How to research your business idea
Spotting your gap in the market is only the first step. Wendy Tan White explains the market research that now needs to take place
Being an entrepreneur involves spotting opportunities. This can happen either by seeing a problem or issue which, as a consumer, you feel needs solving, or by identifying a gap in the industry in which you work.
The former is much riskier than the latter, being based on personal passion rather than industry knowledge. If you don’t know the market you’re entering, getting involved requires some serious due diligence. In-depth primary (research you conduct yourself) and secondary (looking at information others have published) research is vital, and must be relevant to the market you’re looking to enter, and your product or service.
Essentially, you need to determine whether your business idea is viable – in other words, whether there is enough demand for your product or service to support a sustainable business. The first test for viability is macro-level research, although what qualifies as ‘macro’ will depend on the type of business you’re trying to launch; if it’s the next Amazon, you need to look at macro-economic trends and the state of spending around the world. If you want to launch a coffee shop, your focus will be the spending patterns in the neighbourhood where you plan to open your shop.
Knowing the wider economic landscape is critical, because you need to know whether there is sufficient appetite for your product before you even begin to get into the merits of your product versus those of your rivals.
Next, consider how your offering differentiates from your competitors. Unless you’re creating something completely new, there are a number of ways to create a competitive edge: price, quality, design, customer service and so forth. Do your innovations convince customers to make a lasting commitment to you versus a competitor?
And finally, you need direct, first-hand interaction with your target customers. This could be one-to-one interviews, focus groups, blind-testing, or any number of different tests. It’s critical to get direct feedback to ensure your target audience find your product desirable enough to buy.
Even if you’re the second type of entrepreneur, who’s identified a gap in your own industry, you still need to carry out research into your target market. Don’t get complacent with research, and make sure you have a confidant – someone whose honest and open feedback you can trust.
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Of course, an alternative method is to just get out there with a prototype of your product and try it out on your market. Despite initial market research there have been many iterations of Moonfruit’s business model, branding and product versions. We’ve gradually learnt that the best way to run the business is by being responsive to the changing needs of our customers. The internet has reduced the cost of entry of starting up your business and provided you with the ability to be agile, evolving your business iteratively to stay in tune with how your customers want to use your product or service.
Wendy Tan White is the founder of Moonfruit