Tag: Starting up

Market research

How to Conduct Market Research for Your Business Idea

Great business ideas often hit in the spur of the moment. An idea strikes you while you’re taking a shower, or chatting with a friend at a bar.

It’s easy to get caught up in the excitement and go full-steam ahead, but how do you really know it’s a great business idea?

Market research is one of the first steps you should take, well before you invest a whole lot of time and money into development or manufacturing products. The most successful businesses tend to understand their market very well and position themselves to operate successfully in it.

Here are a few tips for doing your market research:

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Use primary and secondary research

There are two main types of market research businesses can use; primary research and secondary research. Here’s what they comprise of:

  • Primary research – This is all the research activities you can conduct where you gather first-hand information. For example; focus groups, phone interviews and online surveys.

  • Secondary research – This is all the research activities you can conduct where you gather public, commercial or internal data. For example; government records, data from research agencies, market data your organization has gathered in-house (if you already own a business).

Both types of data can be useful for your market research. While primary data can allow you to get more specific, micro-level data, secondary sources are good for analyzing market trends and potential size.

Market research

Clearly define who your buyer is

The best business ideas tend to solve a problem or fulfill a need better than what any other option on the market is offering.  You need to have a clear idea of who your target buyer is that needs that problem solved.

Buyer personas are a great tool for clearly defining who your business idea will be targeting. These fictional “characters” are outlined with as much detail as possible so that you can even make an assessment of any subgroups. You’ll want to define demographic, geographic and psychographic points about your persona/s.

Doing this helps you to visualize your audience and determine who you should be researching and talking to as you continue with your market research.

Determine the size of the market

Determining the size of your market is critical. You and any partners need to understand how much business is potentially out there. If you’re going to pitch investors, this is something they absolutely will want to know. In fact, market size is one of the most basic measures that every VC or individual investor requires.

Market size is determined by the number of potential customers (those you defined in your buyer persona/s) or the number of transactions expected in a year. For example, if you are selling something that almost everyone uses (soap, toothbrushes, sunscreen…), then a forecast of transactions per year is appropriate.

If you’re going to pitch investors, an expectation will be to show projections out to three years. In doing this, account for organic growth and for any expected roll-outs into other geographic areas.

No startup should expect to gain 100% market share, which is why determining your niche or addressable market is important. Expecting to capture somewhere in the range of 1 – 5% of the addressable market usually suggests a realistic outlook. 

Get data on your potential market size from:

  • Census and Labour Bureau
  • Local real estate data
  • Local demographic information
  • Surveys and focus groups.

Importantly, when you gather primary data you really want to understand whether there is demand for a solution like yours. Aim for a mix of participants to engage in market research activities. Ask open-ended questions so that people are free to give their own full answer. (HubSpot gives a great list of examples here).

Market saturation is a situation where the volume of a product or service has reached a maximum in its current state. One way to determine whether a market might be saturated already is to look at its growth. Any market that is fast-growing typically has room for new suppliers, but if it remains steady or has stagnated, it can be a sign that the market has reached saturation (unless your solution is radically different or solves problems that competitor’s solutions do not).

Conduct competitor analysis

A competitive analysis is the process of analyzing and categorizing your competitors’ relative strengths and weaknesses as compared to your own. You need to be able to make an honest determination: can we really compete?

Here are a few steps to go through:

  1. Determine who your competitors are. Remember that these might be direct competitors who offer similar products or services to the same target audience within the same areas, or indirect competitors – companies who are similar but perhaps targeting a different need or purpose.

    You could start by listing any who you already know of, then search Google to find any others. Use specific keywords that describe your proposed company such as “project management software,” “marketing agency in Atlanta,” or “donut shop in Des Moines.” Look for the results that come up on the first two to three pages, as well as any paid ads.

    Other ideas for determining your competitors include; asking target customers, looking at the advertisements in trade publications, checking social media and online forums, looking at member lists for trade associations.

  2. For each competitor look at points such as:

    1. Revenue
    2. Customer numbers
    3. Size and location/s
    4. Products and services
    5. Their USP (Unique Selling Proposition)
    6. Number of employees
    7. Websites and social channels
    8. Company history
    9. Financial reports
    10. Marketing messaging (website, social media, content, advertising, product copy…)
    11. Company reviews
    12. Pricing
    13. The audience they are talking to
    14. SEO – keywords, ranking, links and domains
    15. Brand awareness among target market.

