Small Business Deep-Dive #1: Market Research Explained
Interested in starting a small business? You’re not alone. There’s something universally enticing about the ability to set your own hours, free yourself from the corporate ladder, and avoid those messy office politics. And, in 2019, there were over 30 million small businesses in the United States. You’re in good company.
But just because “everyone’s doing it,” doesn’t mean it’s intuitive. That entrepreneurial spirit can get you far, but it’s easy to crash and burn without some sort of a roadmap.
In a previous blog, we shared our 10 Steps for Building a Rock Solid Small Business. It was a brief glimpse into a pretty rich topic, and that article only skimmed the surface. Which got us thinking...how about a deep dive?
Hug your loved ones and tell them not to wait up…because we’re going in.
For the next ten weeks, we’ll be laying out a comprehensive guide to starting your small business. Read on for an in-depth look at market research, why it’s the first step, and how to get started on this thrilling small business journey.
Is my small business idea...good?
Here’s the cold, solid truth: if you don’t have customers, you don’t have a business.
Your idea can be brilliant, bonkers, or niche. But it’s a big world out there, and no matter how wacky, there certainly could be a market for it. You want to sell harmonicas for cats? Tiny cat lips blowing out a bluesy tune? Amazing. But in order to get started, you’ll need to get to know your customer base.
Market research will yield a wealth of information about potential clients. It will also give you useful insight into economic and business trends. Combine these two findings and you’ll get the first green light for your business idea.
This step will shine a spotlight on limitations and risks in the market. It can also show you how to improve your idea. Better to work the kinks out early instead of halfway through the loan process. Cats don’t have opposable thumbs to hold harmonicas? Better include cat harmonica harnesses.
What are some market research icebreakers?
You’ll start your research by gathering data about your target demographic. Factors like age, income, or family size can tell you a lot about a population. The data doesn't stop there. The more specific you can get with your questions in relation to your business, the better. It's all about the knitty-gritty details.
Once you know about your demographics, you’ll want to ask questions around:
- Market Size
- Economic Indicators
- Market Saturation
By the way, trends aren’t just for fashion forecasters. Market research keeps you in touch. You’ll learn about the current tendencies of your customer base and small businesses in your market share.
Use public resources or go rogue?
There’s a lot of ground to cover when it comes to market research. Your research options range from “hands-off” to “roll-up your sleeves.”
Plenty of resources are available for procuring market data. The alternative is good ol’ fashioned direct contact with customers. It’s tempting to let someone else do the leg work. But not so fast. Both approaches have their benefits.
Existing resources can cut down on workload but may not be specific. You should use these tools for questions that have quantifiable answers (like income). Cat got your tongue? Hopefully not, because talking to customers directly is best for nuanced feedback.
What are the tools available for direct research?
Direct market research isn’t a matter of “if” but of “when.” If you’re an introvert, utilize surveys or questionnaires to get the skinny on your customers. If human interaction is more your speed, opt for focus groups or interviews. I’m sure Mr. Muffins has a lot to say about his ideal harmonica weight. Want a middle ground? Hire someone to run these for you if it’s in your budget.
Keep your customers close and your competitors closer?
You’ve stalked your customers like a cat at a bird feeder. You know everything about them, their hopes and dreams, or at the very least their product preferences. Now it’s time to look at the other side of the coin.
These are your competitors. Every business owner before you knows market research and competitive analysis go hand in hand.
Competitive analysis is a valuable subset under the market research umbrella. It’s how you will study and conquer your existing competition.
Your business is unique. You know that. Your mom knows that. Customers don’t necessarily know that. Which means you’ll need to identify your competitive edge using competitive analysis.
Competitive edge = increased revenue.
Questions you’ll ask during competitive analysis include:
- Who are your competitors?
- Who are your other competitors in secondary markets?
- What are their strengths? Weaknesses?
- What is the overlap between your target customer and your competitors’?
- What is your window of opportunity for market entry?
- What are potential obstacles when trying to enter the market?
What are some helpful resources for competitive analysis?
Gather some recon on your competitors by looking at their website or social media. How does “Feline Woodwinds Inc'' interact with their customers? What do reviews indicate about their strengths and weaknesses? Do a quick search on the internet right meow (sorry). What does it yield? How quickly do your competitors come up? With what kind of content?
Additionally, check out Porter’s Five Forces to get a better feel for your market. Want to get a picture of your industry’s strengths and weaknesses? The five forces are a way to determine competition in a market segment. End game? Long-term profitability.
Ready to meet your future customers?
I know. The idea of a cat playing a harmonica is pawsitively ridiculous. But there is a customer out there for every product. You just need to find them. If you don’t give market research the time and attention it needs, you’re setting yourself up for failure before you even apply for that business license.
Check in next week for part two: Creating a Business Plan.
Know Your Numbers Accounting is your financial foundation.
Market research is just step one for starting a profitable small business. But step zero? Is making sure you have a rock-solid accounting team behind you. Contact KYN Accounting today for expert small business financial guidance.
What’s your wackiest business plan? Did it work out? Let us know in the comments below.
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