How to research your business idea
You’ve decided to transform your passion into a full-time job, and now it’s time to take the next step: researching your business idea. Embarking on a new business venture can be an exciting, if not daunting, prospect. But by understanding what the demand is for your product or service and who your top competitors are, you can get started in no time.
Now, here are five easy steps to jumpstart your small business idea:
1. Create a market research game plan
Marketing is an ongoing process that requires thorough research. And it all starts with a comprehensive understanding of your business environment. So to help secure your place in the competitive landscape, it’s best to do your homework on the front end.
To help you get started, ask yourself these questions to guide your research:
• What is the state of my industry?
• What makes my products and services unique?
• Who are my main competitors?
• Who is my ideal customer, and how can I reach them?
This brainstorming session can help you figure out what you already know and what you may need to learn more about. It can also help you determine the objective of your market analysis. Are you conducting research for internal purposes, such as new product research to help fill a gap in the marketplace? If you are preparing to launch a new product, it’s a good idea to heavily research your competitors.
But if you’re conducting research for a loan approval like Origin’s Business Loans and Lines of Credit, for example, you may need to focus more on market size and growth. Either way, your market analysis will depend on your goals.
No matter what your aim is, market research is the best way to fine-tune your business idea and get your game plan in place. It can help you determine your target market, check out the competition, or analyze your business strengths and weaknesses. When you combine all of this information, you can paint a helpful portrait of your business’s potential.
2. Determine your target market
An important goal of market research is to understand the type of customer most likely to buy your product or service. If you understand your target market, it will be much easier to successfully direct your marketing efforts.
Market research can be divided into two main categories: secondary and primary. Anything that comes directly from your audience, like focus groups, surveys, and interviews, is considered primary research. As this information comes straight from the source, it’s easier to determine your audience’s habits and preferences. Keep in mind that a good product will align with these requirements, meeting consumer needs and easing customer pain points.
Secondary research contains information that comes from external, public sources. This can include anything from government statistics to commercial market reports, and even your business’s own marketing data. From demographic information and lifestyle interests to consumer statistics and buying power, this research will provide valuable insights to help you fine-tune your marketing game plan. Use these sources to chart trends and recognize patterns to better target your marketing.
While you’re conducting market research, pay special attention to where your target audience spends most of their time. Then, target your marketing efforts in those places and on those platforms. For example, if your target audience spends most of their time on social media, a roadside billboard might not be the best use of your marketing budget.
You can collect this information from a variety of sources. A simple web search will bring up dozens of entries, from periodicals to government reports. A quick trip to the library can also connect you with valuable local resources from state agencies, so remember to utilize your community network. And if you need more help narrowing your focus and creating a small business game plan, consult Origin’s Entrepreneur Resource Center. From treasury management and business loans to fraud prevention resources, use these tools to take your small business idea to the next level.
Ultimately, market research provides valuable insights that help you determine whether your business idea is viable. If your product or service meets a need and serves a purpose for one or more target audiences, it will probably succeed. But if you’re having trouble identifying an ideal customer or group who could benefit from your business, you might need to go back to the drawing board.
3. Size up the competition
Learning about your competitors is central to the success of your small business. In order to find out more about the competition, you need to engage in competitive research.
Competitive research is the process of identifying your main competition, understanding their business strategy, and then making your strategy better. It helps to have a handle on your competitors’ strengths, weaknesses, pricing strategies, and other metrics. Once you identify the competition, ask yourself questions like:
• Who are their customers?
• How do they market to them?
• What is their sales volume?
To kick start the process, first identify your business’s primary competitors. This can be done with a simple online Google search of your product or service. This knowledge doesn’t just help you compare and contrast your own business against the competition – it also gives you invaluable insight into industry trends. By assessing your company's position against your competitors, you can make adjustments and get a leg up.
Keep in mind that competitors can be divided into two categories: direct and indirect. Direct competitors target the same customers you do with comparable products or services. A classic example is McDonald's and Burger King. Indirect competitors, on the other hand, compete for the same customer base and satisfy the same need, but with different product or service offerings. For example, margarine versus butter. By researching your business’s direct and indirect competitors, you not only familiarize yourself with the market, but you can also discover areas for growth and expansion.
Ideally, you’ll want to identify a few main competitors and deep dive into their business models. Analyze their online presence by scrolling through their websites, social media accounts, blogs, and more. You can even sign up for their mailing lists to get a grasp on how they communicate with their customers. Keep a list of your findings and use that research to make your business more competitive.
4. Conduct a SWOT analysis
To operate a successful company, it’s important to keep your processes efficient and up to date. A SWOT analysis is one of the easiest ways to assess your business. But first, what is a SWOT analysis? A SWOT (which stands for strengths, weaknesses, opportunities, and threats) analysis is a planning process that pushes your business to overcome challenges and pursue new opportunities.
Since its creation in the 1960s, the SWOT analysis has become one of the most helpful tools in a business owner’s toolbelt. Conducting a SWOT analysis is the most effective way to evaluate your business and the external factors that could affect it, helping you to grow your business.
To start your SWOT analysis, think about what your business does well. What areas do you constantly excel in? Next, ask yourself where your business can improve. Are there areas where your competitors outshine you? Then, think about new opportunities your business could take advantage of. And finally, consider which external factors could pose a threat to your business.
A good SWOT analysis functions like a roadmap. It gives a business a clear picture of the competitive environment in which it operates. By understanding the internal and external factors acting on your business, you can identify which strategies to pursue.
In a SWOT analysis, internal factors are strengths and weaknesses found within the business. While strengths are the things that set your business apart, weaknesses are the factors holding you back. For example, you may have a competitive advantage like highly skilled employees. That’s a strength you can capitalize on. But if you have an aging technology infrastructure, for example, that’s a weakness you need to address.
External factors, on the other hand, are opportunities and threats that exist outside of the company. External factors can include things like
• Market trends
• Economic factors
• Demographic data
• Political or environmental legislation
• And more
For example, when looking for opportunities outside of your business, consider whether there’s an emerging need for your service. Take a look at the market trends and demographic data in your area, and identify a market you can target.
When it comes to threats, consider if there are any direct competitors who could pose a problem for your business. Pay close attention to market trends, and determine if there are any trends that could negatively impact your business or product.
After your analysis, take what you’ve learned and create an actionable plan that makes the most of your business’s strengths and minimizes its weaknesses. Remember that your initial business idea is the first step in a long research process.
5. Get familiar with the regulations
When getting ready to start your own business, it’s important to research the government and state business regulations that could impact your company. From tax codes and labor laws to environmental regulations and privacy protections, there are many regulations to keep track of depending on your region and your industry.
If you’re a first-time entrepreneur, this research may seem daunting. If you need help breaking down the legalese and cutting to the chase, check out local resources in your area such as small business incubators or chambers of commerce that may provide small business counseling free of charge.
It takes a lot of time, research, and support to build a long-term strategy, but the experts at Origin are here to help you turn your small business dreams into a reality. Whether you need help establishing a business savings account or a sounding board for your ideas, our Trusted Advisors have your back. Learn more at Origin.Bank and connect with an Origin Trusted Advisor in your area.