Starting A Business Fundamentals
Know Your Market
Before diving in and spending money on your new business you really need to do some in-depth research into whether or not there is a market for what you intend to sell.
This time will definitely not be wasted and the information you gather will form an important part of your Business Plan (see Create Your Business Plan Masterclass).
You need to assess the viability of your business.
The best way to do this is by carrying out some market research.
There are four main ways of carrying out market research – that don’t involve just asking your mum or best friend if they would buy from you!
- Observation – This involves watching your potential customers and their behaviours in action. This means – without interacting – watching customers buying products or services similar to yours, listening to what they say as they shop, noticing what they buy and how much they paid. This type of market research works best if your business caters to customers, not to other businesses.
- Focus Groups – For a focus group you gather around eight to 12 potential customers and ask them their opinion about your product or service
- Interview – Simply put, this is a one-to-one conversation between you and a potential customer where you ask them their opinion on your product or service. These can be good if there’s a personal aspect to your product or service which potential customers may not be comfortable discussing in groups. On the other side of the coin, this method is a bit labour intensive as you only get one opinion at a time.
- Survey/Questionnaire – This involves creating a structured multi-question survey which you can then get potential customers to answer either by mail, email, in person or over the telephone, for example.This method of market research involves getting feedback from potential customers through a structured, multi-question survey.
With all of these options you have to bear in mind the reach of the market research before basing a big business decision on it.
If you only manage to speak to 12 people, or get 30 to fill in your questionnaire, that’s only a very small sample of the population and may not be representative of the market as a whole.
However, it can give you a clearer idea of what people are prepared to pay and what people like or dislike about your product.
As part of knowing if there is a market for your products or services you need to identify who it is that will buy from you.
Who are your customers?
You need to identify who your customers are going to be.
Will you be selling to individuals or businesses?
If it’s individuals – how old are they, where do they live, how much do they earn?
If it’s businesses – what sector are they in, in what circumstances will they be looking to buy from you?
If you have already secured some customers or have some potentials lined up, delve into what connects them to give you an outline of a buyer persona.
The other consideration when looking at your market is the other businesses already operating in the same space.
What about the competition?
Explore who you will be up against to attract your customers’ business. Choose about five competitors who are offering similar products and services and carry out a SWOT analysis.
STRENGTHS – What makes your business better than the competitors?
WEAKNESSES – Where do you come up short against your competitors and what will you do to mitigate?
OPPORTUNITIES – What external factors can you take advantage of which will help your business succeed, eg a growing market.
THREATS – What external factors are a black cloud hanging over your business, eg a new shopping complex near your new retail shop. How will you overcome the threat?
By now you should have a clearer idea of whether your business has wings.
If the market isn’t there or you can’t compete with others already offering what your business will offer, it’s perhaps time to go back to the drawing board and reconsider.
But don’t give up. Remember, where there’s a will, there’s a way. Maybe a simple tweak is all it needs to appeal to a different market, or you can come up with a new uniue selling point which will blow the competition out of the water.
If you are confident that there is a market for your business and you can offer something customers want that the competition can’t match you on, it’s time to push on with your plans.
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