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So, you have a business proposition, a great idea, and something you are passionate about pursuing. Now, we need to go and take the time to see how well this idea of yours will perform in the current market. To do this, let's learn how to do market research for a business plan you are creating. At the end of it all, you should have an understanding of why your customers will buy what you have to offer. if that sounds interesting to you, then let's dive in!
At the end of the day, market research for a business plan of yours should aim to answer the following questions:
- Who your customer is
- What your customers spending habits are
- What the market for similar products and services is currently like
- Who your competitors are
- What opportunities your business has to grow
Learning how to do market research is about getting into your audiences heads to understand why they think the way they do (which ideally they think the way you do about what you have to offer), and what the current environment for your idea is like. You want your market research to provide key insights into your audience that will help you better serve your customer base.
Who is Your Customer
First, take time to understand who your customer is. Describe them in detail. How old are they? What's their occupation? What's their income like? Do they have a certain type of education? Really, these questions are to lead you into creating a very vivid picture of who your product/service is for. Once you have this image you can further understand who they are, what they need, and how what you have can help them.
As said previously, a great business is a blend between passion and wisdom. The best businesses provide something that you are passionate about, something that you would want, or even something that has greatly helped you in the past. Because of this, when you think of your audience and customer base, you should be able to relate them to your past or current self.
What Are Their Spending Habits
I want to stress that market research in no way is about finding ways to manipulate the market to your favor. That is bad business. However, it is important to know the spending habits of your audience. This will allow you to determine if what you can offer is profitable. Are you able to sell to your target audience and make a profit, or will it take more to produce the product/service than you could ever sell it for?
When conducting your market research investigate what your customers buy now, how much they buy, and where they buy from. If possible find things similar to what you have to offer that your customer already buys. If not, taking an overall look at their spending habits can be beneficial as well to give you an approximation of how much they would be willing to spend on something you have to offer. Be careful. If they aren't willing to spend the amount required to make a profit on what you have to offer, then this might be a red flag.
Furthermore, your market research should include research on why they might buy a related product. This requires you to really dig into their thoughts. What are they actually requiring? Can what you offer fill their needs better?
What Is The Market Like
Also, your market research for your business plan should include an insight into what the current market for similar products/services is like. Research how many similar businesses there are out there already and compare this to how large the customer pool is. Are there enough potential customers for your business to make profit. Will you be able to reach enough people to find success? These are the questions your market research should answer.
The last thing you want to happen is to start something, invest a lot of time, effort and money in it only to realize there weren't enough potential customers for your business to be able to make profit.
Who Are Your Competitors
You may have heard me mention before not to create unnecessary competition. Well, how do you know what unnecessary competition looks like? You have to go and do your research on it! When doing your market research for your business plan, include research going over the competition. Unfortunately, there will always be competition out there. Furthermore, competition can actually be very good. Competition leads to the creation of new and better things, continual growth, and the generation of solutions to many problems.
When proposing a business idea you have two choices: avoid the competition, or do something they aren't. Take the time to first investigate how you can avoid potential competition. A great example of this is PayPal.
In his book Zero to One, Peter Thiel explains this example of PayPal perfectly. When PayPal was launched, many views it as competition to Visa. However, since PayPal actually ended up expanding the entire market overall, it gave more business to visa than it took.
If competition cannot be avoided, you must see how you can offer a product/service they can't, or offer it better. Regardless of the competition, a true entrepreneur should strive to do what they do to the best of their ability. You should only offer a product or service that you can fully attach your name to, and is something you truly see as great and useful. If what you offer still cannot be better than what the competition offers, investigate how you can offer it in a different, unique way.
What Are Your Opportunities To Grow
Lastly, your market research for your business plan should include research on the potential opportunities your business will be able to grow. You don't want your business to become stagnant, and in order to prevent this you must actively seek out ways to evolve over time. Think long term. For instance, you want to start a coffee shop. how could it grow? Eventually maybe you start selling ice cream? That might be a silly idea, but you get the point.
If time is given to it, there are almost always ways to grow and expand a business. Just be proactive about doing it, and make sure your plan is valid. Your market research should include this potential plan.
So how do we go about actually performing this market research? There are really three main ways:
- Social media
- Organic conversation
- Paid surveys.
Social media is a fantastic place to start. Think about creating a Facebook™ page for your business and interact with your followers. This gives you the opportunity to build relationships and understand people in the online realm, and will also be a great asset for you when it comes to marketing your business. I think the most rewarding way to do market research is by talking with people. I just like the idea of having real conversations with people. Think of ways to naturally bring up questions in conversation that will help you get an understanding of your audience. Maybe even ask close friends or family that fit your audience if you could interview them.
Lastly, a great way to get abundant quick information is paying for surveys. There are actually companies out there that will take care of all the heavy lifting for you... For a price that is. If this is something you want to look into, check out PeopleFish.
Catch you on the flip,
P.S. If you are wanting to, or have ever wanted to start a business, but are lost on where to start, click here and check this out