      Determine strengths and weaknesses for each of these points.

  3. Honestly compare with your own product or service and the resources you have available. For example, maybe you have some kind of proprietary technology that will make your offer solve the customer problem better. Maybe you have features that competitors don’t yet have.

    Remember too, just because there are some big players in your market doesn’t mean that there’s no hope for you. Many startups have had success because they were able to be agile, to move quickly and solve a problem more efficiently than a behemoth competitor.
Market research

Test your idea

There are many ways to test a business idea without spending a ton of money on setup, coding or manufacturing. For example, we know of a local donut shop that started out by creating social media pages that showcased their marvelous creations. They got an inexpensive permit for a home kitchen and offered deliveries of their donuts. They also setup at local farmer’s markets and craft fairs. The popularity of their product first lead to renting space at a popular hotel, then moving on to a bigger stand-alone store once their business established a strong following.

With other types of products or services you may be able to setup a landing page to gauge potential interest (remember that handing over an email address doesn’t mean they’ll automatically buy!). Drive targeted traffic to the landing page to gather interest. We know of a monthly subscription box service that did this, converting about 18% of their initial email list into buyers later. Part of their secret was to keep up communication once people signed onto the list. They kept them updated with what was happening so people knew to expect a launch.

If yours is a technology startup, you can invite beta users to give you feedback, right from the first couple of features being coded. This helps you to get good feedback before you’ve gone too far into creating the product.

You may even be able to test inexpensively through an activity that you are going to do anyway. In his book 100 Side Hustles, Chris Guillebeau features Peg Donovan, an operations manager from Portland, Maine who makes at least $2k per month from her side hustle. Where she lives, IKEA is popular but is an almost five-hour round trip. Deliveries are expensive, often costing more than the item ordered.

Peg’s idea was to charge a delivery fee for picking up people’s orders. This way, she makes a profit while they save money on delivery. How did she test this? Simply by telling colleagues at work that she was going to IKEA and asking if they needed anything picked up. Several people did and her business was born.

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Final thoughts

Market research is an essential part of setting up your business for success. It’s important to do and to do thoroughly, but don’t get so caught up in it that you end up with “analysis paralysis.”

Here’s a thought on that from SCORE:

“Once you start researching using free resources online, it’s so easy to get carried away. Set a timer for each research session to keep you on task and prevent you from getting overwhelmed.”

Be thorough and know the key data points, even if you’re not seeking investors. Lastly, if you feel like you’re too close and attached to an idea, seek a third-party mentor to help you sift through the data. It’s often helpful to have that third-party that has no “skin in the game.”

How to Start a Business How to Start a Business

How to Start a Business: A Step-by-Step Guide

Do you have the ambition of starting a new business?

It’s an exciting idea, running your own business, but people often find it tricky to navigate the steps from business idea to business reality.

Building a strong foundation is critical when you’re starting out. It makes a big difference in terms of developing a successful business. In fact, according to the Small Business Administration, about two-thirds of businesses with employees survive at least two years, while about half survive to five years. There are all sorts of reasons for business failures, but having a thorough and regularly-revised business plan can help to mitigate the chances of it happening to you.

In this article, we’re breaking down step-by-step how to start a business. Yes, there are a lot of critical steps, but if you follow them, you’ll find yourself better-prepared to tackle the world of business ownership.

#1. What do you need to get out of your business?

First of all, have you given thought to what you actually need to get out of your business? This helps you to narrow down the type of business that you should go for.

As an example, many business owners refer to the fact that they’ve “never worked so hard in their lives” or that they’ve been too busy or tied up to take any vacations. If this sort of scenario sounds like a nightmare to you, then you need to plan carefully to avoid it.

You might have goals to be the next global giant, but it’s also okay to have relatively modest goals for a business. Some common ambitions include:

  • Wanting to make a bit of extra money (perhaps achieved through a side-hustle)
  • Wanting more freedom and autonomy with work
  • Wanting to free up more time for family or other things you’d like to be doing
  • Wanting to build something you can use to give back for philanthropic purposes
  • Wanting to be a market or industry leader
  • Wanting to build something in the hopes of acquisition in a few years
  • Wanting to diversify your income stream.

