Market research is an important part of any business, whether it has been around for many years or it is a new company formation. You may have an amazing idea that you have been considering for some time or you may have had an epiphany one night over a few beers… either way, carrying out research is vital to determine the viability of your idea and the likelihood of its success. By conducting research you will learn valuable information about your potential customers and their buying habits, you can identify new and emerging trends – as well as trends that are on the way out – and you will be able to find out about the competition that already exists in your chosen trade. Going into business blind is never a wise choice and you cannot simply rely on luck – you should arm yourself with as much knowledge as possible to ensure you’re giving your new company formation the best possible chance of long-term success.
The importance of thorough research
You must look at any new business idea with a realistic attitude. Sure, there will always be an element of risk involved – that is simply unavoidable – but the level of risk can be drastically minimised by thoroughly researching all aspects of the market you are entering into. Is there a need and demand for the product or service you wish to offer? Is your business venture financial viability – can you get funding and support yourself for X amount of time before you start to turn a profit? Can you find producers and/or suppliers for your product or service? What does your product or service offer that will make it better and more appealing than those on offer from similar businesses? Is your business idea sustainable? Are you prepared to be flexible with your idea if required by current market trends? All of these questions, and more, need to be answered before any decisions are made.
You should first draft a comprehensive business plan that will include all of the details of your business. Include strategic information about the market you plan to enter by conducting primary and secondary market research; that is, research you carry out independently and research statistics available from other sources relating to your product and market. Do not simply use friends and family as your research subjects: their responses are likely to be biased and they may not wish to cause offence by telling you the idea is not sound.
Paul Mooney, director of small business support service Blue Orchid, believes market research is fundamental, suggesting “You need to know if there’s a market for your product or service, how much demand is out there, who your potential customers are, what are they prepared to pay, how often are they prepared to pay it and are you going to be able to make money from what people are prepared to pay for your product or service?” Furthermore, Mooney suggests five important steps for carrying out a successful market research strategy:
- Decide on the questions you need answered.
- Decide what information you need to gather in order to answer these questions.
- Choose a method for gathering this information.
- Decide on the best way to analyse the data you collect.
- Decide what you will do with the results of your market research
You can carry out primary research on your own by conducting surveys and focus groups specifically relating to the product/market you want to enter. Social media venues are excellent, cost-efficient platforms for contacting large numbers of people from all demographics. You could easily put up an online questionnaire and reach potentially hundreds of people for feedback. Ask local businesses about their needs, if this is relevant to the product or service you will offer. Attend networking events and gather information by talking to other business owners. Carry out research on the street, perhaps in the area you intend to operate. If you can, visit your potential competitors’ businesses to see first hand what they offer – are you satisfied with their products or services? Can you take any ideas from what they are doing well and what they need to improve on? How could your product or service offer something better for the intended consumer?
Secondary research is also very important and available from a number of places. You could start by contacting government-run small business organisations, many of which can be found through your local Chambers of Commerce. They will provide a wealth of support, advice and statistical information to help you research your target market, determine the viability of your business idea, draft a business plan and find funding to get your business off the ground. The Institute for Small Business and Entrepreneurship (ISBE), the Federation of Small Businesses (FSB), National Enterprise Network, and Business Gateway (Scotland) are all incredibly beneficial organisations whose main purpose is to offer impartial support, information and advice to small businesses and start-ups in the UK.
The Office for National Statistics, as the name would suggest, has a great deal of statistical data and information relating to the UK economy, population and society at local, regional and national levels. Additionally, you can search the Companies House database to find out about similar businesses operating in your local community or intended market area – this is useful for identifying and researching your potential competitors and finding out how other companies are fairing in the current economic climate.
It may seem like a lot to take on board and a time-consuming task carrying out market research but it will pay off, saving you a great deal of time, money and disappointment in the long-run. It is tempting to just jump in when you are excited about a great idea, but just remember – if it’s a good enough idea it won’t be damaged by taking you’re time and getting all the facts first; your new company formation will stand more of a chance of succeeding and developing into a reliable, sustainable, profitable business.