Topic overview

Research your market

Research your market

You might be convinced you're on to a sure-fire winner, but not testing your business idea before you launch means you're asking for trouble.

Even if response from prospective customers is overwhelmingly positive, you could learn something that enables you to improve your offer - and make selling that little bit easier.

The importance of market research

Long before you take serious steps to start a business, ask potential customers their opinions of your products or services. Find out whether they would buy at your intended prices, and if so, what and when would they buy.

Also ask them what they like and dislike about your competitors, because this could provide you with important information.

Getting pre-launch feedback enables you to make changes (great and small), so that your offer is more closely tailored to market demand. It's easier to make changes before you start up as a result of researching your market, rather than later having to convince people to buy something they don't want, which never works.

Simple, low-cost market research

Few small businesses need pay for professional market research. There are many simple, low-cost tests you can carry out yourself.

For example, if you want to open a shop and need to know how many people pass by, simply stand in your chosen location and take notes. Repeat the exercise at different times of the day and week to get a true picture.

Politely stop people. Tell them you plan to open a shop nearby, and ask what they'd like you to sell. Don't forget to find out what they think about your planned prices.

If yours is a more specialist small business, contact target customers directly. If you plan to sell to other firms, ask whether they'll meet you face to face, so that you can discuss your new business and the benefits it might offer them.

You can also find out a lot about your market using existing market intelligence - although there's no substitute for speaking to customers directly, desk research can help to plug gaps in your knowledge.

Dealing with good and bad feedback

If people's responses are positive, that's great. Perhaps you have a sound idea for a business after all (although there are no guarantees). Don't ignore negative responses though if they're well founded, and don't make excuses when you're criticised. Listen to feedback and act on it where necessary.

Make sure you speak to a representative sample of potential customers - not just your friends and family. Depending on your type of business, you may have to do this at different times, on different days and even in different locations.

Weighing up your competition

You also need to find out what your competitors offer, when, where, how and at what price. Then you can work out whether or not you can compete.

This might simply involve walking around the area in which you plan to set up. You can even pose as a customer, pay a visit to their premises and see what's on offer. You could check out competitor websites or ring them up for information (including prices).

A quick scan through a local paper or online business directory can also provide a list of likely competitors. If you've already got contacts in the industry, sound them out too.

The job of market research isn't complete until you have confidence in the scope and depth of your findings. The more information you gather, the less likely you are to set up a business that is destined to fail.

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