You know the feeling, the excitement when you just come up with the best business plan ever. Most the time you never act upon it, but what if you wanted to? Is there an easy way to check if your plan might be successful without putting down your life savings? Read these insightful tips to evaluate your plan before you put everything on the line!
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The facts are sobering: the majority of small businesses fail within five years of starting up. While there are many reasons that businesses fail, including some that have nothing to do with an owner’s skills, it’s also possible that many of those same businesses collapsed simply because they couldn’t get enough customers to buy their product or service. In other words, the owners founded their business on a strategy of “build it and they will come” where, unfortunately, the customers never came. In fact, a recent study undertaken by the Blackbox seed accelerator found that many tech start-ups failed because they focused more on their product than on their potential customers.
The good news is that there are a variety of ways you, as an entrepreneur, can conduct some market research to assess the potential demand for your product or service without spending a lot of money or hiring an expensive market research team.
Ask the Right Questions
- Is this product or service I have in mind going to satisfy a market need?
- Who are my potential customers, and where can they be found?
- What competition is out there? Is it direct or indirect, local, national, or international?
- How distinct is my product from what is being offered by the competition?
- Can the product stand the test of changing trends or take advantage of it before it dies out?
- Does the law of the land allow for such a business to be established?
- At what prices are consumers prepared to buy my product, and can I make any profit at any stage?
Google It
While it may seem obvious, using Google and other search engines can be an effective way to gauge the potential market for your idea and whether or not you’ll be facing competition. “Believe it or not, you can do a simple keyword search using either Google keywords or any reputable marketing software such as Market Samurai or Magic Bullet to see if your idea already has a demand,” says Jesue Walker, a serial entrepreneur and president of The Ultimate Emergence Company. Once you have the keyword results in front of you, click on them and pay attention to the right column of the search, which lists the paid advertising. “Click on each of these and see what they are offering,” says Walker. “This is your competition, if any at all. Going back to the search page or keyword results and [seeing] how many times a day and week this keyword is searched for…is the beginning of finding out if you can gain at least one percent to two percent of this market.”
Collect Feedback
Getting direct feedback via surveys or interviews can be another very effective way to gauge interest in your product or service. The easiest way to test a new business idea is by crowdsourcing your idea first,” says Ian Aronovich, CEO and president of GovernmentAuctions.org, a site that compiles and provides information about government auctions of seized and surplus merchandise from all over the country. “Get the perspective of a large group that you already know is capable of giving you truthful and helpful advice. Crowdsourcing is quick, easy, and you will get an array of positive and negative criticism.”
To do this, you may want to draw on an increasing number of online tools that will allow you to tap into the wisdom of the virtual crowd for modest prices. Examples include: uSamp, UserTesting.com, UsabilityHub.com, CrazyEgg.com, GutCheckit.com, and Ask Your Target Market.
Sell Something, Anything
While spending time in front of your computer conducting research and gathering information can be helpful in ascertaining the potential of your product or service, the truth is that the most valuable feedback you can get is whether someone, regardless of what they tell you, will actually hand over money for it. “It is amazing how many people will spend years and hundreds of thousands of dollars on concepts that people ‘really like’ without ever asking them if they would buy it,” says Matt Ferguson, president and CEO of Progressive Health Innovations. “Even better, also ask the people selling in the space if they could sell it for a certain price.”
The best way to get this kind of feedback, then, is to actually create a prototype of your product or service, even in its most basic form that you can shop around to retailers, distribution partners, or even attendees at an industry trade show.
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