You also need to consider your personal preferences. Does it suit you to turn up to a bricks-and-mortar location for set business hours? Or, do you prefer to be less tied-down? Perhaps the flexibility of an online-only business works for you over any sort of physical location.

Consider where your skills and passions lie too. No one wants to work on something that they don’t find stimulating. You might be interested in doing work that is a stretch for your current skills, but if you identify this early, you can work on ways to build up the skills you need.

Finally, think about the lifestyle you would like to lead. Would you like to be checking in every day with your business? Or, would you like to build something that keeps ticking along, even if you’re in the middle of a mountain range for a couple of weeks? Do you have ambitions of being mega-rich? Or, would you simply like a business that pays for your basic needs, or enough to be comfortable?

Write all of this information down, as it will help to guide you through business ideas. You will notice that some options are quickly a “no” because they won’t meet your bottom-line requirements for a business.

#2. Brainstorm business ideas

We’re including this section here because many people have the idea that they’d like to own a business, but don’t yet know what that will look like. If you already have an amazing idea, that’s great! You may like to skip ahead to the next section.

There are dozens of ways in which people have come up with winning business ideas, and brainstorming is a great technique to generate a flood of ideas. The key is to try to evaluate ideas based on the business preferences you have already identified.

Where do good ideas come from? Here are a few questions that can trigger them:

  • What is something that really bugs you? Many good ideas start as fixes to a problem that the business owner has encountered.
  • Is there a better way of doing something that is currently a product or service? Not all business ideas are entirely new, but sometimes you can reinvent them in a way that gives a competitive advantage. For example, look at what subscription box companies have done for things like razors, make-up, snacks or pet food.
  • Is there a way to harness a new or up-and-coming technology? Some great business ideas position the company as a pioneer of change in the business landscape.
  • Can your current skills or hobbies be monetized? For example, you might have a passion for salsa and a secret family recipe for making it.
  • What problems or concerns do other people often voice? Could managing these concerns be the start of a business?

Once you’ve brainstormed a few ideas, highlight your top two or three contenders for further investigation.

How to Start a Business

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#3. Conduct market research

For a business idea to succeed, it needs to solve a problem, fulfill a need better than current solutions, or generally be something the market wants. Your next step is to run your shortlist of ideas through a validation process (pick your most likely idea first).

First of all, is there a big enough market to justify the business idea? If you’ve determined that there is, you can then get even more specific and figure out how saturated the market is and whether there is room for your idea.

You might conduct focus groups or surveys to find out exactly what people are looking for, what bothers them, or any suggestions they have. Importantly, you’ll want to analyze competitors – is anyone else doing what you want to do already? If not, could there be a good reason that they aren’t?

It’s important that you identify what makes your products or services different from competitors. What will your business strategy be and will it be viable? For example, competing on price in the highly competitive ecommerce business can be a race to the bottom. If you have large competitors, you will almost always lose because they have the resources to fund loss-leaders.

Determining a USP (unique selling proposition) helps you to define what will make you different and why customers should choose you over competitors. As part of your research, you need to understand what will appeal to your target market in terms of a USP – what makes it worth it to them?

Another part of your market validation absolutely has to be the financial side. What will it cost to get your idea going and can you charge enough to turn a profit within the time that you need to? If you need to charge more than competitors, what makes your business worth choosing for customers?

#4. Write a business plan

This is the point where you’ve narrowed down to one business idea you’d like to go ahead with. You’ve validated that there is a market for the idea and that it’s possible to make it work financially, so it’s time to write a solid business plan.

At some point in here, you’re going to have to come up with a business name – something that is easy to remember and catchy to your desired customer base. Google is a useful tool here – check that no one else is using your desired business name and that the URL you will need is available.

Your business plan should be a written description of how you plan to evolve your business from start to finish. There are many different ways to write a business plan, but we suggest finding a template that makes sense to you in terms of level of detail. A tip here is that if you’re going to require investors or a loan, then you’ll probably need to make it as comprehensive, yet clear as possible. Lenders and investors want to see that details are well thought-out.

Most business plan templates either fall under the category of “traditional” or “lean startup.” Traditional plans are hefty and detailed, beginning with an executive summary, potentially including a funding request and ending with appendix.

Lean startup business plan templates are suitable for businesses that are able to start very quickly with few required resources. For example, if you are branding yourself as a consultant and making use of your own skills and experience, you may not need a whole lot of “extras” to start up on your own.

