Everything you need to know about planning for a new business
Most successful entrepreneurs will tell you that a solid plan accompanied their brilliant ideas and business ventures.
Of course, every plan starts with research. Research determines where you’re likely to succeed, gives you insights into how you can succeed better in those places and—most importantly—how you can keep succeeding. It can also show you what to avoid.
In this guide, we’re going to look at two areas of research and planning that serve as a guiding light for successful businesses: market research and its counterpart competitive analysis.
What is Market Research?
Market research is the process of gathering important data about the market your business operates in. This research helps illuminate the dynamics of the market, including which direction it’s headed in and what makes the buyers buy in that market.
Market research can make a break a new business. Not doing it can even spell disaster for companies that have a strong foothold in their industry. Not understanding what your market looks like, who your customers are and what they want from your products or service is akin to the blind leading the blind and asking to get paid for the service.
When you begin performing market research, you need to have a few specific questions in mind. And in doing the right kind of research, you’ll begin answering these questions:
- How large is my market?
- Who are my potential customers?
- What are my customer’s shopping habits?
- How much are my customers willing to pay?
- What are my competitors doing in the market?
- What can I do better than my competitors?
As you get deeper into market research, it can be overwhelming. It takes a large amount of time and resources to perform accurately, so it’s important to understand that it’s not something you do in a day or two. It’s an ongoing process that should be a continual and integral part of your business’s development.
What is Compeitive Analysis?
You can think of competitive analysis as kind of a sub-discipline of market research. Whereas market research is focused on the bigger picture of your industry, your market, your customers and your competition, competitive analysis is a close examination of your competitors. It’s what helps you craft your products and services into something that differentiates you from your adversaries. In other words, it’s how you make your business unique.
Your competitive analysis should take a close look at your competition using insights you glean from your market analysis. Once you know the kind of market you’re targeting, you want to take a close look at how the competition is fairing. Of course, your competitive analysis informs your market research and vise versa, so again—it’s all an ongoing process.
Good competitive analysis will examine the following closely across your market landscape:
- Market share
- Strengths and weakness of both you and your competition
- The window of opportunity for entering the market
- Potential barriers to market entry
- Indirect competitors that could impact your success
It’s a good idea to take a look, not only at your industry but other, adjacent industries. You could have competitors that you don’t even know about poised to enter into your market, and you need to know about these things when you’re planning your business.
Following a Process
As with every other complicated endeavor, breaking it down into smaller parts makes it more approachable. Here are a few steps to keep in mind when approaching your own market research and competitive analysis:
1. Determine the purpose of your research
Starting with a “why” to guide your research can be invaluable. Are you looking for new opportunities? Looking to reduce business risks? Thinking about new products? Determining the purpose of your research is the first step you take, and the most important one, so you should give it due thought.
One way to help guide the process is determining whether your market research is going to be for internal or external purposes. Internal purposes would be for goals like improving business operations or increasing cash flow. External purposes would be for convincing lenders to give you a loan.
2. Take a close look at the outlook of your industry
Taking a highly-detailed look at your industry can inform even the haziest of decisions. Determining where your industry and market are heading by utilizing metrics can mean the difference between unmitigated success and ruin. Look at metrics like projected growth, industry trends and size to help inform your decisions.
Doing a thorough analysis of your industry can also help show potential investors that you know what you’re doing and where you’re headed. It can help illustrate to them that your industry and business are definitely worth their time and money.
3. Determine who your target customers are
Even the most successful companies don’t target every person. Instead, they have an acute idea as to who their customers are and the people who stand a high chance of being new customers. Likewise, you’ll need to figure out who your target customers are and put a vested effort into understanding them. This includes what kind of people they are, what their values are, what they want out of your product and service and what they’re willing to pay for it.
You can start by looking at the basic demographics of your customers, such as:
Once you determine who your customers are, you need to take it a step further and figure out their needs and desires, their personalities and interests, and their even their values. There are ways to do this independent of actual people, but the best way to do it is to simply ask the ones you have. You can implement surveys and suggestions across your business to give your current customers (the most important ones) an opportunity to tell you exactly how they feel about your business, brand, products and services.
Another good idea is to create a customer persona based on your analysis. Once you have a large enough pool of information on who your customers are, create an amalgamation of all of your customers rolled into a single persona. Then figure out how to best serve this average of all your buyers.
Once again, as your business grows and changes, your customers are also growing and changing. It’s critical to keep this process going so that you know how to serve your customers now, not your customers from last year.
4. Take a close look at the competition
To understand your market, you need to understand what it comprises—your competition. Likewise, you need to know the kinds of customers your competitors are targeting.
Take the time to look at the other businesses in your market, find out what they’re offering, who they’re targeting, where they’re located and what they’re doing well. This can show you where and what to target and what not to target. If your competition has a clear strength in a sector of the market and you aren’t 100 percent sure you can do what they do substantially better, look elsewhere.
5. Get even more information
As they say, knowledge is power. Once you think you’ve got a highly-detailed analysis of your customers, your competition, your market and your industry, go back and get even more data. The more you look, the more you’re going to find holes and blank spots in what you know.
Keep in mind that everything you determine throughout your analysis needs to be relevant to your business, industry and what you’re providing for your customers. It should also be unbiased and factual—make sure you’re brutally honest with yourself and your business. Make sure you get your information from credible sources from the beginning to prevent any bad data from snowballing into something that could paint an entirely different picture.
6. Step back and analyze what you’ve found
Once you’ve certain you’ve done an absolutely thorough analysis of your market and competitors, it’s time to look closely at the knowledge you’ve amassed. Determine how all the data you’ve gathered correlates to your initial purpose. And then use it to determine a path forward for that purpose.
Based on your new knowledge, you’ll be able to show yourself (and investors) what needs to be done better, what needs to be changed, how you can move forward on new opportunities, and start improving your bottom line.
The Bottom Line
Performing market research and competitive analysis can seem like daunting tasks, but they’re absolutely critical in planning your business for the best possible outcomes. They’ll take you a lot of time and effort, but they’re more than worth every bit of it. Both practices will improve your business across the board.
More than just planning, these combined strategies will help you stay competitive and dominant once you’re already established too. Don’t let all that research go by the wayside—be sure to use it to refine and improve your business with the knowledge you’re given.
Lastly, a great business plan doesn’t only happen before a business gets going. It’s something that continues long after a business is successful. Revisit your research and analysis regularly and compare your notes with how your business is doing and where it’s headed. This ensures that you’ll always stay competitive. After all, you didn’t become an entrepreneur to sit back and relax.