When you research a new business idea, you may want to answer a few basic questions. When you are thinking of starting your own business, research plays a very important part. After all, you want to know who your customers are, what do they want, who are the main competitors and how much you can charge for your products & services.
Top MBA schools spend a lot of time teaching their students basic & more advanced principles of research. I know, I went to one. Among the most famous and often quoted business school frameworks are Porter’s five forces.
However, I am writing this blog from my personal entrepreneurial experience. I am a big believer in research and have done much for my various startups. Systematic research of your business idea is a complement to your knowledge, skill and expertise that you may already have in your industry and sector. In some cases you may actually already have clients and provide services (for example lawyers often set out on their own and take their clients with them). In that case, market research is a bit faster & has to do with ‘growing’ your business rather than starting from scratch.
Assuming that you are starting from scratch, below are a few pointers on how you may structure your research. These are basic foundational ideas that you may want to explore further. Each industry has its own nuances that may require a unique approach. For example, if you wanted to start a coffee house, you may want to stand in various city corners to measure foot traffic at existing coffee chains etc….
To read more on this topic, check out our Starting a New Business Guide.
Research a new business idea- understand your market.
1. What is your Target Market or who are you selling to?
Are you selling to businesses or to individual consumers? Are you selling a service, a product or both? When you do your business idea research, starting with a deep understanding of your target market will create a great foundation for your business.
2. Who is your ideal customer and how big is the marketing opportunity?
When you research a new business idea, quickly figure out who your ideal customer is. For example, for MachFast.com our ideal customer is UK resident who is keen on starting a business and incorporating a limited company to get going. The customer regularly uses smartphones and associated apps to get things done. Our customers are short on time, & prefer a simple easy way to complete admin tasks.
Figure out how big your market opportunity is. Are you targeting a small niche market, or a national/international client base? For example, MachFast.com, is built for nearly 700,000 new companies that get started every year in the UK; but we built the technology that can work in other markets as well. If your product & services are aimed at individual consumers, then you may want to have a demographic profile figured out. A demographic profile is a simple description of various customer characteristics that may apply, on average, to your ideal customer. For example, you may want to answer the following questions?
- How old is your ideal customer?
- Where do they live?
- How much money do they make?
- What gender are they?
- Are they single or in a relationship?
- Do they have kids?
- Do they like to travel or read books?
- Do they have a good credit history?
- What profession do they practice?
- Do they have specific cultural affiliations?
If you answer the basic questions above, you then can figure out how your product and/or service may be useful to your ideal customer in a way that fits their lifestyle service and product preferences.
3. Who is your competition and what are similar products and services?
Unless you are a theoretical physicist or mathematician, and your ideas are in the realm of artificial intelligence, you will likely face competition from other products and services. The best example are restaurants. Thousands start and fail each year. Despite Covid-19, many restaurants will continue to open and close. Diners have an amazing choice of where to dine or order delivery from. If you don’t know your competition, and what makes you different from them, you are unlikely to succeed.
Write down various product & service providers who are direct competitors.
- What do their customers say about them?
- What do customers like about existing products/services?
- What do customers not like about their products and services?
- Who are the big dominant companies in the market?
For example, if you are thinking of setting up an electronics shop, will you be able to beat Amazon.com? Or Argos around the corner?
Market by association
The easiest way to market your new product or service is by association with an existing product or service? One of the best examples is the Dollar Shave Club, whose YouTube commercial went viral. They identified a specific type of customer who wants a clean shave, with the best quality razors, at a low price and instantly available on-line. The target demographic are young men who are less connected to traditional brands like Gillette.
4. What is your Unique Selling Point? (USP)
Every business needs a USP. You must have something special in your business that attracts customers. Your sauce is the spiciest in the market, your strawberries are the sweetest, your mouse trap is better, your car is faster, your quality is the best and/or your price is the cheapest. You may be the only expert in the field, or you may have a patent and nobody can replicate what you have without paying you money. For example, Sir James Dyson completely reinvented a vacuum cleaner; patented his ideas, and became a billionaire on the back of a very unique design, an appeal to aesthetics and exceptional engineering.
5. Basic SWOT Analysis & Business Planning
Say what? SWOT analysis is a fancy term for Strength, Weaknesses, Opportunities and Threats. After you figured out what you are selling, who your target customers are and who you are competing against, it is time to put it on a pretty picture. We put together a little cheat sheet so that you can easily write down three or more observations on each element of your business. We limit this to three so that you can focus on the most important things. You can always expand the list to beyond three.
Finance and Business Planning
Before you get going, please figure out your finances. Check out our blog on starting a business that talks about money and starting a business. The main question you want to ask yourself is:
Given what you know based on the above research, how much money will you need to get going, survive and build a prosperous business?
We can add a few more basic questions to the above:
- Where will the set up money come from?
- What are the basic on-going business and personal expenses you need to take care of?
- How much money can the business earn at its best?
- How long can you survive without having any customers or revenue?
- Is this a lifestyle business or do you want to scale & grow?
- If it is a lifestyle business, then what is your ‘steady state’ where you are basically satisfied?
- If you plan to scale & grow, how quickly can you scale and what are the capital needs?