These templates are very high-level and tend to focus on value proposition, infrastructure, customers and finances. One of the most common versions (which you can find free if you search online) is the “Business Model Canvas.” Note that if you are seeking lending or investment funds, these plans may be too lean to satisfy requirements.

No matter what type of business plan you choose, be prepared to treat it as a living document. As time goes on, your business matures or there are changes in the market or with technology – you’ll probably need to adjust your plan to account for those.

#5. Plan your business finances

Do you need to organize financing to get your business started? Or, can you self-fund, or start with very little funds?

If you do need funding to get going, there are many possible avenues you can take to get it. You need to make some calculations to work out how much you will need, as this may play a role in how you decide to get the financing. Consider what you need for startup costs to set up and get going, as well as what you might need to cover ongoing expenses before you turn a profit.

You will need to consider expenses such as:

  • Licensing, permits and subscriptions
  • Legal fees
  • Equipment and inventory
  • Trademarking
  • Leases
  • Marketing
  • Utilities

It’s a good strategy to create a spreadsheet or similar document so that you can keep track of expenses. One of the core reasons that businesses fail comes down to finances – you don’t want to run into any surprises!

The question now is, how will you get the finances you need? Here are some of the most common avenues small businesses take:

  1. Small business loans
  2. Credit cards (a risky prospect if interest rates are high)
  3. Business grants (Check out Grants.gov for a searchable directory of federal grants)
  4. Loans from family or friends
  5. Crowdfunding campaigns such as through Kickstarter
  6. Angel investors
  7. Bank loan or line of credit
  8. Own savings

The option that is best for you will depend upon your unique circumstances, available resources and appetite for risk. Also consider how much input you’re prepared to take from others. Angel investors may expect a certain level of input in decision-making.

How to Start a Business

#6. Make your business official

A key mistake that many small businesses have made is to skip getting all of the official permits or registrations that they need. Things such as not getting insurance for the business can come back to bite, even if that’s at a later date.

One thing to consider is setting up the business in the manner in which you intend to continue. There is something to be said for the psychological shift when someone goes from being a sole proprietor to an LLC, for example. It’s a sign to yourself that you’re taking the business seriously.

There are several potential sub-steps to making your business “official,” here are a few:

  1. Setting up your business structure. You may want to seek advice from a qualified accountant or lawyer about this. Different business structures have different tax and legal implications. For example, sole proprietor vs. partnership vs. LLC vs. S Corporation.
  2. Your business name and registration. You might need to get a license to operate in your state or county as well.
  3. Federal and state tax ID for your business
  4. Any required insurance
  5. Any permits needed
  6. Setup of bank accounts
  7. Application for any trademarks, copyrights or patents
  8. Any legal agreements, such as supplier agreements, non-disclosures, or employee contracts. This may also include vendor agreements for things like shipping
  9. Reserving your preferred website URL.

#7. Develop your product or service

The details of how you develop your product or service will vary depending on the type of business. For example, some sell physical products while others offer digital services. Nevertheless, it’s important that you don’t skimp on the product development area. Ultimately, this is what is going to represent your company.

Here is where you iron out the details, including how you might package up your products or services. As an example, consider a “productized service” (much like we do here at One Week Website). The nature of this type of service is that you bundle services together into a package, which you then charge a rate (usually monthly) for. It’s important that these packages have clearly defined parameters in order for the business model to work. If not, you can easily end up down a rabbit hole of extra work.

For physical products, you may need to find a supplier, or a manufacturer for something that you have designed yourself. You need to finalize designs and materials and work on areas such as quality control and risk management.

An especially important part of any product or service development is consideration of the customer. You should have a clearly defined target market, as they’re the ones you hope are going to buy what you’re selling. Your development might include activities such as usability testing on people who represent your target audience, or surveying when you’re developing a service. You need to validate that your product or service is meeting the needs of customers as intended – remember that sometimes this will take a few iterations. You’ll need to consider this when you are budgeting.

Lastly, if there are any certifications or educational requirements for your chosen field, get these taken care of as early as possible. For example, some types of businesses need FDA or ISO certification – they may need to inspect your products or facility. If you’re using particular types of vehicles, you may need additional licenses.

