Research starts at the first question you ask. All of the information you will gather is to answer the first question, “Should I start this business?” As you develop the answer you might change the purpose of the business. Some ideas might even be shelved for the future.
Where others see problems and chaos, entrepreneurs see opportunities. An opportunity can arise as you identify an unmet need or want in the marketplace. Opportunity recognition is a continuous process throughout the life of the business as customer wants and needs change.
Start small. Talk to friends, family and coworkers to begin to collect your thoughts. Ask everyone to evaluate your ideas honestly. Start to form your mission statement.
Network. Talk to other business owners to discover the realities of owning your own business. How many hours do they work, how soon did the business start to show profit, how soon could they take a salary, what personal qualities helped them, what personal weaknesses did they have to overcome?
Know Your Industry
Research the trends, current status and health of the industry in which you will operate. What is the size and rate of growth in the industry? Is your business sensitive to economic cycles? How will your business be affected if the economy goes up or down? Is your business seasonal, if so how will you prepare for less busier times? It’s important to know if regulations or technology will affect the business. Most businesses have associations that can provide financial information to get objective data to see if the industry and market can support your business goals.
Research the Market and Competitors
Market research can identify market trends, demographics, economic shifts, customer’s buying habits, and important information on competition. The information must be timely and relevant to your business. Market research can help you minimize your financial risks by determining if your product or service will succeed or fail in the marketplace and perhaps save you from making costly mistakes.
By describing the current status of the industry and the market, the business owner is gaining confidence that the business concept is solid and there will be sufficient business to operate profitability.
You need to understand who is the customer, what are their needs, how to reach them, educate them and get them to purchase the product or service.
As you do your market research, you will be determining whether your target is sufficiently large enough to reach your goals, or whether your goals should be adjusted to accurately reflect the success you can anticipate from your target market. You will need to identify and understand the barriers to entry. During your research, you will be trying to learn if you can be responsive to changes in the market, and if your product and delivery methods are aligned with customer expectations.
In your research, you’ll identify competitor offerings. Evaluate competitors’ strengths and weaknesses and how to differentiate yourself from your competitors. Competition is what makes the market work. Understand your competitors and learn from them.
You will identify your niche, where you are going to position your offerings. This, along with your costs, will help determine pricing.
Research the Field
Network with owners of similar businesses in noncompetitive locations. As long as you pose no threat to them, what better source of information than those who have been “in the trenches” for some time? Look for a city of comparable size, see if your type of business exists there and talk to that owner. Be honest about what you’re doing, and have questions prepared ahead of time to minimize the time you take. Prospective customers and interviews with people who might later become customers can be very valuable.
Visit the Chambers of Commerce, SBDC centers, economic development offices and other organizations that help develop new businesses. Universities, colleges and libraries also have resources that can help with your research.