Many would-be entrepreneurs have not done their homework and base their business idea on what they think people should buy, rather than what people really want or actually do buy. Testing the market thoroughly could mean the difference between a good and a great business, success or failure.
How can you avoid this trap in your own start-up?
Here are four simple and inexpensive action steps you can take to test your business idea to make sure there is a viable, sustainable and growing market for your proposed product or service.
- Identify your market. How big in terms of rands is the current market for your product or service? Is it a new or a mature market? Are you in a new or mature category? A lot of these questions can be answered with a few hours of online research or from the industry associations.
Another good tactic is to go to a trade show or exhibition and look at your prospects as well as your competition.
Answers to these types of questions will give you a big advantage in getting a handle on the opportunities within a marketplace.
- Identify your customer. Develop a list of questions to profile the “perfect customer” for the product or service you are trying to sell. Include questions such as: Is the target male or female? How old are they? Are they married? What was their main motivation purchasing a particular product or service? This knowledge will give you additional insight into how your own sales process should be structured. It will also help you operationally tailor your product or service offering to better fit your audience.
- Test and measure demand. Big companies spend lots of resources testing ad campaigns and hiring focus groups. However, you can do a lot more effective research on your own by simply starting small then testing and measuring everything you do.
- Start a list of contacts. At this point in your start-up and planning phase, you may have a list of vendors, suppliers or even potential customers. If so, great. Keep building that list and start to develop a communication strategy to keep in contact with that list on a consistent basis. Today’s contacts may be tomorrow’s customers. More importantly, they have access to entire networks of people who may want or need your product or service.
The real goal of networking is not making a sale to your direct contact, it’s about creating a relationship with that contact that leads to referrals and word-of-mouth leads down the road.
In the end, there is no fail-safe formula for business success, although people are always trying to find one. The best indicator is a proven market with room for growth, populated by people willing and able to pay for something unique or different that helps them make their lives better, easier or happier in some way.