At the start of this month, we kicked off a whole new series called the Startup Strategy series. In that opening post, we explained that the purpose of the Startup Strategy series was to simply help budding entrepreneurs learn how to start their respective businesses. In the first post, we started with the absolute basics i.e. why you should even bother to start your own business.
If that post made you think that you should start your own business, then you’ve most probably already thought of a business idea to pursue. After all, every successful company begins with a business idea, does it not?
Test Your Business Idea before Backing It up Financially
Would you agree that every business idea is not worth pursuing? Consider the “gold fish walker” in the image. Yes, you read that right. Someone, somewhere in this crazy world actually manufactures and sells a product called the gold fish walker. Would you even consider a business idea about manufacturing or even marketing a gold fish walker viable? Why not?
The answer, as you no doubt already know, is that the business idea falls within the realms of pure lunacy. While this idea may be loony, there are business ideas that are not loony but just not as profitable as others. Such ideas can be very difficult to turn into reality; no matter how hard you work or how much money you invest.
Therefore, before you start your own business, you need to test your business idea so that you can ensure that it is viable and profitable. This post of the Startup Strategy series will explain to you how you should test your business idea.
Market research has to be at the heart of your effort to test your business idea. It is not unlikely for people to feel so passionate about their business idea that they fail to objectively analyse its viability and profitability. The primary purpose of market research is to test your business idea but it serves another very critical purpose as well.
Researching the market with your business idea in mind will allow you to further develop it. By focusing on market dynamics, customers, and competitors, you will understand your business idea to a point where you’ll be able to come up with a deployment strategy containing realistic and achievable objectives.
In order to conduct your market research, you need to devise a market research plan as well. Without a market research plan, your efforts would be disjointed and you’ll never get the certainty that you need to really put your back into making your business idea a successful reality.
There are various platforms you can use to do your market research. The most obvious and many times the most fruitful is to go through various market studies and surveys. These days, there are multiple sources of such information online – some free and some paid. You can use survey results, market analyses, and case studies to get a grasp of the possibilities around your business idea.
Another platform is social media. Social media trends can be a good marker for figuring out what people are approving and rejecting in the real market. Other sources of market research based information include getting statistics and analyses from government organisations, from journals and periodicals, and even trade organisations and associations.
The kind of information you gather and analyse to test your business idea depends entirely on the product or service you have chosen. However, while devising your market research plan, you should approach the problem from four different directions. Consider the following.
The Perspective of the Company
The first direction from which you should attack the problem is the company. This means focusing on your business idea in its physical form. A large chunk of running a successful business is to focus on oneself and one’s own capabilities.
For instance, if your business idea is that of a manufacturing unit, then you need to figure out how viable it will be for you to establish a manufacturing unit with respect to not only finances but also location and space.
Similarly, if you’re going to be a service provider, then you’ll need to think about premises, expert employees, the right equipment, and anything else that is relevant. Essentially, the perspective of the company in market research revolves around figuring out how you will deliver what you plan to promise to your customers and clients.
The Perspective of the Customer
If you sit behind the table, your customers will be sitting in front of the table. If you don’t really know who you are talking to, you’ll never be able to get your point across. This makes it very important to know who your customer is.
You need to find out who your target audience will be with regard to the product or service you’ll be selling to them. After this, you’ll have to find out how to present your product or service to them i.e. what will be your USP, how you will present your business, and even what types of promises you will make.
There are three types of customers you’ll have to focus on. You’ll have to split your analyses into three groups on the basis of these three types of customers.
- The Purchasers: These are the people with the money who actually make the purchase i.e. make the payment.
- The Influencers: These are the people who influence the purchasers into making that purchase. Media plays this role very often.
- The End Users: These are the people who’ll actually end up using the product or service being purchased.
The Perspective of the Competitors
Analysing the competitors will reveal to you multiple aspects of the industry that you’re looking to make a foray into. When you test your business idea by analysing other businesses doing something similar in the market, it will reveal to you various intricacies inherent in the industry.
For example, if you want to get into high fashion, then by studying potential competitors you’ll learn about trends in the industry that you’ll have to follow yourself if you want your business to be successful.
Analysing your competition also has another benefit if you want to test your business idea. This is the fact that it will give you an idea of how much effort, time, and resources you’ll need to beat your competition.
Moreover, when you test your business idea from the perspective of your competitors, you also get a chance to see niches within the industry you are targeting that will prove to be slightly more beneficial than your current idea. This knowledge will help later if your business idea doesn’t pan out because you’ll have the chance to tweak and modify it to something that will work.
The best way to figure out your potential competitors is to become their customer and follow through on the whole customer experience from receiving emails to buying and using their product. This will give you an idea about their strengths and weaknesses, which will go a long way in finding your marketing angle.
The Perspective of the Co-operators
These businesses will depend on either your business i.e. suppliers who provide you with raw materials or your finances i.e. trade associations and groups who want your business to succeed because you contribute to them. Media can also be seen as co-operators especially if you’re aiming at a large market in an important industry.
You need to test your business idea from this perspective as well because there is no business in the world that can be successful in isolation. Every business relies on these co-operators in one way or another. Don’t neglect them or you may end up missing a key aspect of running your business.