One of the best ways to avoid starting a new business that's doomed to failure is to test your business idea rigorously before you launch.
Just because you're good at something, enjoy doing it or dream of becoming a successful entrepreneur it doesn't mean your business idea is sound. If your new business is going to succeed, there must be sufficient demand for your products or services at the prices you intend to charge.
It doesn't matter how much knowledge, personality and drive you bring to your new business. If people don't want what you're offering at the price you charge - your new business will fail. Simple.
How to do basic market research
Although the very words 'market research' conjure up images of clipboards, questionnaires and researchers pestering shoppers on a busy high street, for most small businesses the solution is much more basic.
The key to success can be to spot a gap in the market and tailor your business to fill that niche, so you become the number one supplier within that market. Even if you're a 'me-too' business or if you plan to sell something that's already proved popular, you should still carry out market research to seek honest feedback from potential customers.
Pre-start market research for most new businesses need not be sophisticated or expensive, you simply need to know who your customers are and what they think about your products or services.
Don't make the mistake of simply canvassing friends and family, because most will be reluctant to criticise. Plus, they probably only represent a small proportion of your market. It won't be reliable market research by any means.
Speak to potential customers you don't know. Find out their opinions about what you plan to offer. Do some real-life product testing. Crucially, ask whether they'd buy your product/service at the price you're asking. If the answer's no, you need to reconsider.
For small businesses that sell to few customers (possibly other businesses), market research will involve meeting potential buyers to discuss products/services and prices. For those aiming for mass-market appeal, the answer might well involve asking questions to people on the high street, where free samples always come in handy. You might do some door-to-door market research. It's vital to use the right type of research for your business type.
Weigh up your competitors
Effective market research also involves assessing the competition and web-based searches are a good place to start. Also flick through the pages of business directories and local papers/magazines. Even walking around the area in which you're thinking of setting up will reveal much about the competition you will face.
Find out how many businesses in your market offer products/services similar to yours. Determine how much they charge and what terms they offer (e.g. buy now, pay later, etc).
If there are too many competitors, or you can't see a way to stay ahead of them, your business idea might not be viable.
Assess your research
Be honest when considering the results of your market research. Pay particular attention to feedback on prices and never simply ignore those who tell you they don't like your products or prices. Ask what they would prefer you to sell and/or how much they would pay. If this is considerably lower than your price, find ways to cut costs if possible.
Important flaws in your business idea might be exposed, but it's better to find this out before you commit time, effort and money to starting a new business that will never succeed.
You might decide your only option is to think of a different business idea. Don't be disheartened. Many successful entrepreneurs have had to work their way through numerous bad business ideas to arrive at good ones.
Alternatively, your business idea might simply need a tweak here and there to enhance its chances of success. If you're really doing well, your market research will make you even more confident your business idea is a sure-fire winner.
