Importance of the Business Research Process
After observing the difficulty associated with securing adequate transportation for his grandfather to be taken to doctor appointments, shopping, etc., Benjamin decided he would start a transportation business serving seniors.
He secured the proper licensing, acquired 2 vans, the proper insurances, office space and other essentials required for the business. A few months after opening a colleague referred Benjamin to me for assistance with assessing his advertising and promotion activities. In spite of his marketing efforts the business was not getting many customers and as a result not making any money.
In my first meeting with Benjamin I asked him, “how are seniors getting their transportation needs met (who is the competition)?” His response was, “After opening I discovered the public transportation company provided free and low cost transportation services to seniors.” I the asked him, what kind of research had he done?
“I was told I needed research in my business plan. I was not sure how to do research, so I used the section from a business plan template in my plan.” – Benjamin
The mistake Benjamin made was he did not perform any research. This is a common mistake that many entrepreneurs make when starting their businesses. Having a business research method (i.e. fact finding), without exception is a necessary step in starting your business. It helps you to determine whether your idea is feasible and informs you of how to make your business work.
4 Tips for Your Business Research Process
1. Identify what do you need to know.
You have found the business you want to start, now you need to know more about that business. Start by asking and answering objectively, “what things I do not know about this business and what I need to know?” If you are not sure what you need to know, below are some suggestions:
- Who are my competitors and how are they solving the problem my product/service solves?
- How is my product/service different than the competition?
- Who has the problem that I am solving?
- What do they pay to resolve the problem?
2. Gather information from your own observation (primary research).
Some of your information should come from your own observation. In doing so, you should divide your research into two segments, customers and business owners. Conduct interviews/surveys with persons that are typical of the type customer you are targeting, asking questions such as:
- What product/service and why do they buy to solve the problem/meet the need that your product/service does?
- What would they like to be different?
One of the best sources of information about a business are business owners in that industry. They have the practical experience and knowledge of how the business works, what are the challenges, and they are aware of available resources and much more.
Conduct interviews/surveys with business owners in the industry. Speak with business owners of the same type business, vendors, etc. Ask questions such as:
- How much does it cost to start and operate the business?
- What are key financial issues?
3. Gather information from data published by reputable sources (secondary research)
Use reputable sources of information to obtain facts on your type of business. You should research information related to the industry and the market. Industry information you want to know include:
- Industry trends
- Industry participants
- Key industry financial averages
Market information you want to know includes:
- Who is the target audience in the market?
- What is the size of the market?
- Who are the competitors?
4. How to use the information
Conducting research when starting a business should not be an academic exercise that is viewed as a requirement to make your business plan complete. Industry and market research should:
- Guide your decision making.
- Inform you of what to do.
- Identify the opportunities that exist in the market.
- Help you strategize to beat the competition.
- Equip you with factual financial data that helps you make realistic financial projections and decisions.
Solid research is a key component to start your business the right way.
Research is a core component of 5 Step Business Start. Go here to learn more.