The importance of thorough market research before starting a business
It’s one shortcut you just can’t afford to take. You may have it all clear in your head – the concept, the plan, the brand and the launch of your limited company – but however you became convinced your business will undoubtedly be successful, it is still imperative to carry out market research.
Doing good market research before starting a business can help in a large number of areas – it will help identify your ideal customer, what your competitors are up to, what has and hasn’t worked in the past, what obstacles you’re going to have to deal with, what rules and regulations your business is going to have to comply with and so on and so on.
And it isn’t necessarily only a one off activity carried out before starting a business. Many seasoned entrepreneurs continue to see it as something that needs to be done regularly so that they can maintain that vital edge over their competitors. Here’s how effective research will help you get your business off to a flying start.
What does good market research help you achieve?
- It identifies your potential customers
Carrying out market research helps to determine who your customers are and what their buying habits are. For example whether they are male or female, what age bracket they fall into, their marital status, their social demographic, their financial situation etc. Establishing buyer profiles is critical to understanding who your product or service will appeal to and how you should go about targeting your potential customers.
- It enables you to evaluate customer preferences
Getting a glimpse into customer choices and understanding their reasons for preferring one product or brand to another gives valuable insight into the strategies you will need to formulate to successfully market your business. Knowing what your customers read, which websites they look at and what they do during their leisure time are all pieces of valuable information that will influence your business plans and decisions.
- It enables you to set clear goals
The data gathered from any market research activity you carry out will help you to set realistic targets and time frames for growth, sales and the introduction of new business ideas. There’s likely no point in planning for 50% growth every year if your market research is telling you the size of your market is going to get 50% smaller over the same period.
- It means you’ll take informed decisions
Developing strategies, taking calculated risks, making marketing decisions about pricing, selecting distribution partners, choosing social media channels – everything depends on how aware you are about current industry trends and customer preferences. And market research will help build that awareness.
- It can identify new business opportunities
Analysing trends like demographic shifts, educational levels, the prevailing economic climate and consumer habits can provide valuable insights into market needs, enabling you to correctly predict and leverage new opportunities for your business. However great your idea it’s unlikely that you have thought of absolutely everything. And if you have market research which backs that up it will provide a very powerful statement to all those interested in backing your business.
- It helps convince investors to put their money in
Presenting a business idea backed by comprehensive market research to a potential investor goes a long way to creating a positive impression and giving your business credibility. It helps to minimise the inevitable risks involved in starting a business and to create sufficient confidence in the investor’s mind to agree that your plan will work and most importantly to put their hand in their pocket.
The bottom line is all businesses are looking to recognise that gap in the market that their service or product can successfully fill. Conducting market research will provide you with the data you need to support your idea so that it will appear to be a viable business that will attract the investors, employees and partners it needs to help make it a success.
Latest from Basics of Business
What do King Kong, a dentist and the Prince of Wales pub have in common?
Posted on 3 April 2017
Choosing a company name is an important early step for any business. It helps to create the first...Learn more
Entrepreneurship - you can't teach that?
Posted on 28 March 2017
In the lead up to the 2016 Olympic Games in Rio the BBC conducted an online public vote that found...Learn more