In this blog, Wendy Foster from the City Business Library talks about the importance of market research.
The first question, is WHY? Why do research? The simple answer is that it is empowering. And the best place to be when you are starting or growing a business, is to be empowered.
The slightly longer answer is that market research gives you an invaluable insight into your prospective audience and gives you a huge amount of knowledge to work with. And with this information you can compile a comprehensive and accurate business plan.
Business plans are essential, whether or not you need it to apply for funding. If you do want to apply for funding then your informative and detailed business plan will show your prospective investor that you know what you’re talking about, and that your business venture is a fantastic opportunity for them.
Even if you do not need funding, a business plan is still essential for your own knowledge, and a great boost towards your success and future growth.
And… believe it or not, researching your market can also be exciting and great fun. Honestly!
The second question is, WHAT is market research? Hmm, okay, so the simple answer is that it is researching your market. But to be honest, that doesn’t always mean much to people. So, here are a few examples of what you can find out from secondary research, and what the benefits are:
- Find out who your customers are. What is their potential income, eg, will they be able to afford your product/service, and do their interests and/or needs make them likely to do so. Does the area you are looking at have a good number of your target audience that you can reach?
This information will help you identify which area is potentially a good place to set up your business, and it will also help you when it comes to pricing up your product/service. Pricing of goods/services is essential, as this is the bottom line of whether you can break even and then make a profit (even if you are a not for profit businesses, any additional money can be reinvested into the business, and you will need some profit to help with your cash flow). It is also a starting point to help you work out your budget.
- Identify your potential competitors. Is the market taken up by the big players, is it saturated already, or is it made up of small businesses with plenty of space for more? This will help you understand whether you have a viable business idea, or if you need to tweak it to bring something new to your potential customers and fill a gap in the market.
- What is forecast for your sector. Over the next 5 years, is it expected to grow, stay stable, or decline. Will it grow in different areas to where you could move to increase your target audience.
- Learn about your supply chain. A chain is only as strong as its weakest link, so reading up about the supply chain is really important. You may believe there is a large enough customer base for your business, but will you be able to find a supplier (if you need one/more) with low enough costs for you to be able to provide your service at a price your customers can afford.
Thinking about the steps of how you get your product to your customer, including your own suppliers, is a great checklist to help you start thinking about what you need to research.
I fully recognise that the thought of research can be daunting, and I have seen my fair share of eyes glaze over at the thought of research, but once you start learning these things about your industry it genuinely becomes fascinating. The information itself is exciting, and the fact it helps you towards your end goal of running or growing your business is definitely exciting.
Final point to mention here is the HOW. I will make a heartfelt plea to everyone to not rely on a general internet search. There is a lot of great and fun stuff on the internet, but it is not always easy to know what data is accurate, current, relevant, and basically right. So, the best way is to use recognised and authoritative sources. There are companies out there that commission, research and write up reports on market sectors. Use these! And better still, use a Library that subscribes to these so that you can access a wide range of these reports.
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