How to Research your Business Idea

How to Research your Business Idea

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Somewhere between scribbling your idea on a cocktail napkin and actually starting a business, there’s a process you need to carry out that essentially determines your success. Often, would-be entrepreneurs get so excited about their ’epiphanies‘ that they forget to find out whether that idea is viable.

Of course, sometimes the idea works anyway, in spite of a lack of market research. Other times, the idea crashes and burns, halting a business in its tracks. We’d like to help you avoid the latter and keep your business goals on track.

The idea stage

For some entrepreneurs, getting the idea is the easy part. It’s the market research that doesn’t come so naturally. It’s a big red flag when someone outlines the size of the market but doesn’t clearly articulate a plan for how the idea will meet an unmet need.

That kind of full-throttle approach can cost you. Entrepreneurs are often so passionate about their ideas, they can lose objectivity. Rather than taking the time to thoroughly plan and research, they sometimes plow ahead with execution, only to spend valuable rands on unfocused or untargeted activities.

Market research can prove invaluable in determining your idea’s potential. You can gather information from industry associations, web searches, periodicals, government agencies, and so forth. A trip to the library or a few hours online can set you on your way to really understanding your market and the type of customer your product or service will serve. For example, if you don’t know if your product will appeal to the youth market, include a sample of that population in your research efforts.

Your research plan should spell out the objectives of the research and give you the information you need to go ahead with your idea, fine-tune it or take it back to the drawing board. Create a list of questions you need to answer in your research, and a plan for answering them. Utilise experts in planning and conducting research sessions, recommending the most appropriate research, helping you develop statistically valid samples and writing questionnaires, and providing you with an objective and neutral source of information.

The type of information you’ll be gathering depends on the type of product or service you want to sell, as well as your overall research goals. You can use your research to determine a potential market, to size up the competition, or to test the usefulness and positioning of your product or service. If, for example, the product is a tangible item, letting the target audience see and touch a prototype could be extremely valuable. For intangible products, exposing prospective customers to descriptive copy or a draft website could aid in developing clear communications.

Analysis

A business idea should be looked at from four perspectives: company, customer, competitor and collaborator. This approach allows you to scrutinise a business idea before even approaching the topic of brand development. Here’s what to look at for each of the four issues:

1. Company. Think of your idea in terms of its product/service features, the benefits to customers, the personality of your company, what key messages you’ll be relaying and the core promises you’ll be making to customers.

2. Customer. There are three different customers you’ll need to think about in relation to your idea: purchasers (those who make the decision or write the cheque), influencers (the individual, organisation or group who influence the purchasing decision), and the end users (the person or group who will directly interact with your product or service).

3. Competitor. There are three different groups you’ll need to keep in mind: primary, secondary and tertiary. Their placement within each level is based on how often your business would compete with them and how you would tailor your messages when competing with each.

4. Collaborators. Think of organisations and people who may have an interest but aren’t directly rewarded for any success your business might realise, such as associations, the media and others that sell to your customers.

Another approach to research is SWOT analysis, meaning analysis of the strengths of your industry, your product or service; the weaknesses of your product (such as design flaws) or service (such as high prices); and potential threats (such as the economy). SWOT enables you to understand the strengths and flaws, from internal information such as bureaucracy, product development and cost, to external factors such as foreign exchange rates, politics, culture, etc. SWOT enables an entrepreneur to quickly understand the viability of their product or service.

Whatever your approach to evaluating your idea, be sure you’re meeting the research objectives for your product or service. With those goals top-of-mind, your analysis will help you discover whether your idea has any holes that need patching.

Checking out the competition

Assuming your research process has helped you uncover your competition, you now need to find out what they’re up to. Become a customer of the competition by shopping with them or enlisting the help of a friend. Visit their website. Talk to your competitor’s customers – ask them what they like or don’t like about the product or service. If you conduct formal research, include a question like, ‘Where do you go for that product or service? Why?’

Your aim is to understand what your competition is doing so you can do it better. Maybe their service is poor. Maybe their product has some flaws. Or maybe you’ve figured out a way to do things better, smarter, more cost-effectively.

Find your selling point. It’s going to be the core of your marketing programme and what sets you apart and lures customers your way.

  • Nice article, do some research indeed, both secondary but also primary as well, it is really important to go out there and survey your potential clients, not only your friends and family circle. Find more startup research / business plan research tip and info on Marketest.
    Test the market first!

  • Market research is an important element, but it can also lead you into a totally wrong direction. I’m sure the market research for “Tablet PCs” would have been quite frustrating when Apple starded working on their iPad.
    I like Henry Fords quote: “If I asked my customers what they want, they simply would have said a faster horse.”
    Research is important, but be sensitive with the results.

    • I fully agree with this! But would add that when asking a question like that, we need to look deeper than the answer we get.

      Eg. Customer says, “I want a faster horse” – As a business, we should ask, what does that really mean? What need needs to be met? What is the underlying motivation behind that answer? We need to anticipate what they’re really looking for.

      I definitely believe that market research can sometimes lead you in the wrong direction, but that’s normally when we as businesses take it at face-value, without looking deeper and without looking into the future.

      This quote always resonates with me: “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” ~ Wayne Gretzky