There aren’t many aspiring entrepreneurs out there who aren’t capable of generating at least one truly great business idea in their lifetime. And let’s face it, much of the early success in starting a local business (and any business really) usually comes from turning intangible dreams into concrete, real-world money makers.
The thing that separates the greats from the not-so-greats is their ability to thoroughly assess the local marketplace before jumping all-in and taking the massive action required to lift a new business off the ground.
Why Massive Action Alone Won’t Cut it
Does the following quote describe your entrepreneurial mindset?
“Vision without action is merely a dream. Action without vision just passes the time. Vision with action can change the world.” – Joel A. Barker
Barker sure knew that quote would inspire at least a few people to get off the couch and make their dreams into reality.
It’s true that you have to marry vision and action to enact positive change in your life and realize success, but there’s one important element missing from that mantra if you want to be an entrepreneur:
“Without knowledge action is useless and knowledge without action is futile.” – Abu Baker
If nobody wants your product or service, no amount of marketing or forceful selling will make you profitable over the long haul. Not unless you want to get into snake oil sales and risk having your biggest claim to fame in business being a massive FCC injunction!
First, figure out IF consumers actually want what you’re planning to sell, before investing all your emotional and financial capital into that next great idea.
Assess the Marketplace First for the Win
There are 3 main reasons why entrepreneurs avoid doing deep thorough market research before they launch their latest and greatest product or service:
- Blatant arrogance that they know what people want and how best to deliver it to them.
- Foolish reluctance or refusal to accept criticism about their product (eg., “My product is perfect, what do they know?”)
- Fear that research will cost too much and you won’t have enough left over to launch.
All the above reasons are pure rubbish…
Consider that arrogance won’t get you angel investors or venture capital funding. They want to know if you’ve tested all the profitability variables of what you’re offering.
The inability to accept criticism is the key ingredient to a popular dish known as “bankruptcy stew.” There’s no reason why you shouldn’t find out what people think and what you can improve upon before you spend hard-earned savings or start taking on massive debt acquiring resources and/or filling a warehouse with ready-for-market stock.
If the cost of exploring the market first is too much, consider how much it will cost when you have thousands of units of your product sitting idle in a warehouse (or your home) and nowhere for it to go. Or the cost of renting a storefront and hiring a staff when you don’t have enough customers to justify the expense.
Begin With These 3 Marketplace Markers:
The following marketplace markers will give you most, if not all the information you need to know about the viability of your product or service before you actually begin the process of funding and lauching your startup.
1. What’s the industry doing?
Look for the trends currently taking place in the industry. Figure out whether it’s in a growth phase or a downturn. Look for technological changes within the industry, or outside it, that may affect the long-term success of your startup.
For instance, opening a local video rental outlet today would be financial suicide with Netflix, Amazon and Google making video rentals and online movie streaming so easy and affordable. This idea would have been a great idea for a local business a decade ago.
A simple Google search can tell you an awful lot. As of 2015, manufacturing is on a definite and predictable downturn, whereas service businesses of all kinds are on a definite climb over at least the next five years.
2. Look at your potential customers.
First, figure out the boundaries of your area of operations; both the immediate and surrounding areas you plan to do business in. This will give you a base number of “potential customers” who may benefit from what you’re offering.
Then you want to determine the area’s median income level, and what they’re actually spending their money on. The local median income can be found at your local small business center or on census sites like census.gov in the U.S., and statscan.gc.ca in Canada. Compare the median income level with total population numbers, and consider the unemployment numbers in your service area to get an idea of how profitable your business can be.
Consider all the factors that will affect the growth of your business from a customer standpoint. If you’re looking to open a seasonal grass cutting/snow plowing business, do most of the locals have riding lawnmowers and snowblowers sitting in their garage already? Do they have the disposable income to justify paying someone to do this service?
How much competition is in the area and how much do they charge?
3. Competition analysis.
Now that you’ve confirmed you have either a steady or booming industry, and that the locals would indeed be interested in your value added product or service, you need to take a real good look at the competition.
Visit your local chamber of commerce, read the yellow pages, drive around the area, and do an Internet search for “XYZ Business in (Local Area)” to see who shows up. Networking at local events like fairs, charity fundraisers, sporting events, etc., are a great way prod the locals for information about your competition too.
Look at where the competition is spending their marketing budget and contact the publications and radio stations to see how much similar ad spots would cost. Consult an SEO company to find out how much the competition is spending on their online advertising.
Last, ask around and have your friends do the same, to find out who the competition is and how established/trusted they are.
Never rely solely on published data when performing a market assessment for your product or service assessment. Spend a few bucks and sit down with an industry consultant, become a secret shopper at your competition’s business, use the resources at your local small business center, etc.
After you’ve analyzed the industry, customer needs, and competition, then it’s time to go full-steam ahead and take massive action!