Market Research before starting a business
Market research, apart from being so crucial to understanding the potential of a new business idea is surprisingly enough a process that extremely few entrepreneurs or business owners / managers carry out. Most people are happy with the odd ‘that sounds like a great idea’ or ‘ wow how did you think of that’ comment from friends and family. No surprise then that around 60% of start-ups are no longer around after three years. Outside of the few occasions when your friends and family are going to be your only clients – which means you have a hobby rather than a business – market research need to consult potential clients.
When conducting market research, speak to a sample of those people who you will be asking to part wth ther hard earned cash in exchange for your product or service once your business opens. This is the first opportunity to see how viable your idea is. Yes it may sound great, and perhaps there is nothing else like it on the market but if people are not prepared to buy it, it either means that the benefits of its use is not clear or the idea needs a re-think.
No surprise then that, when approaching banks, venture capitalists or business angels for funding the information they may ask for would be the results of your market research study. Provide positive proof of client interest at this stage and you will certainly have your foot in the door. Any lack of client interest or lame excuses on why no research had been carried out may prove hard to overcome.
In speaking to a wide range of business funders and representatives if venture capital frms over the last few weeks I was as surprised as they were that so few new businesses have actually done research of their own.
When asking Peter Jones, well known entrepreneur and venture capitalist what the one thing is he would tell a budding entrepreneur, he said: “My most crucial tip of all, is make sure that you research your idea thoroughly! It is amazing how many people try to pitch to me, without having looked into the market sector that they are trying to break into. Sometimes a simple internet search reveals that their idea has been done before, or that their estimation of demand is completely skewed. Look around at your competitors and see how you can offer a better and more competitive service than them.”
Doing a research or viability study prior to starting your business is not something ‘other people’ do. Its something every business owner who wants a real chance to succeed, simply have to do. Who are your clients, what are their interests or challenges, how much will they pay to solve or address these challenges? Just some of the questions that anyone needs to answer before starting a business.