#8. Develop your branding and messaging

How would you like your business to be perceived? What “voice” do you want to convey to the customer and what will your brand represent? These are important questions to answer early in your business setup, because it helps to ensure you present cohesive messaging.

In fact, when we build websites, one of our major tasks is to ensure we work with clients to get their messaging clear. This helps us to build a site that speaks to that target audience and emphasizes the most important things first. You only have a few short seconds to grab the attention of a new customer, so they need to “get” you very quickly.

So, how will you develop your voice and messaging? Here are a few ideas:

  1. Look to your competitors – what are the gaps or flaws in their messaging? What types of customers are they attracting with their messaging? Consider how your brand might differentiate. For example, you might have an edgier voice compared to a more conservative competitor.
  2. Describe your products main advantages and why they are so important. You could also seek this information from the voice of the customer, by asking any test users.
  3. Think about the values of your brand. How will these be communicated by your overall messaging? Some brands have even created manifestos to help express what they care about and why the do what they do. (See a good example from Red below).
    How to Start a Business

What sets your company, your product or service apart from others?

Your brand messaging might include things like your value proposition, mission statements and manifestos. Importantly, it’s not just those specific elements, it’s an overall tone and feel that knits everything together into a cohesive unit. For example, people who see your brand on Facebook and in print media shouldn’t detect any difference in how you are presented.

#9. Set up your website and back-end systems

See what we did there? Yes, we strongly believe that it’s important to get your messaging down before leaping into creating your website. This will help you to select an appropriate design and layout.

Of course, you also need to consider website functionality and overall setup. There are so many different options you could go for, but you need to consider things like budget, expertise required and your desired level of management of the website. For example, some DIY website platforms don’t allow you to customize how you’d like or they limit functionality. They may also build everything onto their own platform so that, if they were to shut down, your website will potentially go with them.

One way to narrow down and find your desired setup is to list everything that you must have for your website. For example, you might need payment gateways, a shopping cart function, portfolio features and content sharing. You might want to integrate certain key tools, such as accounting software or CRM (customer relationship management) tools.

Besides your website, you may need any or all of these back-end systems:

  • Project management software
  • Accounting software
  • Email management tools
  • CRM software
  • Payroll software
  • Booking systems
  • Inventory management systems
  • Chat or customer support systems

Again, list your must-have features to help you narrow down your options. We also like to look for tools that integrate well together, as this tends to avoid a whole lot of manual data-handling.

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How to Start a Business

#10. Promote your business

With all of the systems, products and paperwork taken care of, it’s time to promote your business. Make sure that you’ve budgeted for marketing among your startup costs! In today’s world of noise, you’re going to have to promote yourself to be found by your target market.

There are a myriad of potential ways to promote your business, so let’s look at a few that are common for startups. Some will cost you money, but others are free or quite inexpensive. Create your own marketing plan based on what your resources and needs are:

  1. Devise a launch strategy. Make a big deal of launching your business as a way to attract customers. For example, bricks and mortar stores often have opening parties, while online businesses might have launch deals.
  2. Start building an email list. Email marketing is an inexpensive route to take, but you need to have a list aimed at your target audience. You might do something like create a pre-launch landing page and invite people to sign up for opening deals or to be kept informed.
  3. Build a social media presence. To narrow it down, find out which channels your target audience is using and go to those places. Aim to do one or two channels very well rather than spreading yourself thinly across several.
  4. Use paid advertising. You might choose online methods, offline methods or a mixture of both. Again, the key is to have figured out where to find your target audience. For example, you might use paid social media or search advertising. You might take out ads in local newspapers, local directories (on or offline) or industry publications.
  5. Be present at relevant conferences or trade shows. Strategic booths or sponsorships can help to boost your profile.
  6. Join networking groups. For example, your local business association, Young Professionals groups or meetups. Have business cards available to hand out.

Final thoughts

Whew! There are certainly many steps to take when starting a business, but don’t let that put you off the business ownership dream. Every journey is different, but the most successful businesses have almost always had a plan to get that way.

A good business always begins with a firm foundation. You need to understand your market and be clear about the need your product or service fulfills. Differentiating from competitors is important, as is coming up with clear, compelling messaging.

Stick with us as we look at the sections in this article in more detail in future posts. There’s a lot to organize, but you’ll never regret taking a thorough approach to developing a profitable business.

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