You’re starting a new business. It’s an undertaking that is both frightening and exciting. It can lead to great rewards or financial ruin. To try and swing the odds in your favour, to go into this venture with a measure of intelligence rather than just crossing your fingers and hoping for the best, you’ll draw up a business plan.
A business plan is critical not only for persuading your bank manager to lend you the money you need to get your business up and running, but also to determine whether or not you actually have a chance at turning a profit. And perhaps the most important component of your business plan in this respect is market research.
Areas of Focus
Comprehensive market research will include an evaluation of a range of areas and factors that affect your business, such as:
- Potential competitors.
- Suppliers of raw materials, parts and labour (along with back-up suppliers).
- What restrictions or incentives exist to doing business in your particular market.
- Your needs for technological expertise and whether they can be met sufficiently by the available labour market.
Perhaps more than anything else, though, your market research should identify who your potential customers really are.
As a business, customers are your lifeblood. Without them you have no market for the great new product or service you’ve decided to bet your financial future on.
To run your business effectively you need to know exactly who is going to buy what you’re offering. To this end you need to undertake market research to determine the set of characteristics that sets your target customers apart from all other members of the consuming public. Think about things like:
- Gender split (i.e. percentage of male customers vs. female customers).
- Geographic location.
- Level of education.
- Relationship status.
- Number of children.
Once you have performed the necessary research to determine the profile of your target customer you are in a position to do two very important things:
1/ You can fine tune your product or service so that it more effectively meets your customers’ needs and therefore becomes a more attractive purchase. Are your target customers the type of people who are concerned about the environment? Perhaps you could add an eco-friendly aspect to your business offering.
2/ You can target your advertising and marketing activities so that they have more impact and generate a greater return on investment for your business. If, for instance, you know that your target customers rarely go to the movies you won’t waste money on cinema advertising.
How Many Customers are There?
An associated piece of market research, once the characteristics of your target customers have been identified, is to quantify the size of your market. You need to know how many of these special people are actually out there waiting to spend their hard-earned money on what you’re selling. It’s all very well to know exactly who your customer is, but if there aren’t enough of them to generate a profit even a finely tuned product with the most precisely focussed advertising campaign won’t make your business a success.
An Indispensable Tool
Market research is an indispensable tool for identifying the size and composition of your target market – two things which can either make or break your business. Leave it out of your business plan and you could find yourself standing in the queue at Work and Income rather than controlling a business empire.
Learn more about market research in this video.