Market research is something that many entrepreneurs choose to skip when planning a new business. Maybe they find the task too overwhelming, or perhaps they are afraid they’ll find out their business idea can’t succeed – that their “baby” isn’t so cute after all.
Last week we talked about creating a Startup Plan for your new business idea.
To catch you up, a Startup Plan is a detailed list of tasks and subtasks that must be completed in order to get you from the initial idea stage to opening day and beyond.
Starting a new business without a Startup Plan is like traveling a winding road at high speeds with a blindfold on: it’s exciting for a mile or two, but you will quickly slam into an assortment of unforeseen obstacles without ever reaching your final destination. Even if you survive the ride, you’ll always regret the journey.
The very first step on any Startup Plan should be to conduct market research to validate your idea.
Here’s another colorful analogy for you: starting a business without doing market research is like stepping out onto a tightrope without bothering to check the tightness of the knots that are holding the rope in place. You’re halfway across when the knots loosen, the rope wobbles; you lose your balance, and fall to the ground with a splat.
It’s odd how many of my business analogies end in the horrific death of the entrepreneur. Odder still is that conducting market research is something that many entrepreneurs either forget to do or more often than not, choose to ignore.
The problem is they’re afraid their market research will tell them what they don’t want to know, that their big idea – their baby – ain’t so cute after all. They fall victim to what I call “Ugly Baby Syndrome.”
It’s a tough pill to swallow when market research tells you that your baby is about as attractive to the buying public as the south-end of a north-bound mule. That’s why many entrepreneurs choose to ignore the results of market research and plow ahead as planned; fooling themselves, their families, and their investors, believing that they know the market better than the market knows itself. I have a word for these entrepreneurs. They’re called “idiots” and the world of business failures is full of them.
So why is conducting market research such an important step in the startup process? Because well-conducted market research can verify whether or not there really is a market for your product or service, period.
If there is a verified market, great, forge ahead. And if the research shows a problematic market that you’d be best to avoid consider yourself lucky that you found that out before mortgaging the house to start the business.
Market research will also help you come to know your market well. Ideally a market should be passionate, large, easy to reach, and have plenty of disposable income to spend on a product like yours.
A market should be hungry for the product you’re selling; otherwise you will find yourself trying to sell a product to an apathetic market that has no use for it. I equate it with trying to sell houseplants to homeless people; there’s just not much of a market there.
I can’t tell you how many times I’ve consulted with startup entrepreneurs who think they have a “can’t miss” business idea, but their opinions are based on their own emotions, not on real world data. They’re in love with their ugly baby and won’t take “no market” for an answer.
Just because you love your product does not mean the masses will. So conduct your market research thoroughly, honor the results, and adjust your plans accordingly.
So how do you conduct market research? Thanks to the Internet it’s often as easy as going to your favorite search engine and typing in the name of the product and industry you’re interested in. You should find a number of industry organizations and associations, many of which publish statistics about their industry and make them available free or for a fee.
In the case of my retail business I found an industry association that supplied me with excellent market and industry data for a few hundred dollars; which saved me tons of time, so it was money well invested and the data was much more in-depth and well-researched than anything I could have come up with on my own.
The government also publishes market and industry data and it’s usually available for free (hey, you paid for it on the front end with your tax money). You can also find information on industry-related forums, message boards, search engines, forums, and newsgroups.
And don’t forget to research your competition because there is much you can learn from them.
I did on the ground research by going into the stores of my future competitors and noting things like selection, pricing, cleanliness, and customer service. Doing that helped me validate my theory that the market I was contemplating would support a bright, clean store with fair prices and excellent customer service.
Localized market research can also tell you whether the area where you’re planning on opening your business is sufficient enough to support your efforts.
You may have a great product with a viable market, but not on the street where your store will be located. Localized market research will help you locate your business in the optimum spot. We’ll talk about that more in an upcoming column on scouting and choosing the perfect location for your business.