Understanding Your Market
Part 2: Understanding Your Market
After identifying an idea to pursue further, you should research the role your business will serve in your target market. This will help you create a strong foundation for generating the necessary cash flows needed to continue operating.
You can gauge market feasibility by researching comparable small businesses to learn more about their success rates. You should account for competition inside your market and determine how that will affect your profits. If there is not enough demand for your product or service, you can consider expanding or moving your market geographically, reanalyzing how to sell the product/service, or reconsidering the business entirely. During this step, it is okay to return back to Part 1 and see if another potential business idea could be more successful.
Take this step carefully because understanding the market will help you create targeted advertising and marketing plans, offer customized solutions, or adapt to changing environments. You can find more information about executing good marketing strategies in Part 7.
To Start Off:
- Understand the problem(s) your business will solve.
- Define the market you want to pursue and your target customers.
- Validate the potential success of the business by gathering feedback from potential customers.
- Evaluate how customers solve this problem today, as well as what the competition offers.
It is important to understand and analyze your target market, both in volume, value, customer segments, buying patterns, and competition. Also consider the overall economic environment, including barriers to entry and any regulations.
A good place to start can be to read market research reports. You can access industry-specific research by using resources like IBISWorld or Statista. Although sometimes expensive to access, these will give you a great understanding of industries and give you access to data. View a sample IBISWorld report to gain a better understanding of what kind of information you will find in a report.
Below, you will find an extensive list of websites that provide market research.
General business statistics
Find statistics on industries, business conditions
NAICS, USA.gov Statistics, Statistical Abstract of the United States, U.S. Census Bureau
Gain info on potential customers, consumer markets
Segment the population for targeting customers
Know unemployment rates, loans granted and more
Dig deeper into employment trends for your market
Pay your employees fair rates based on earnings data
Money and interest rates
Keep money by mastering exchange and interest rates
Production and sales statistics
Understand demand, costs and consumer spending
Track indicators of sales and market performance
Statistics of specific industries
Use a wealth of federal agency data on industries
Conducting market research is extremely vital. Although this research can be time-consuming, this will help set you up for success through finding customers for your business. By understanding your competitive market, you will be able to predict the future success of your business more clearly. You will also be able to explain how the company will provide value to the community or market it is entering. Finally, this will also help you create detailed marketing and sales plans. Read ahead to Part 4, where you will create a business plan, to see where this information will be very valuable.
- Analyze all competitive offerings available and how you can improve your product/service to outperform the competition.
- QuickBooks explains how to conduct a competitive analysis for a small business really well.
- Small Business Administration explains how to use a competitive analysis to find a market advantage.
- Learn more about complementary offerings to understand how they are seeking their target audience. You can also explore creating partnerships with these companies.
- Read more about expanding your market through complementary offerings explained by a data analytics company.
- Salesforce talks more about how to execute a relationship with complementary businesses, including some ideas on what to include in a partnership agreement.
- Identify any economic trends that will affect the analysis. You can find some trends affecting small businesses here from the National Federation of Independent Businesses. It is also suggested that you look into the macroeconomic trends associated with the industry your business will be in.
- Ask the Downtown Development Authority staff for Hartwell’s NextSite report. NextSite helps identify real estate opportunities for retail development through market research and analysis.