• 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.

    Market Analysis

    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

    Consumer statistics

    Gain info on potential customers, consumer markets

    Consumer Credit Data, Consumer Product Safety

    Demographics

    Segment the population for targeting customers

    American FactFinder, Bureau of Labor Statistics

    Economic indicators

    Know unemployment rates, loans granted and more

    Consumer Price Index, Bureau of Economic Analysis

    Employment statistics

    Dig deeper into employment trends for your market

    Employment and Unemployment Statistics

    Income statistics

    Pay your employees fair rates based on earnings data

    Earnings by Occupation and Education, Income Statistics

    Money and interest rates

    Keep money by mastering exchange and interest rates

    Daily Interest Rates,Money Statistics via Federal Reserve

    Production and sales statistics

    Understand demand, costs and consumer spending

    Consumer Spending, Gross Domestic Product (GDP)

    Trade statistics

    Track indicators of sales and market performance

    Balance of Payments, USA Trade Online

    Statistics of specific industries

    Use a wealth of federal agency data on industries

    NAICS, Statistics of U.S. Businesses

     

    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.


     
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