Testing your idea for a business

One of the best ways to avoid starting a business that’s doomed to failure is to test your idea for a business rigorously before you even think about launching.

Just because you’re good at something, enjoy doing it or want to become a successful entrepreneur doesn’t mean you have a sound basis on which to start a business.

There has to be sufficient demand for your products or services at the prices you charge. It doesn’t matter how much knowledge, personality and drive you possess. If people don’t want what you’re offering at the price you charge – your new business will fail.

Basic market research

Although the words ‘market research’ might conjure up images of clipboards, questionnaires and a small army of researchers pestering shoppers on a busy high street, for most small businesses the solution is much more basic.

The key to success is to spot a gap in the market and tailor your business to fill that ‘niche’, so you become the number one supplier. Yet even if you’re a ‘me-too’ business or if you plan to sell something that’s already proved popular elsewhere, you should still seek brutally honest feedback from potential customers within your specific market.

Pre-start market research for most small businesses need not be sophisticated or expensive. You simply need to know who your customers are and what they think about your products or services.

Don’t make the mistake of simply canvassing friends and family. Some will be reluctant to criticise. Plus, at best, they probably only represent a small proportion of your market.

Speak to potential customers you don’t know. Find out their opinions about what you’re offering. Do some real-life product testing. Crucially, ask whether they’d buy your product/service at the price you’re asking. If the answer’s no, reconsider your idea for a business.

For small businesses that sell to few customers (possibly other businesses), market research is likely to involve meeting potential buyers to discuss products/services and prices. For those aiming for mass-market appeal, the answer might involve asking questions to people on the high street, where free samples always come in handy.

Eye up the competition

Market research also involves assessing the competition and web-based searches are a good place to start. Also flick through the pages of business directories and local papers/magazines. Even walking around the area in which you’re thinking of setting up can reveal much about the competition you will face.

Find out how many businesses in your market offer products/services similar to yours. Determine how much they charge and what terms they offer (eg buy now, pay later, etc).

If there are too many competitors or some whose prices/terms you cannot match, your idea for a business might not be viable.

Assess your market research

Be honest when considering the results of your market research. Pay particular attention to feedback on prices and never ignore those who tell you they don’t like your products (or how much you charge). Ask what they would prefer you to sell and/or how much they would pay. If this is considerably lower than your price, you’ll have to find ways to cut costs, if possible.

Important flaws in your idea for a business might be exposed, but better to find this out before you commit time, effort and money to starting a business that will never succeed.

You might decide your only option is to think of a completely different idea. Don’t be disheartened. Many successful entrepreneurs have had to work their way through numerous bad business ideas to arrive at good ones.

Alternatively, your idea for a business might simply need a tweak here and there to enhance its chances of success. If you’re really doing well, your research will make you even more confident that you idea for a business is a good one and you’re on to a sure-fire winner.