Small business owners face a dizzying array of challenges during the formulating and launching phases of their new venture. To meet these challenges, the entrepreneur needs large doses of energy, focused planning, proper funding, and single-minded determination.
The ensuing juggling-act of competing demands often means that some areas of the business plan receive too little attention. This in turn, can result in the business operating on assumptions that have not been supported with factual research.
While it might sound surprising, many new businesses – and many existing businesses too – fall short when it comes to market research.
Why would a business launch without conducting proper research?
The answer to that question is complicated. Entrepreneurial people are typically action-orientated individuals and they are good at getting things done. Emotion, and the energy that it unleashes, motivates the entrepreneur and drives them forward toward their goals. However, emotion can also lead to the temptation to take shortcuts, especially if the research process becomes frustrating and takes more time than anticipated.
If you are considering self-employment, then recognizing the risks associated with inadequate market research should motivate you to properly test your ideas before starting a business. A professor from my university days said it best – “if an idea is going fail, have it fail on paper first.”
Start the research process with a simple hypothesis statement for your business idea. Write a short summary incorporating key elements of the 5 Ps – People you want to sell to, Products you want to sell them, Pricing you think they will pay, ways to Promote your business to them, and a definition of what Place means for your business.
This will form the basis for your research plan. The hypothesis statement is what you believe, in basic form, your business will be. It is a belief statement that you must now prove, or disprove, through diligent market research.
Next, you will need a set of objectives to help guide your effort. What do you need to verify and what are you unsure of? Your objectives should be tied to your initial assumptions about your business idea, and may change as you delve deeper into your research.
There are two important types of research that need to be done; one is called Primary and the other is called Secondary.
Secondary sources of information are existing resources that provide you with factual data and analysis related to the 5Ps. Other key areas for consideration are: industry size – as well as outlook and trends, the general purchase process of clients and their buying criteria, your competition – both direct and indirect, and external forces such as the economic climate or government regulation.
Examples of secondary research sources include business directories, trade associations, any print or electronic media and Statistics Canada. Like a Pandora’s box, secondary research can seem overwhelming at times, so it’s really important to have structure and goals within your research plan. Make sure you visit your local library and seek assistance from a qualified Librarian.
Primary sources of information provide first-hand feedback from your potential customers. In essence, you are examining the 5Ps again, but now you are learning directly from those whom you believe represent the views and opinions of “typical” clients. Examples of primary research include surveys, face-to-face interviews, focus groups, and test marketing.
Like a good detective, you are critically assessing what you find and seeking factual “clues.” Common or similar answers from select groups, verification of industry standards, identification of competitive advantage, and confirmation of initial thinking are examples of these “clues.”
Useable data should be qualitative and quantitative in nature – meaning the source should be credible and it must represent a larger sampling. Avoid anecdotes and hearsay statements.
Your research should support your hypothesis, and provide you with details about the market opportunity. It should spark new ideas that will assist business development, and raise more questions about how you should proceed.
If there is strong evidence that your idea does not match what the marketplace is telling you, then you must re-think your approach.
In reality, the research process never ends for the small business owner. Changing market, consumer and economic conditions require constant adjustments.
The successful entrepreneur is the one who recognizes this, and makes market research an important part of managing their business.