4 ways to begin market research
The right business idea starts with research.
When you start a new business, the importance of market research should never be underestimated. Researching your potential customers, competitors, operating costs, and pricing builds a foundation to build a successful business.
Follow these four research tips to help you make more informed decisions about your business idea.
1. Start your research online
There is a lot you can learn online about what’s happening in your chosen market. Search for:
- Your main competitors and what they say and offer
- Comparative prices and services
- Experts commenting on your industry trends
- Social media opinions and blogs
- Supplier and set up costs
Start to build a picture of your industry characteristics and get an idea of demand by using data collected by third parties. They have information on housing trends, key demographics and a range of other surveys and reports which may give clues to the number of possible customers.
From this initial research if you can demonstrate a clear competitive advantage and the business opportunity has a stable long-term future, then it’s looking promising.
2. Validate the market
Nothing beats asking a potential customer directly if they would buy what you’re offering, at the price you want to charge. To help you do this, profile your ideal customer by describing their demographics (gender, age range, location, income level, profession etc) or if you’re targeting businesses, then their characteristics (business size, location, what they sell).
Then try to find people or businesses that match your ideal customer (search online, inside social media channels, your networks and referrals), and ask them what they:
- Like about your idea
- Don’t like about your idea
- Would buy and how often
- Are prepared to pay
The key is to obtain feedback that gives you a direct answer (even if it’s negative) to really know what people think.
3. Talk to industry insiders
Suppliers, industry associations, chambers of commerce or local business support agencies should all have an opinion on your idea. They’ll hopefully have a good working knowledge of your industry, market trends, any latest innovations as well as insight into the volume of purchases (and therefore sales) of similar businesses to guide you.
Also ask them:
- If the market is likely to continue to grow
- If your pricing is realistic to make a profit
- The best way to distribute or sell to your customers
Though the main reason to talk to suppliers is to research costs and the terms they’ll give you, you might as well find out about the industry and your market potential at the same time.
4. Test market with actual customers
If you can, start selling to real customers to test the market. How you do this will depend on the type of industry you are in. You may want to mock-up examples or prototypes, offer your work for free to get a foot in the door, produce limited runs of your product or launch your business part time while you’re still working.
Balance market validation techniques with the cost, so you’re feel confident to keep going if the feedback is positive. If the cost to develop a prototype or production run is low, consider making a start and see what happens to demand and if it succeeds, then scale up. If the cost to do this is high then before you commit your capital, conduct more customer research and testing to ensure your idea is feasible.
Anything to track what customers will actually do is like gold and will give you a better estimate of demand.
After these 4 steps you’ll have valuable market and industry information to give you a much better understanding if your new business idea is viable. Use this collection of insights, research, data, feedback and conversations to guide your decision to launch.
If your information points to a viable business, write up your business plan.
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