Starting a Small Business: How to Research Your Market
10 Steps to Starting Your Own Business: Step 1
Making the leap from a military career to a veteran-owned small business might seem like a daunting challenge -- but then again, you've faced daunting challenges during your time in service. To pull your business together, what you need is a well-executed battle plan.
If you have an idea for a business, the first step is researching your market, and determining if there's an opportunity to turn your idea into a success. During this phase you'll gather info about customers who would be interested in what you would offer, as well as businesses already operating in your area. Use that information to find a competitive advantage for your business.
For customer research, follow these points:
- Demand: Is there a desire for your product or service?
- Market size: How many people would be interested in your offering?
- Economic indicators: What is your area's income range and employment rate? Will enough people have the finances to afford your product?
- Location: Where do your customers live and where can your business reach?
- Market saturation: How many similar options are already available to consumers?
- Pricing: What do potential customers pay for these alternatives?
To help answer these above questions, you can use the resources on this Small Business Administration page.
You can also do "direct" research, and connect with prospective customers to get their direct opinions. This can be done through:
- Surveys and questionnaires (visit SurveyMonkey for tips on how to create them)
- Focus groups (this Fortune article explains how you can create one)
- In-depth interviews
Keep in mind that direct research can be time-consuming and expensive. Use it to answer questions about your specific business or customers, like reactions to your logo, improvements you could make to buying experience, and where customers might go instead of your business.
Competitive analysis helps you learn from businesses competing for your potential customers. This is key to figuring out what your "competitive edge" is — what you can provide that other businesses can't, and creates sustainable revenue for you.
Your competitive analysis should identify your competition by product line or service and market segment, and address these characteristics:
- Market share
- Strengths and weaknesses
- Your window of opportunity to enter the market
- The importance of your target market to your competitors
- Any barriers that may hinder you as you enter the market
- Indirect or secondary competitors who may impact your success
The SizeUp tool can help you discover how your business stacks up against competitors by city and industry.
Several industries might be competing to serve the same market you're targeting. That's why you should make sure to differentiate your competitive analysis by industry. There are many methods for doing this, including Porter's Five Forces analysis. Important industry factors to consider include level of competition, threat of new competitors or services, and the effect of suppliers and customers on price.