Starting a business is a little like buying a car: You need to do some research before taking the plunge. First, figure out if there’s demand for your product or service. Do a competitive analysis. Find a place to set up shop. And create a plan to differentiate your offering.
Doing your due diligence can mean the difference between success and failure, and it doesn’t have to cost a penny. Networking, online research, informal focus groups and other do-it-yourself methods can often do the trick.
Consider the case of an event facility. It started as a place to hold weddings. Located in a beautiful old house, it attracted wedding business, but wasn’t turning a profit because it was usually empty on week days.
So the owners contacted members of a nationwide wedding planners’ association with similar estate-type settings in other geographic markets. They discovered that others in their situation filled the gap with corporate meetings and by offering bed-and-breakfast arrangements.
Today, 40% of the facility’s business is corporate events, and the owners are building a lodging facility on the grounds to expand their offerings. Before you get the research ball rolling, you need to come up with a solid business concept. Once you have a concept, you need to determine if it’s viable.
Once you’re sure of your business idea, dig in deeper. You need information that’ll help you develop a unique business proposition that’ll give you a competitive advantage. The best sources of information will vary depending on the type of business and circumstances, but options include the following:
In the wedding facility example cited earlier, the trade association for wedding planners provided a direct pipeline to the information the facility was seeking. Other trade information can also be found in print or online trade publications, or by walking the aisles of a trade show.
2.Demographic and Economic Data.
Try the Government portals such as www.statssa.gov.za, www.thedti.gov.za or city guides such as www.joburg.org.za to find out general information on things like age range, income, number of businesses by type in a geographic area and total sales in your category. For even more information, a reference librarian can point you to other specialised databases.
Your local chamber of commerce maybe able to help you find the information you need. Also try government-sponsored Small Business Development Centres, which assist entrepreneurs and small-business owners.
Sometimes professors at business schools are interested in having their graduate students do a market feasibility study for course credit.
If you’re starting a local business, shop the competition and check their websites. Or find a similar business in a similar city and ask to talk to the owner. Also look for similar businesses for sale and contact the brokers for information like why they’reselling and what their financials are like. You may be interested in buying that business yourself.
Do an online search of businesses in your industry and evaluate what they offer to help fine-tune your idea.
Run your idea up the flagpole with informal focus groups. Talk with friends of friends – but not your own friends or family, since they may not tell you the truth – and old customers or existing customers if you’re already in business.
This is the acid test to see if your plan is ready for prime time or needs tweaking. To figure out if you should go ahead with your business idea, you need to ask questions like these:
- Is the market saturated?
Does your city really need another hardware store or flower shop? How much money is spent in your industry each year in your area? Is there room in the market for one more business?
- Does the market want what you’re offering?
If you’re thinking of providing day care for dogs or a facility where people can cook a week’s worth of meals in a group setting, will anyone care? Or if you’re developing a new online service for day traders, is it something they can’t live without?
- What’s the competition doing?
What do they do well? What do they do poorly? What’s unique about them? Can you offer something different that’ll encourage customers to patronise you instead of more established businesses?
- Can you reach your target audience?
If you’re selling inline skates, are you opening in an area with a population of the right age and disposable income?
Do you have a large number of competitors that you will have to research? Tell us in the comments section below…