You’ve had a brilliant idea for a business. You feel incredibly passionate about it and your friends and family are encouraging you to take the plunge, to set up your own business. But how can you really tell if there is a market for your business idea? How can you work out if there is both a big enough customer base and the will or need to buy what you’re selling? Whether you’re anticipating launching a product or a service, it’s essential to figure out whether it’s wanted or needed, not only are you preparing for success that way, but you’re also saving yourself time and money rather than launching with a product that is destined to fail.
The key time you can spend before launching is in research. You can follow the SWOT analysis route (identifying the strengths of the industry, the weaknesses of your product or service and the potential threats to the success of your business), or look to drill down into the ‘4 Cs’, Company, Competitors, Customers and Collaborators. Whichever research path you take, the main considerations here are to understand more fully your market, your customers and your potential for profit.
First up is to identify your potential market and deep dive into it as much as possible. What is the market turning over each year? What businesses are thriving and with what products, what market share do they hold? You should identify your potential competitors, direct and indirect. Who is out there already selling what you propose to sell, answering the same or similar problems you intend to answer. Look into those businesses, how well they are performing, who their customer base is, what their price points are, and what their profits are, year on year.
Now, turn to the internet to go into the details on your customer base. Who is it you’ll be targeting? When you know who your target audience is, figure out where they live online, what platforms they use, what content they engage with, how they shop and what they’re buying. You’ll begin to see whether your product or service has potential within that or not.
With all the research you gather, you’re looking to establish whether there is room in the market for new entrants. If your product or service overlaps with others, pay attention to the market share information to see what piece of the pie you’ll be fighting for. If established businesses have around 80% of the market, you and the other small businesses will be sharing the remaining 20% and you should be able to work out whether you’d make enough profit to make your business viable.
Niche, Niche, Niche
You’ve done the research now and you will have worked out where your new business would fit into the overall market. Now consider how you can carve out your own niche within that to provide that you are the only supplier. Consider the problem you’re going to solve for your customers and plan to lead in that niche area and set your own prices. Finding a narrow space, a unique selling point, is a very strong place to start from. It allows you to widen as your business grows having built up a loyal customer base to begin with.
Test and test again
Once you’ve established all you can about the market and where you can carve out your niche in it, it’s time to test. And not just with family and friends. You need to find an objective audience to test your product or service, your website or idea on. Family and friends will likely mirror your own enthusiasm and while it’s great to have support it’s even better to find out the problems and the opportunities of your idea before you invest more time and money. Work with small groups of customers, launch a test website to see how your idea will be received, or partner with local shops or businesses to offer your service on a trial basis to see how it works. There are many ways to test your product and the more you do, the more information you’ll have to work from. You’ll receive objective feedback on pricing, on the desirability of your product, on problems your customers really want to solve and on what you can offer them that will make you indispensable. It’s invaluable information to gather so well worth taking the time.
Make hard decisions
After all this information gathering, it’s time to make some hard decisions. You might discover that your product or service is absolutely viable. You have identified the market, the customers, the pricing, you can see there is the need or want for what you’re offering and you’re then in a great position to pull all your findings into a business plan and move forward with your launch. But what if your findings show that your idea does not have legs, what then? Don’t just abandon everything. Use what you’ve learnt to edit your idea, to shape and mould what you originally planned to do to answer the needs of the market, the problems of your customers, or the sensitivities of pricing. You now have all the information you need to devise a product or service that really will work and that is a pretty good position to be in.
Regardless of your business idea, putting in the research and testing time before you launch will serve you well. No one would launch a business with plans to fail, so it’s important to take objective advice and research and apply it to all your plans before taking the plunge.
Whatever your business idea, whether it’s just something you’ve been mulling over or whether you’ve taken some steps on the entrepreneurial path already, we’d love to help. Read some of our Go For It Success Stories and get in touch. Our business experts will be delighted to hear from you and to talk you through everything you might need to know to move forward with your business concept.