Taking informed business decisions requires in-depth market research.
During the planning and growth stages of your startup, you will find the information gathered from market research beneficial to understand the potential of your products or services.
Conducting market research on a regular basis helps businesses to keep up with technological breakthroughs and adjusted regulations.
Also understanding the customers’ changing tastes and competitors’ growth helps successful businesses to adjust or offer new products or services.
Market research is a critical key for the business plan of a new startup, as it helps you with:
- Determining the potential of your offered products or services
- Attracting customers to your business
- Selling to your customers and earning return customers
What is Market research
It’s the process where you would represent some final results of analyzed data from conducted research on the market for certain purposes or for answering a set of problems facing what you’re offering and provides the needed data for the decision makers.
To conduct market research, you will need to set your research goals first, and then select the techniques and method to be used during the research.
The 2 Types of data to be collected are quantitative and qualitative data, according to the collected data nature.
A combination of both is best, as quantitative data is more specific as it answers statistical questions that can be asked.
While qualitative data is more appropriate for exploratory stage and getting general awareness of the total market as it answers more personal questions about how and why a person would react to what you’re offering.
There are 2 places to collect data, primary data, and secondary data:
Primary data:
The data collected by your own business or through a market research firm on your behalf, so it’s your own data exclusively.
Data can be collected from questions asked through in person, phone, online surveys, and focused groups among other techniques.
It’s very specific, satisfies your specific situation, and a great competitive advantage as it’s only yours, but it’s expensive and takes a longer time to collect.
One of the core benefits of primary data is also the ability to target a specific group to study.
While you prepare your questionnaire keep in mind the following points:
- Moving from general to more specific questions.
- Ask questions that are easy to understand and straight to the point.
- Keep it short and simple
- Avoid using ambiguous words and hard to answer questions.
You can also reward the customers with coupons or prizes to be turned in upon completing the questionnaire as an incentive.
Your own business employees are also a great source of information as they are in direct contact with the customers.
Secondary data:
It’s data and facts that already exist, which can be collected internally from customers comments, revenue, and costs.
Or externally from newspaper magazines, trade groups reports and publications, government reports or any organizational conducted researches that already exist.
It represents the data so fast and so cheap, but you will lose your competitive advantage as it’s public, it can be outdated and it won’t always fit your specific situation.
Secondary data is way less targeted than the primary market research data.
It can answer more broad questions like:
- If the current economic conditions change and what’s its current status, that can be international, national, or local.
- Understanding the trends affect your industry, like customers preferences, shifts of technology, prices change of goods or services.
- The potential international growth of your business
- Demographic characteristics of your customers, like the age groups, income levels and population.
- Understanding the needed labor, the available skilled job seekers and what are the expected salaries.
Risk management and contingency planning:
A business may face multiple types of risks, starting from loss or damage it might take, a threat of not achieving the business objectives, or not reaching the results as planned.
More than half of startups fail within the first 5 years, but you shouldn’t let that fact paralyze you.
There are a lot of successful entrepreneurs out there, they are naturally risk takers, but most importantly, risk management plan is the most valuable competitive advantage of yours.
There are also multiple ways a business can treat risks:
- Ignoring it, just wait and see what happens next
- Reducing the probability of the risk to occur
- Deflecting the risk, through the use of insurance for example
- Preparing for the risk by a contingency plan
- Treating the risk as an opportunity, especially if it also affects the competitors too
A business may treat risks through multiple approaches and on a day-to-day basis.
A countless number of risks may face businesses, altogether might seem invincible, however, categorizing them and tackling each one alone is the way to manage your risks.
Market risks approach
Changing in demands for your offering at the price you set can become insufficient, leaving your business at risk.
Businesses spend billions on market research each year.
Getting feedback from customers, surveys of potential customers, focus groups and beta testing of your products or services are good techniques to measure the acceptance of your target market to your offering.
But eventually you will never know for sure, you can’t just offer a product or service that’s a perfect fit for each customer, but you aim to create what leaves a customer with an Impression of reasonably happy.
You can also mitigate market risks by reducing and limiting the over-reliance on certain products or customers, testing new products, and developing multiple distribution channels.
Financial risks approach
Getting your business up and running won’t protect it from the financial risks, and running out of cash is the end of the road for any business.
Not having a plan B for the financials of your business operation is the worst way to manage risks.
You can’t just put all your hopes on securing external funds, especially with capital-intensive businesses.
You need to have two different plans, first one in case of securing external funds from investors or loans to rub your startup, and another one for bootstrapping in case you couldn’t secure those external funds.
Securing funds and business loans while been a rookie entrepreneur may be a very small chance.
You might consider bootstrapping while minimizing your expenses in that case instead.
Raising funds is not the only challenge, the real one comes along after that while trying to make enough income to cover your costs.
You might also be able to secure funds at the time you don’t need, and just won’t be able to secure enough when you’re really indeed, so keep enough money in reserve for the critical needs management and rainy days.
You can also manage your financial risks through the use of insurance and assessment of your investment.
Operation risks approach
You won’t be just selling the product; you will also be responsible for making and delivering it.
Having a team of well-experienced people becomes handy to deliver the product to the customers according to their expectations as your brand promised.
Technological risks come into the picture as well, keeping your customers’ credit cards records safe in your database, contamination of damaged key elements of your data center, or even finalizing product design with a limited R&D available budget.
Maintain quality by quality assurance and control, and keeping a spare capacity.
Having a co-founder who has been there and made it before plays a crucial role in mitigate those risks too, and makes sure everything should go according to plan.
People risks approach
Humans are the most crucial part of your business; your employees can be the core reason why your business skyrockets or hits rock bottom.
As an entrepreneur, you’re responsible for creating your brand culture for others to follow.
They have to tolerate being together every day for eight hours, you need to manage ego and rogue members among personal conflicts too.
You can never let your personal relationships get into your way of hiring, if your roommate is the best fit for the job then that’s the only reason to be hired.
If your friend is really good for the job, but another applicant got more experience for your type of targeted customers then the best candidate with the right experience wins.
Avoid full reliance on one key member of your staff for a whole product or service or even a part of it, any process in your brand should never depend on one person to be done.
Make the delivery of your product or service with your brand standards so that the client expects an absolute process oriented, not a coupled dependency on a sole employee in specific.
Improving hiring, selection process, and protection against losing the key staff is how you mitigate people risks.
You can’t just think of each possible scenario you might face, just thinking of all of them will just consume your energy for no reason, however, planning for the obvious ones can be beneficial.
That includes the competitive risks of your competitors copying your business model and outperforming you, or the legal regulations as well.
Contingency planning is about planning and identifying potential problems that may arise, even the unexpected ones as a part of risk management.
It involves planning for the unwanted events to minimize its impact and quickly recover from crises for the business to get back to its normal operation again as soon as possible.
