A fantastic business idea suddenly appears in your head, and you’re instantly sure that the world would be drooling at it, as soon as it comes to life. Afterall, it’s a surefire solution to a real problem that a lot of people have, the perfect plug for that market gap that’s been mocking all attempts to fix it (if such attempts have been made at all). You might do a little asking around about any similar products (do they even exist?), just to pay dues to caution. But you’re so convinced about this inspired idea, you might as well brush through the whole inquiry thing.
Don’t be so certain.
It’s alright to be positive about your plans, but only if those plans are worth your time, sweat and brain racking. Many ‘wonderful’ business ideas have died upon release into the real wild world, where facts don’t care about feelings. The prospects for your idea might seem huge to you, but you can’t be absolutely sure that it’s what the people you’d be selling to would want.
So, take a step back, and ask yourself this simple question: Is there a market for my business?
The market research company, Statista published a chart, which shows the results of a survey of failed startups. The chart ranks the reasons given for startup failure in terms of the number of times they were cited as the cause of such failures. Of all the reasons for failure charted, “no market need” was the most frequently cited. About 42% of the failed startups surveyed were found to have met their demise for this reason- more than those that folded up for cash shortage problems (29%) and an unsuitable team (23%).
This isn’t hard to get one’s head around. If you’re introducing a product to the market that people don’t think they need, you’ll have a hard time selling it to them. Steve Jobs, (the late CEO of tech giant Apple) did say that “a lot of the times, people don’t know what they want until you show them.” However, this is rarely the case. You’re probably not going to convince people that they need your flying bicycle product or goat skin-flaying machine. The best bet would be to ask them first.
How to know if there’s a market for your business idea
How do you find out if there’s a large enough pool of potential customers for your product idea? Here are four ways to do so.
Conduct a survey
You could ask a few friends what they think of your business idea, but it’s certainly wise to go beyond that circle. Compose a questionnaire containing questions about consumer needs and expectations related to the product you’re thinking of introducing to the market. Send the questionnaire out to a large number of people, who belong to the sort of target demographic that’s likely to use the product, and have them respond to the questions.
These days, you can create and distribute surveys digitally using online survey tools. This means you don’t have to print loads of survey forms or compose a monotonous questionnaire on Word documents. These tools also automatically collate results from surveys, and make the overall outcome of the survey process much easier to determine. In the end, your survey should be able to help you decide whether or not your supposed target market will be enthusiastic about your new product (or business).
Examine the purchasing power of your potential customers
If you’ve determined what your typical customer would look like (their demographic groups), you should be able to tell whether they’ll have sufficient money to buy your product. If you find that your average potential customer doesn’t have the sort of purchasing power that’ll enable him or her patronize your business, you may have to modify certain things about the business idea (or abandon the idea altogether, if it comes to this). But if the evidence suggests that potential customers can muster enough to purchase your product on a regular basis, you could go with it.
Look at how potential competitors and other market players are performing
If your potential competitors have a stranglehold on the market, your business will have to offer something truly outstanding to have a chance of standing up to them. If the prevailing public opinion about them is one of dissatisfaction, it’s an opportunity for you to steal the march on them and snatch up a good segment of the market. And if the mood in the industry is positive and forward-looking, it could be a sign that there’s scope for growth there, and that new players in that industry may have opportunities to explore.
However, be extra cautious about a business idea that fits into an industry, which has troublingly few success stories coming out of it. Where it’s clear that currently, participating ventures are struggling with sales and finances, you should try to find out why this is the case. More often than not, the problem with such businesses is that they are fighting for portions of a market that are in the firm grip of larger competitors, or trying to bridge a supply gap that doesn’t exist.
Interview people who are (or have) tried something similar
You need to know about the experience of people, who have run (or are running) businesses similar to what you want to set up. They could have insights you’ll find useful, and their advice may prove crucial to the eventual success of your business (if you go on to set it up). They might know what your customers would want, and thus save you money on product improvements.
Never let your preconceived beliefs about what your customers would like to prevent you from asking honest questions about your business. Be willing to let people communicate their real needs, and be ready to meet them (for a price) if you have the means to do so. You’re not going to grow a business by trying to ram your own preferences down people’s throats. They can do without you, but your business will be nothing without them.