One of the fundamental requirements for starting a business is a business plan. Most if not all funding sources, banks, venture capital firms and/or angel investors require a detailed plan. An explanation of the need for a sound business plan is outlined in another article, Business Plans, on the Greater Knoxville SCORE website. Another article, Planning, outlines what the business plan should include.
However, BEFORE YOU START A BUSINESS and prior to developing a business plan an entrepreneur needs to answer the question: Is the idea or start up business viable? What are your chances of survival? That is, can the idea or business make a profit? Most of us, when we develop an idea or business proposal, have a very biased opinion. That is very normal and quite natural. However, the viability of a new business depends primarily upon customer acceptance. Evaluation of a product or service can be accomplished with some type of market research.
Market research is the foundation of success of most businesses and most certainly for new business startups. The business plan essentials should consist but not limited to these five core elements:
- Company Description
- Market Analysis
- Price Analysis
- Marketing Plan
- Funding & Financials
Notice that three of the five basic elements (# 2, #3 and #4) can only be answered with a real basic evaluation of the products or services. What is Market Research used for this evaluation? Market research and marketing research are often confused. ‘Market’ research is simply research into a specific market. It is a very narrow concept. ‘Marketing’ research is much broader.
Regardless of which term you choose; the purpose is to make an intelligent evaluation. Marketing research is not a perfect science. It deals with people, prospective customers, who have independent and changing consumer habits and behavior. Market research is necessary to determine three important issues for startups or existing businesses:
- What is your market
- Who is your customer
- Who is your competition
Here is a typical example of some detailed questions you need to answer about a product or service before your company is organized. The only important answers must be from the customer viewpoint.
- Who will be your customers, how many are there and where are they located?
- Which customer needs are important? Are the needs of prospective customers being met by current products?
- Who will be your competitors and what are their strengths and weaknesses?
- How would my new business compare with my competitors?
- What is happening in the market? What are the trends?
- How will you advertise and/or promote your business?
- Will you make or buy your product?
- How will you deliver your product or service?
- Are your prices consistent with what buyer’s view as the product’s value?
- Can you price your product/service to make an adequate profit?
Market research on a limited budget can utilize local sources and techniques
Local Chambers of Commerce
University and college business marketing class projects.
Local public library Business Reference (865-215-7853) at the Lawson McGhee Library in Knoxville.
Local trade and professional organizations can be searched by city & state location using the directory of the Center for Association Leadership
Surveys by mail post cards or Internet surveys via limited free email SurveyMonkey
Good market research is the foundation of a good business plan as well as a continuing requirement for an existing business. For more information, the Small Business Administration (SBA), has a detailed article on Market Research found on their web site.
REFERENCES AND LINKS
* http://www.marketresearchworld.net Market Research Gateway
* http://library.dialog.com/bluesheets/html/bl0114.html Trade Associations
* http://www.referenceusa.com/ Powerful & expansive database. Available at the Knoxville public library on-line for library members.
* http://www.forrester.com Expensive but has some free white papers & newsletters
Source: Walter Williams, SCORE Counselor, Revised May 2019
The material in this publication is based on work supported by the U.S. Small Business Administration under cooperative agreement SBAHG-04-S-0001. Any opinions, findings and conclusions or recommendations expressed in this publication are those of the author and do not necessarily reflect the views of the U.S. Small Business Administration. The information contained in this publication is believed to be accurate and authoritative but is not intended to be relied on as legal, accounting, tax or other professional advice. You should consult with a qualified professional advisor to discuss issues unique to your business.
Copyright 1990. SBA retains an irrevocable, worldwide, nonexclusive, royalty-free, unlimited license to use this copyrighted material.