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One of the first steps in examining your business idea is to do some research to get to know more about your market. Presumably you already know that a market exists for your product. If you have an idea for a business but you're not sure whether a market for it exists or is big enough to support your business, you are getting ahead of yourself. If that description applies to you, you'll need to take a step back and look at finding the right small business for you.
For those who believe that a market exists, but who want to know more about the size and shape of the market in order to forecast their chances for success, research is the best place to start. Researching your market to know more about your customers and your competitors is a critical step for small business owners. If Procter & Gamble puts out a product that doesn't sell, they move on to the next idea. If you put out a product that doesn't sell, you're out of business.
- Who are your likely customers? Will who they are affect where you need to be (for example, if students are your customers, you may need to be near schools)?
- How can you reach your customers? Which marketing options will reach the most customers at the lowest cost?
- How much will they pay for your product or service? Are you planning to charge too much for your product or service? Are you planning to charge too little?
- Who are your competitors? Have you also considered those who aren't direct competitors but who might nevertheless compete against you (for example, if you sell an online magazine, you're competing not just against other online magazines but against other products that occupy someone's leisure time)?
- How will be you be positioned in the marketplace? Will you compete with existing businesses head on or will you try to find a special niche?
For a more complete analysis of how to assess your market, see our discussion of the following:
- Analyzing the market environment will help you analyze your competitors and develop competitive strategies.
- Market research on a budget will help you locate and target your potential customers.
- Business planning will help you develop the marketing portion of your business plan.