How To Research Your Business Idea

1/23/2017 HowtoResearchYourBusinessIdeaEntrepreneur.
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READY TO LAUNCH
How to Research Your Business Idea

Your brilliant idea may indeed be brilliant--or it may need some
work. Here's how to nd out whether you're ready for startup.
KAREN E. SPAEDER
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Somewhere between scribbling your idea on a cocktail napkin and actually

starting a business, there's a process you need to carry out that essentially
determines either your success or failure in business. Oftentimes, would-be
entrepreneurs get so excited about their "epiphanies"-the moments when they
imagine the possibilities of a given idea-that they forget to nd out whether that
idea is viable.
Of course, sometimes the idea works anyway, in spite of a lack of market research.
Unfortunately, other times, the idea crashes and burns, halting a business in its
tracks. We'd like to help you avoid the latter. This how to on researching your
business idea is just what you need to keep your business goals on track.
The Idea Stage

For some entrepreneurs, getting the idea-and imagining the possibilities-is the
easy part. It's the market research that doesn't come so naturally. "It's a big red
ag when someone outlines the size of the market-multibillion dollars-but
doesn't clearly articulate a plan for how the idea will meet an unmet need in the
marketplace," says Aaron Keller, an adjunct professor of marketing at the
University of St. Thomas in neighboring St. Paul and a managing principal of
Capsule , a Minneapolis-based brand development rm.
https://www.entrepreneur.com/article/70518 1/15
1/23/2017 HowtoResearchYourBusinessIdeaEntrepreneur.com
That kind of full-throttle approach can cost you. "Entrepreneurs are often so
passionate about their ideas, they can lose objectivity," adds Nancy A. Shenker,
president of the ONswitch LLC , a full-service marketing rm in Westchester, New
York. "Rather than taking the time to thoroughly plan and research, they
sometimes plow ahead with execution, only to spend valuable dollars on
unfocused or untargeted activities."
Market research, then, can prove invaluable in determining your idea's potential.
You can gather information from industry associations, Web searches, periodicals,
federal and state agencies, and so forth. A trip to the library or a few hours online
can set you on your way to really understanding your market. Your aim is to gain a
general sense of the type of customer your product or service will serve-or at least
to being willing to nd out through the research process. "For example," says
Shenker, "if you don't know if your product will appeal to the youth market, make
sure you include a sample of that population in your research e orts."
Your research plan should spell out the objectives of the research and give you the
information you need to either go ahead with your idea, ne-tune it or take it
back to the drawing board. Create a list of questions you need to answer in your
research, and create a plan for answering them. "Utilize experts in planning and
conducting research sessions," Shenker advises. "They can recommend what type
of research is most appropriate, help you develop statistically valid samples and
write questionnaires, and provide you with an objective and neutral source of
information."
The type of information you'll be gathering depends on the type of product or

service you want to sell as well as your overall research goals. You can use your
research to determine a potential market, to size up the competition, or to test the
usefulness and positioning of your product or service. "If, for example, the
product is a tangible item, letting the target audience see and touch a prototype
could be extremely valuable," notes Shenker. "For intangible products, exposing
prospective customers to descriptive copy or a draft Web site could aid in
developing clear communications."
Analysis
Analysis
When working with rms on brand development, Keller rst looks at a business
idea from four perspectives: company, customer, competitor and collaborator.
This approach allows Keller to scrutinize a business idea before even approaching
the topic of brand development. Here's what he looks at for each of the four
issues:
1. Company. Think of your idea in terms of its product/service features, the

benets to customers, the personality of your company, what key messages you'll
be relaying and the core promises you'll be making to customers.
2. Customer. There are three di erent customers you'll need to think about in
relation to your idea: purchasers (those who make the decision or write the
check), inuencers (the individual, organization or group of people who inuence
the purchasing decision), and the end users (the person or group of people who
will directly interact with your product or service).
3. Competitor. Again, there are three di erent groups you'll need to keep in mind:
primary, secondary and tertiary. Their placement within each level is based on
how often your business would compete with them and how you would tailor your
messages when competing with each of these groups.
4. Collaborators. Think of organizations and people who may have an interest in

your success but aren't directly paid or rewarded for any success your business
might realize, such as associations, the media and other organizations that sell to
your customers.
Another approach is to research is SWOT analysis, meaning analysis of the

strengths of your industry, your product or service; the weaknesses of your
product (such as design aws) or service (such as high prices); and potential
threats (such as the economy). "[SWOT] enables you to understand the strengths
and aws, [everything] from internal information such as bureaucracy, product
development and cost to external factors such as foreign exchange rates, politics,
culture, etc.," says Drew Stevens, a St. Louis professional speaker and consultant
who works with entrepreneurs in researching and marketing their ideas. "SWOT
enables an entrepreneur to quickly understand whether their product or service

will make it in the current environment."
Whatever your approach to evaluating your idea, just be sure you're meeting the
research objectives you've outlined for your product or service. With those goals
always top-of-mind, your analysis will help you discover whether your idea has
any holes that need patching.
Checking Out the Competition

