Do you know your market (product/suppliers/competitors/customers)?
Unless you are already independently wealthy, and want to start a business just for fun, every prospective or actual business owners intends to make a living out of his/her business. Because of that reason before you invest a single dollar in your idea, you need to understand if the business can generate a profit that will be enough not only to pay you back your investment, but to allow you to reach your realistic lifestyle goals. In our previous article we show that one of the primary reasons why a new business fail is because of financial reasons (lack of capital, poor business credit, personal use of business funds), and this happens because many new business owners do not truly understand their market.
Do you know your target market?
If you look on the web today, many companies offer you help to register your business, to create your business plan, to sell you products or services, to sell you advertising or SEO services, and to rent you physical or virtual space and storefronts; but very few actually offer you to help you understand if your idea can truly become a business. One of the most common misconceptions of new business owners is the idea that “if you build it, they will come”, and one that has potentially caused the most business failures in the world.
Today’s customers are more sophisticated that at any previous time in history, and it is more challenging than ever to persuade them to spend money in your business instead at your competitor place. The internet and mobile advertising and price comparison apps can help customers decide on the spot if they will purchase that perfume, shoes, or even TV at your store, or online at Amazon or Ebay. In addition the current economic conditions are making customers rethink their buying habits, and many of them continue to window shop while waiting to see if/when (they can get a better price/their own economy improves). With all of these challenges any business that does not understand their target market could spend all its money in inventory, rent, and advertising that will not match their potential customer base, and go bankrupt in an otherwise vibrant and growing economy.
Business Research 101
Many people are afraid of the word research blindly put their money on a new business because they believe that it is a good idea. Opening a business without doing at least your basic research it is like deciding to buy a car without having an idea of what do you really need, and what do you really can afford. Business research does not needs to be complicated, or expensive, but it is the minimum you need to do before you put your hard earned money into any venture. Most of your basic business research can be done by:
Using public government sources:
This is basically your tax dollars at work. The government already offers a wealth of data and information about businesses, industries and economic conditions that can aid in conducting market research. These sources provide valuable information about your customers and competitors including:
Using industry and trade group sources:
In addition to the free government sources, many industries and trade groups offer a large number of statistical and business information on their web sites. You can use Internet and database searches to find information related to your location and industry. While some of these databases are not free, they can have some of the most up to date information about your specific business segment, and can actually help you make a better decision about your business. Some of the better known sources are:
Other business data and statistical sources:
There are many sources of data on the internet, and you can benefit from a small investment on research before committing tens/hundreds of thousands of dollars in your business idea. Some of these additional sources of information include:
- General Business Statistics
- Consumer Statistics
- Economic Indicators
- Employment Statistics
- Income Statistics
- Money and Interest Rates
- Production and Sales
- National and International Trade Statistics
- Industry Specific Statistics
We want you to succeed!
With all of the available sources of information on the internet, nobody should decide to invest their hard earned money before conducting at least the most basic research about their business idea. While we can agree that over 90% of new business fail within the first three years, it is also true that the majority of these failures could be avoided by conducting at least a basic research, and determining the viability of your plan. Entrepreneurs believe that they can do it better, and billionaire success stories like Google, Facebook, Pinterest, and many others can provide enough incentive for many to continue trying. If after reading this article you decide that you need some help in your research you can contact us for additional assistance.
Inloso offers strategic business consulting in Latin America and the U.S., in the areas of multinational strategic business development, multinational operations, and entrepreneurship. We have over 20 years of experience and can help you expand your business, improve your profits and customer satisfaction, and/or reduce your costs of operations. Please visit our contact page if you are interested in our assistance in any of these areas.
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