Hello and welcome back to @OradeaTechHub Journal
I hope you had enough time to read the first article. Was it helpful for you? Let us know in the comments section below.
In today’s article, we are going to continue our topic regarding “How to develop a successful start-up idea” and we are going to focus on the first step: Studying the market.
So you believe you’ve got the “perfect idea” for a product or service. It’s so nice that you think you can start a new business and eventually thrive because of this idea. That’s great, but the last thing you should do is rush into this without doing a bit of market research. And by doing a “bit” of research, I actually mean doing extensive research.
Remember the last article? I failed my business because I didn’t research well. Not doing your market research is the way to fail your business before you even get it off the ground.
You need to know the nature of the business as well as figure out who your target demographic is. And don’t rely on basic public data – this simply isn’t enough.
Starting a business is like buying a car: You need to do some research before taking the idea to the market. First, figure out if there’s demand for your product or service. Do a competitive analysis. Find a place to set up shop. And create a plan to differentiate your offering.
How to look for demand in the market? Take NOTICE of what is happening in the industry. Take time to observe things around you. See if there is a real problem that you can fix and find the right solution for your possible clients.
Doing your due diligence can mean the difference between success and failure, and it doesn’t have to cost a penny. Networking, online research, informal focus groups, and other do-it-yourself methods can often do the trick.
So why doing research in the first place? The simple answer is because you don’t want to fail. A complex answer is because research can lower the risk factor, increase sales, improve customer satisfaction, gives you a better understanding of your own place in the market and helps you create a growth strategy.
Before you get the research ball rolling, you need to come up with a solid business concept. Once you have a concept, you need to determine if it’s viable. To figure out if you should go ahead with your business idea, you need to answer questions like these:
- Is the market saturated already with this idea? Does your city really need another marketing agency? How much money is spent in your industry each year in your area? Is there room in the market for one more business?
- Does the market want what you’re offering? Have you conducted a survey to find out if somebody will ever buy your product or service? Or if you’re developing a new online service, is it something they can’t live without?
- What’s the competition doing? What do they do well or poorly? What’s unique about them? Can you offer something different that’ll encourage customers to patronize you instead of more established businesses?
- Can you reach your target audience? If you’re selling a new product, are you opening in an area with a population of the right age and disposable income?
Once you’re sure of your business idea, dig in deeper. You need information that’ll help you develop a unique business proposition that’ll give you a competitive advantage.
The best sources of information will vary depending on the type of business and circumstances, but here are some sources of information:
- Demographic and economic data. Try the Romanian Institute of Statistics, or most recent Economic Census to find things like age range, income, number of businesses by type in a geographic area and total sales in your category. For even more information, a reference librarian can point you to other specialized databases.
- Business groups. Your local chamber of commerce may be able to help you find the information you need.
- Local universities. Sometimes professors at business schools are interested in having their graduate students do a market feasibility study for course credit.
- Local competitors. If you’re starting a local business, shop the competition and check their websites. Or find a similar business in a similar city and ask to talk to the owner. Also, look for similar businesses for sale and contact the brokers for information like why they’re selling and what their financials are like.
- National competitors. Do an online search of businesses in your industry and evaluate what they offer to help fine-tune your idea.
- Potential customers. Run your idea up the flagpole with informal focus groups. Talk with friends of friends–but not your own friends or family, since they may not tell you the truth–and old customers or existing customers if you’re already in business. This is the acid test to see if your plan is ready for prime time or needs tweaking.
How to do market research and what are the key factors you need to check?
1. Determine the purpose of your research
Technically, there are many reasons why businesses might do market research. They use them to assess business risks, reduce multiple problems, or create opportunities for them or their clients. You can do research and see past problems to decrease future risks, and analyze successes to see what you need to continue do in the future.
Now, before starting market research, determine whether the analysis is for internal or external purposes.
Internal purposes will include things like improving cash flow and business operations.
External purposes will include trying to convince lenders to give you more money.
In any case, your analysis is a critical part of your business plan. It shows to the money men that you know your industry and that your business has a growing potenti
3. Prioritize the results of the first step.
You can’t research everything, so concentrate on the information that will give you the best payback.
3. Look at your industry size of it
In your analysis, outline the current state of your industry. Include statistics where the industry is heading using metrics such as size, trends, and projected growth. This section will let investors see that you’ve done your job.
4. Find your target customers
Let’s be realistic, not everyone will be your customer. When you analyze the market, you must determine who your potential customers are. This part of the process is called a target market analysis.
You need to fully understand who your customers are and where they come from. So in your research be clear and look at things like:
- Education level
- Marital or family status
Once you narrow down who your customers are, find out their needs, interests, personalities, and demographics.
Consider also creating customer personas based on your research. Many businesses have multiple customer personas. After you compile different customers’ characteristics, build different personas to represent your typical customers.
Revisit your target market from time to time to ensure they still fit your business.
5. Compare your competition
To further analyze the market, you need to understand your competition. And, you must know who your competitors are trying to target.
Take the time to research what other businesses are out there. Look at things like your competition’s offerings, location, targeted customers, and disadvantages in the market.
Make a list of all of your main competitors. Go through each one on the list and determine their strengths and weaknesses (SWOT analysis). What does their business have that you don’t? Why would a customer pick a competitor’s business over yours? Do they pose any threat to your business?
Once you outline your competitors’ strengths, weaknesses, opportunities, and threats, rank them from most to least threatening. Then, determine your startup’s advantages and marketing position.
6. Analyze your findings
After you analyze the market, it’s time to take a look at your findings. Lay out all of your research and organize it using different sections. Include sections for your purpose, target market, and competition.
Based on your research, you will be able to forecast other things for your business, such as your cash flow cycle, gross margin, and customers’ buying habits.
7. Put your analysis into action
Conducting a market analysis might seem like a daunting task, but your business will thank you for it later.
Sure, you’ll spend a good chunk of time working on your marketing analysis. But, it’s well worth it. Don’t put all that extensive research into waste. Put your analysis into action.
For internal purposes, look at how you can use your findings to improve your business. Use your analysis to see if you can make any of your business processes more efficient.
If you conducted an analysis for external purposes, be prepared to speak with lenders about your research and conclusions.
Don’t just box up your analysis and pack it away for “later.” Revisit your market analysis every now and then for necessary tweaking.