Your idea might be world changing. It might have (or at least feel like it does) the potential to make millions of dollars. But not so fast there. Don’t run in, guns a-blazin’. You can’t go directly from idea to profit. You need to explore your idea. You need to conduct some market research before investing time or money to minimize the risk.
A well thought out research plan could be the most important document you ever create in your entrepreneurial adventure.
What questions should you ask?
Any good research starts with questions. What are you looking to answer? An idea is just that - an idea. It has potential. It could be profitable. It might work. But could and might aren’t strong foundations to build a business on.
Start with the basics:
WHO will be buying your product or service? WHO is the target market? Be specific and concrete here.
WHERE will you sell your product or service? Online, your own retail space, through retail stores? Consider everything about distribution - the logistics and cost involved to get your product into the hands of your target market.
WHY will people want to buy your product or service? Does it fill a need, address a concern, or remove some pain point or irritation in their lives? It not, you probably need to rethink things.
WHEN can your product or service be available? How fast until you start to see a profit? If there’s a delay, what’s the risk of someone one swooping in before you to fill the void you identified?
WHAT are you selling? A physical product? A digital product like software? A service? What costs are involved with production? If you’re selling a physical product, get a prototype made and get it into the hands of your target market. What do they think?
Where can you get information?
You live in a remarkable time. Almost everything is available from the comfort of your own home. Start with Google (or Bing, or Yahoo). Search for stories and news about the industry you’re going to enter. Look for TRENDS (in fact, set up a few Google Alerts using keywords that apply to your industry and idea). Products/services in demand, and those in decline.
Subscribe to industry associations and forums. Get their newsletter. Attend their events and talk to people working in it already. Go to the library (remember the library? It has lots of great resources, too!).
Look to government and private agencies like the Small Business Administration (USA) and the Federation of Small Businesses (UK). They can provide industry reports and white papers, offer advice on who to talk to and what questions to ask, and so much more. Your federal and local government wants you to succeed. They need you to succeed. Small and medium sized businesses drive the economy, and they’ll do whatever they can to help you plan and grow your company and idea. All you have to do is ask.
Look at your competition
A market analysis is crucial. You need a crystal clear understanding of a) the competition you’ll be facing, and b) the size of the market. Can it support another player? Is there room for you to grab a decent market share? Is the market growing, or experiencing a decline? Check out the Office of Entrepreneurial Education resource page for some fantastic links on American economy and market stats, many of them updated daily.
When examining your competition, consider the following:
Their market share
Their strengths and weaknesses
How your product/service is different and better than theirs
Not familiar with SWOT? This acronym - which stands for strengths, weaknesses, opportunities, and threats - should be part of your research. Apply it to your idea and business. Apply it to your competition’s product/service and business. Where do you do better than them? Where do you fall short?
Your business idea research should answer questions. Read, read, and read some more to get as much information as possible. It should show you in no uncertain terms whether you can reasonably expect some degree of success. Does the market support it? Is there room amongst the competition? Does your product/service fill a void and/or improve on an existing solution? If so, that’s a green light. If not, start over.
Photo by Nomadic Lass
Creative Commons License