Before diving into the swimming pool of business ownership, you need to do more than a bit of research. Think of it like doing the research necessary before buying a car. You wouldn’t buy a car just because it looks pretty on the outside. (At least, you shouldn’t.) You wouldn’t plop down a wad of cash without knowing what went into that car’s manufacture.
In the same way, you shouldn’t start a business without knowing if people even want the product or service you plan to offer. A great many companies have failed because the owners didn’t do the due diligence they should have.
Market research doesn’t have to cost an arm and a leg. In fact, in many cases, it doesn’t have to cost a thing. In the article below, we’re going to pull back the curtains on how to do market research before starting a business. If you’re ready, let’s get to it.
You should be doing primary and secondary research
Now, before you jump headfirst into the shallow end of the pool, you should know that there’s both primary and secondary market research that you need to conduct. Both will provide you with the actionable intelligence necessary to launch your business with the highest possible chances for success.
Primary research
Primary research is all about obtaining information on the market firsthand. That means you go out and do the research personally. You talk to people and start to acquire information before you ever do any specific research. For example, you go out, and you conduct open-ended surveys or interviews with small groups.
Following these interviews and surveys, you might take the general information you’ve obtained, analyze it, and then decide to dig into a specific issue, problem, or fact you’ve uncovered in a more comprehensive fashion. It’s all about narrowing things down and getting specific here.
Secondary research
At the same time you’re conducting primary research, you can also be doing secondary research. That is, collecting information from sources like public records and other data that are available to you (especially online) from which you can draw conclusions. For instance, you can obtain such things as:
- Market statistics
- Sales data
- Industry content
- Trend reports
You can use all of this data to help you gain competitive intelligence, which is particularly useful when considering what you’ll be going up against. Here are some places you should explore when conducting the secondary research.
Public sources
Examples of excellent information reservoirs are government websites. Many have databases that are free to use. You can find government statistics and a host of other information that can be incredibly helpful to the would-be entrepreneur.
Two websites in particular you should explore are the following:
U.S. Census Bureau
Bureau of Labor Statistics
These websites can provide helpful information on many different industries and are well worth the time and effort spent examining them.
Commercial sources
A lot of commercial info here comes from sources like the following:
Each of these companies provides industry insights, which take the form of market reports. However, most of these reports are not free. You’ll have to invest a bit in taking advantage of the time and effort these companies put into compiling their data.
Internal sources
Essentially, this is information that’s already in your possession. This isn’t likely to help much before you have a business, but later on this is market data you’ll need. For example, if you’re thinking about launching a new product or service, you may want historical data on how similar products or services in your lineup performed.
Types of internal data you’ll have here are things like customer-retention rates, the previously mentioned information on how various products and services performed historically, and what your average revenue per sale happens to be.
What kinds of market research are there?
The following list gives a quick picture of the types of market research you could choose to perform. It isn’t exhaustive by any means, but these are common types with which you should be familiar:
- Focus groups
- Surveys
- Interviews
- Buyer persona research
- Pricing research
- Product/service use research
- Market segmentation research
- Customer satisfaction and loyalty research
- Brand-awareness research
- Campaign research
- Competitive analysis research
The Importance of market research
Doing market research before you decide to open up a business is so important. We can’t overemphasize that. You don’t want to waste time, money, or other resources pursuing an idea that’s doomed from the beginning. On the other hand, in the course of doing your research, you may find incredible opportunities to exploit.
Remember to dig into things like who your main competitors might be. Find out what kind of marketing strategies they employ. Look to discover how successful they are. You should also find out exactly who the people are that are most likely to purchase from you. What are their demographics?
At the end of the day, analyze everything and summarize your data. Everything you discover is going to help you do one of three things. You’ll either validate your idea, start over from scratch, or give up that idea entirely and fundamentally change the direction you’d planned for your business.
Should that occur, remember that there are millions of paths you could take. Inspiration will come again.
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