03 Apr Why Market Research is Essential before Starting a Business
There are few things in life that you should jump into blindly and starting your business is not one of them. Running your ideas and plans past your family and close friends is merely dipping your toe into the entrepreneurial world – you need a whole range of opinions from a variety of people, and your family members may not ultimately be your target customers.
Carrying out detailed market research is an essential step to planning or starting any business, it can give you answers to a host of questions you may have or problems you foresee and want to iron out. We know that market research is important, but why? What benefits does it offer?
Discovering Potential Customers
You may have an idea of what your target customer looks like, but there might be other people that would be interested in your business, who would purchase your product or service, that you have overlooked. Having a very set target customer in mind could mean that you’re missing out on potential business because you’re not aware of or marketing to these other people, and market research can help you to identify who they are.
Through a series of questions and scenarios, you can gather so much information, from ages to buying habits. Based on all these details, you can establish and build profiles of your potential buyers. Knowing who your buyers are is essential to make sure you only focus your efforts on those potential customers who are actually likely to be interested.
Creating Communication and Identifying Opportunity
Opening a line of communication with potential customers through market research allows you to create a dialogue about your business and learn what other – unbiased – people think about your business. This communication can also bring competitors to your attention, participants in your market research may talk about and compare your business to others that are doing something similar, or maybe even better.
Determining the competitors in your arena is vital, as you’ll be able to judge the saturation of the market, which may ultimately lead you to unearthing new opportunities. If there is a high level of saturation in the market, and you are thinking about leading your business in a slightly different direction, market research is great at showing you what is out there already, shining a light on the gaps and opportunities in the market.
Setting Realistic Goals
When you are making your business plan for the coming year, market research can help you project your business growth realistically, as well as define goals and targets for the year that you are able to achieve and reach. You don’t want to over plan, there is no need to prepare for 50% or more growth over the next 12 months when the market research you carried out shows that the size of the market is declining and your growth is likely to reflect that.
Making Informed Decisions
The most important thing you can do when making any decision about your business is to be hyper aware of the market. You shouldn’t make any final decisions on things like distribution companies, pricing decisions or marketing plans if you aren’t up to date on the trends and preferences of customers within your industry – all of which can be discovered through market research.
Using It as a Tool
When presenting to investors in order to get capital for your start up you need more than just your passion for the business you are trying to create; enthusiasm is something they appreciate, but cold hard facts are what they want. Emotion alone can’t solidify an investor’s decision to part with their money with no reassurance of a return.
Market research allows investors to build confidence about your business, they can see you are serious and, most importantly, it lets them know what they could potentially be getting into. Laying out the evidence that supports your plan will only help you, as it gives investors the chance to make their own informed decision.
Determining Potential Obstacles
Market research can bring many holes in the market to light that you might not have recognized. It might point out that the market you thought was healthy is actually looking to get smaller as demand decreases. Realizing these hurdles ahead of time, and before you are too far down the road, can save you from wasting a lot of time and money on a venture that isn’t likely to thrive as expected. This gives you the chance to take your business into a different, more profitable, direction.
You could put together a series of online surveys, arrange a local focus group or pass on the duties of carrying out a full and in-depth market research project to the experts and outsource your market research services. Make sure you do at least some before launching your business, it is imperative to the success of any venture.