Research your Business Idea FIRST!

As we've said previously, it's important not to rush into anything without doing your homework first. It's extremely important that you make sure there is a market for your product or service.

Budding entrepreneurs often write to us at Entrepreneur Online asking our advice on a particular business that they're thinking of starting. They suggest that their's is a unique business idea that they've investigated and found that there is a definite need.

We're amazed at how many times these "unique" businesses are actually not unique at all. The "entrepreneur" simply hasn't done their homework properly. This could be because the entrepreneur hasn't determined the true business category that this business is marketed under. (eg. a person thinking of starting a "Body Corporate Management Service" may not be able to find any competitors under the category of "Body Corporate Management Services". However, there may be plenty of competitors listed under the category of "Property Managers").

This process could be regarded as your basic market research. You should at least assess the basic viability of your new venture or business idea before you start spending any money.

Ideally, you should have a proper "Marketing Plan". This can either be a separate document or part of your "Business Plan". These are covered in more detail in other sections of this site.

However, at this stage, some of the basic questions you need answered are ...

Are there any competitors and who are they? Search for the same type of business on the internet, in yellow pages directories, in your local newspaper and by simply asking around.

How successful do they appear to be?
Visit their places of business (or at least drive past). Are they growing and putting on new employees or opening up other outlets? If they operate from home, do they appear to have new vehicles and equipment? Are they at home during business hours when they should be out on-site working?

Are there enough customers for another new player? and
Is your new product or service something that people actually need? These two are often hard to assess. We recently saw a product that everyone (without exception) thinks is fantastic. However, the company is having difficulty selling it because nobody has a need for it. Although people think it is an excellent product, they can get by without it. The company has spent millions of dollars to manufacture a "great" product that nobody wants to buy. This could have been avoided if the company had done their market research properly before going into production.

When doing your research, don't just ask your friends. Approach and ask strangers … people who you believe would be your customers. Asking your friends will not provide you with accurate answers because they'll probably tell you what they think you'll want to hear.
The most important questions you should ask while doing your research is "Would you buy it?" and "How much would you pay for it?"

Is the business seasonal or consistent all year round?
Some businesses sell more in certain seasons or are dependent on the weather. They could rely on tourists or people who are on vacation. We recently spoke to someone named Tom. He was considering buying an icecream franchise. The example profits the franchisor provided him were from a franchise in a location where the weather was warm. However, Tom's desired location was in a much cooler area and he would not have sold as much icecream.

Are you, the business, or your premises required to be licensed and if so what are the requirements and costs involved? Do you need to be qualified in some way before becoming licensed?

These are only a few example questions you need answered. Formulate as many relevant basic "market research" questions as you can think of ... and don't be afraid to get the answers.

BEFORE you spend any money on setting up your business, do the research and test, test, test.

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