In my last articles I gave you information to consider before moving forward with the idea of starting your own business. If you’ve made it to here, I hope you’ve thought it through and are prepared for the challenges ahead. Running a business is hard, and it’s a lot of work. Some people look at business owners and think they do little work, make lots of money, and have lots of free time to do what they want. Nope, they are wrong. Eventually you might get to a point where you have plenty of employees that you minimize your workload, but you need to get there first.
Before you go further there are 2 things you should take care of. Market research and writing a business plan. This can be tedious, but it’s not as hard as it sounds. This can also work as a test to see how well you’re prepared. The way I see it is, if you aren’t willing to do the work up front to ensure your business success, you likely aren’t going to be doing the work necessary for your business to succeed later. Here we’ll talk about how to conduct market research, and on another article we’ll cover writing a business plan.
Conducting the research
There are many things you can include in your research, but in order to keep it simple and not overwhelm yourself with data you’ll have trouble processing later, I’ll narrow it down to 4. When conducting your research, I suggest you look outside of your circle of friends and family. While they are an easy source of information, it may not be the best reliable. The reason is simple, they are likely to tell you what you want to hear because they don’t want to hurt your feelings. Your research should consist of hard facts. For simplicity of writing this article I’ll assume your business is for a service, not a product, but the same principles apply.
Is there demand for your service
Start by figuring out what problem your service solves. The worse the problem, the more demand you’ll see for your solution. Starting a gardening service is difficult because almost anyone can purchase a mower and do it themselves, so the demand may be lower. A plumbing business however will have more demand since it’s more difficult to do and doing the work wrong can be costly, so the demand may be higher. Those are fairly simple examples, but to conduct research on something more obscure or difficult, you’ll probably have to reach out and ask people. One way is going to a busy area where people aren’t in a hurry like a mall and approach and ask random people. You could also reach out to your neighbors on apps like Nextdoor or on Facebook groups. The larger the group, the better results you’ll get.
What’s your market size?
If we go back to the plumbing service example. We established this would have higher demands due to the necessity and complexity. You now need to look at market size, if you are doing residential then just look at the city you’ll be servicing and find out how many homes are in that city. Simple as that, each home is a potential client since they all have plumbing. It’s not always this simple however, if your market is a specific group of people, say male teenagers between the ages of 14 and 18 who play football, you might have a harder time establishing a count, but don’t break your head over it, you need an idea of the market size, not an exact count.
Market saturation
This one is simple by comparison to the last two. How much competition do you have? You can look at Yelp or do a google search for other service providers in your area and get a fairly accurate count of how many competing businesses are out there.
Pricing
This is another simple one, you need to know how much people are willing to pay for your service. You could look into how much your competitors are charging to give you an idea of where the market sits on pricing. This is just an idea however because remember there are other factors to consider, quality of work isn’t the same across the board for example. If you provide better quality you can charge more and the opposite also applies. Also demand may change, air conditioning companies charge more in the summer because their demand goes up, they charge less in the winter to become more competitive because the opposite occurs.