Some say that successful entrepreneurs are born, not made. Others disagree, saying entrepreneurship is a talent that can be learned. The truth of the matter probably lies somewhere between the two. The desire to create and grow a business, no matter the size, requires a combination of character, talent, vision, timing, and market research.
As an entrepreneur, the market for your product is the pool of consumers or businesses that have a need that your startup business may help them address. So, you need to define your market before conducting research. Once you define the scope of your potential business and the potential market for your product, you can then find out why a consumer or business would purchase from you rather than a competitor. Before investing in starting your business you need to find your niche and determine your clients’ willingness to pay for your product – which is where market research comes in.
In order to gather this information, entrepreneurs use resources to conduct market research including the chamber of commerce, the U.S. Census Bureau, and the SBA, provide valuable information to business owners. For instance, Shawn O’Connor, founder and CEO of Stratus Prep, recently told Forbes about a tool made available by the SBA called SizeUp. It allows you to put your business’s industry and city and it maps out your competition, highlighting areas with a lot of competitors in orange and areas with potential customers but few competitors in green.
In addition, be sure to conduct your own research to get information specific to your business and the consumers you hope to attract. A few research tools to consider include interviews, surveys, and focus groups, which can identify information about the importance of price and features as well as the strengths and weaknesses of competitors. In fact, before starting Stratus Prep, O’Connor held focus groups to determine the market size and willingness to pay for his offering. This process also helped him identify which features were most important to potential customer. Then, he compared the consumer information to cost structure to ensure that after expenses; the business would be profitable based on the price consumers were willing to pay.
According to O’Connor, it is important to be open-minded when conducting market analysis as the feedback you hear may not be what you were expecting. “You may feel attached to your business idea and wish to change nothing about it, but after conducting a survey you may find that customers are looking for different service or additional features. So, don’t scrap your idea, but consider adjustments to accommodate your customers’ demands,” he explained.
An example of a company that performed this market analysis is JetBlue, which prior to launching, determined that airline passengers cared more about comfortable leather seating and TV entertainment than the other “amenities” offered by legacy carriers. JetBlue invested in upgraded seating and TVs and emphasized a relaxing journey at a modest price. Turns out, the strategy was so successful that other airlines followed suit and numerous imitators emerged.
Additionally, Starbucks identified and catered to unmet consumer needs, which turned an everyday beverage into an experience. While Starbucks is known for its coffee, it is also renowned for its atmosphere, where professionals, college students and anyone who wants to kick back can set up shop with free WiFi and a comfortable workspace. “The modifications made to the industry standard drew an enormous and loyal following, which is why there is a Starbucks on every corner,” commented O’Connor.
By doing your market research homework before starting your business, you will make company a powerful force in this competitive business world!