
Assess Your Market Research
Be honest when considering the results of your
market research. Pay particular attention to feedback on prices and never
simply ignore those who tell you they don’t like your products or prices. Ask
what they would prefer you to sell and/or how much they would pay. If this is
considerably lower than your price, find ways to cut costs, if possible.
Important flaws in your business idea might be
exposed, but better to find this out before you commit time, effort and money
to starting a new business that will never succeed.
You might decide your only option is to think of
a different business idea. Don’t be disheartened. Many successful entrepreneurs
have had to work their way through numerous bad business ideas to arrive at
good ones.
Alternatively, your business idea might simply need
a tweak here and there to enhance its chances of success. If you’re really
doing well, your market research will make you even more confident your
business idea is a sure-fire winner.
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