Have you ever heard the Field of Dreams line “If you build it, they will come?” It’s a nice notion in a fictional movie, but a dangerous motto when starting a business.
In reality, if you build something, the chances are that someone else may have already built it or ‘they’ (being your market) may not in fact come knocking as they can’t immediately see the value of what you’ve built. This consideration, while unpopular for many visionary entrepreneurial types, is incredibly important to address early before significant resources have been invested.
So how do you ascertain the feasibility of your business idea and determine the existence of a market for it? The simple answer: Research. It takes time, but the more you know, the better placed you’ll be when making decisions about your idea’s future. Taking action on a business idea without knowing if it is feasible is a sure fire way to increase your risk and subsequently the risk seen by potential investors. Research will help you get a clearer picture of the internal and external factors that will impact on your business’ chances of success and a provide rough idea of the potential market share available to you.
Makes sense right? However, a surprising number of businesses fail to take this crucial step before diving into a venture headfirst. We feel this largely comes down to the ambiguity of what’s involved in feasibility research and the fact that very few know where to start. For specific research requirements, many will engage a market research expert to carry out primary research. Whereas for broader research requirements or those on a tighter budget, some may take the option of conducting secondary research themselves by looking online or accessing research reports. If the latter rings true for you, we’ve compiled this article to outline the key research areas to get you started and to highly some tough questions you (as the idea owner) need to ask yourself (and others) to help determine whether your business idea has legs.
Industry Performance and Outlook
Understanding what industry your business idea falls within and having a clear picture of the performance and outlook of that industry, aids in highlighting whether there are opportunities and/or red flags early on. Some questions to ask when researching industry performance and outlook online are:
- Which industry does your business idea fall within?
- What is being said about the current state of this industry?
- Is the industry performing well in terms of revenue and growth?
- How is it projected to perform in the years to come?
Key External Drivers and Trends
It is important to take a look at the people, knowledge, political, social and environmental conditions and trends surrounding your business idea. This is carried out to discover how these factors can potentially impact the way your business will operate. Being aware of these will allow you to better prepare for any changes brought about by external drivers and trends. The questions below provide a starting point for assessing these considerations:
- What are the political, social and environmental conditions in the market you’re entering? What are the implications of these for your idea?
- What is the present state of the economy in which you are entering?
- Will your business idea be greatly impacted by a change in Government or upcoming legislative change?
- What are the industry trends and how can these trends potentially affect your business performance?
Threats and Opportunities
Knowing the threats that your business can possibly face will allow you to devise a strategy to either combat these threats or avoid them. Meanwhile, identifying and understanding the opportunities that are available can help you prioritise and map out exactly how opportunities will be taken advantage of in future. A Strengths, Weakness, Opportunities, and Threats (SWOT) Analysis (or even better, a TOWS analysis) is a useful model used to list out and plan around the key internal and external factors influencing your business idea. The SWOT Analysis starts as a table of the four areas to visually list out your internal strengths and weaknesses and your external threats and opportunities. From there you must assess the next steps to build on your strengths, minimise weaknesses, take advantage of opportunities and mitigate against threats. A TOWS analysis allows this extension of a SWOT, whereby the identified opportunities and threats are attached to the points you’ve identified for strengths and weaknesses in order to create a plan for maximising the potential of strengths and minimising the impacts of weaknesses. Applying these models to your business idea early will help you get a picture of where it stands and can aid in understanding the primary influencing factors for its success or failure.
Investigating who you will be competing against is an essential part of predicting the feasibility of your idea. To get started, the answers to the questions below will allow you to start evaluating whether or not your business idea can compete with these businesses.
- Who are your competitors?
- How established are they?
- What are their strengths and weaknesses?
- Are they likely to respond to your market entry?
- How are you different?
The next critical element is detailing exactly who your business idea will be providing value for. Before this point you’ve probably got an idea of generally who your market will be, but to obtain realistic details of the market size/potential, your research needs to dig a bit deeper and start looking at the overarching market, the segments within that market and sometimes even down a level further to segments within segments! Profiling your target market properly (geographic location, demographics, behavioral characteristics, decision influencers, path to purchase etc.) will allow you to determine exactly who will be the most viable group of consumers to target, how much of a market is available to you and also helps in getting to know your potential customers and what will entice them to buy – All of which forms the basis when developing your tailored marketing strategy.
If the above secondary research doesn’t answer enough of your questions, conducting primary research on a sample of your target market/segment will help you to obtain feedback on your product/service and the likelihood of uptake within that group. Through market testing and research, you will be able to see how a portion of your target market responds to your product/service idea. The results will enable you to gather information towards improving your product and/or define if there is no appeal at all. The answers to the questions below will aid in providing a basis for this information.
- What did the sample like about the product/service?
- What did customers dislike about the product/service?
- How can the product be improved?
- How did the customers respond to the price of the product?
To summarise; little good can come from putting the cart before the horse. Well conducted research will help you to get an idea of the viability of your business idea and aid in determining if it in fact serves an attractive market. If from the above exercise you find that your business idea has potential, and that an attractive market exists for it, then the next step is to craft a business plan. A well-crafted business plan will define the actions that need to be undertaken to ensure the commercialisation of your business idea is well considered and has the greatest chance of success.