Assuming your research process has helped you uncover your competition, you
now need to nd out what they're up to. Shenker advises becoming a customer of
the competition, whether by shopping them yourself or by enlisting the help of a
friend. "Visit their Web site and put yourself on their list," she says. "Talk to your
competitor's customers, too-ask them what they like or don't like about your
competitor's product or service. If you conduct formal research, include a question
like 'Where do you currently go for that product or service? Why?'"
Your aim is to understand what your competition is doing so you can do it better.
Maybe their service is poor. Maybe their product has some aws-something you'll
only know if you try it out yourself. Or maybe you've gured out a way to do
things better, smarter, more cost-e ectively. Find your selling point. It's going to
be the core of your marketing program, if and when you're ready for that step. It's
also going to be what sets you apart and lures customers your way.
When Your Idea Looks Like a Flop

After all this-the idea stage, analysis of the idea, Get Started
Entrepreneur Assist o ers a
competitive analysis-you might nd that your idea (and collection of free business planning
and productivity tools, letting you
not your competitor's, as you'd hoped) is the one with access free business books,
bookmark your favorite articles,
the holes. Does that mean you need to scrap the whole schedule events and reminders and
share documents to assist you in
thing and resign yourself to life as an employee? "Not your idea evaluation and market
research process.
always," says Keller. "Sometimes it just needs to be
How to Create a Marketing Plan ,
reworked or retooled."
will help you strategize your
marketing e orts.
That can be disheartening if you've already spent X The U.S. Census Bureau has the
stats and demographics you need to
know.
amount of hours in the idea stage, plus X amount of
FirstGov.gov is a well-designed,
hours on market research-only to nd that you're not
easy-to-navigate portal to the
quite ready to get started after all. But taking the time government online. Click on the tab
that says "Businesses and
to refocus your energies and determine why your idea Nonprots."
needs some tightening is the best predictor of future Your local Chamber of Commerce
can be an indispensable resource for
success. "No entrepreneur wants to hear that his 'baby' local information for your new
business.
is awed, but only by listening and reacting to feedback
The Encyclopedia of Associations by
can he give his idea a chance for success," notes Gale Group can be found in libraries,
and is an essential tool for locating
Shenker. "Ask yourself, 'Is this a weakness that can be your industry's associations. Also
search on Google, and be sure to
overcome?' If you can't create true value for your
check whether the association has a
trade publication.
customer and your business, then it's time to pick
another idea to pursue." At TSNN.com , you can access a
searchable database of trade shows
worldwide.
Remember, though, that many ideas simply need some Entrepreneur's Top Colleges
listing can help you nd a local
ne-tuning. Before you panic and start ipping through school that o ers entrepreneurship
studies.
your idea books again, closely consider whether you can
Two of the greatest resources
make this idea work. After all, there was a reason you known to entrepreneurs are the
Small Business Development
thought of that idea in the rst place. Some ideas that Centers (SBDCs) and SCORE
(Service Corp of Retired Executives)
seem like they'll be total duds after doing a little
. Each SBA service o ers free and
research end up being great successes. "Ideas that seem low-cost help to small-business
owners and entrepreneurial wanna-
like a op are always interesting to me," says Keller. bes, and should have a local oce
near you.
"Sometimes you look into an idea and nd it was just
luck-but many times, you nd the original founder had some clear insight into
the potential. That insight was his or her focus, and it seemed to lead them to
success.
"I've seen many people launch ideas that I thought were beyond foolish," Keller
adds, "but then I learned more about the idea, the customer and the vision-and
realized the true risk being taken."
When Your Idea Is Ready to Go

The market research you've conducted thus far ought to be a good indicator of
where you need to go next with your idea. One key factor to consider is pricing.
You want to do it competitively while also considering what the market will bear.
For products or services that have a close competitor, Keller advises pricing with
respect to the competitive position. "Higher-priced positioning requires an idea
with enough relevance and importance to customers to overcome the gap between
your idea and the nearest competitor," Keller says.
The beauty of being in business for yourself is that you have the option to make
changes at will-so if a pricing structure isn't working, you can alter it. "Price high
to start-you can always drop the price down," says Keller. "You can never go up."
Shenker adds that you need to be sure your product or service is delivering enough
value to command the price you set. If possible, test di erent pricing o ers as you
go, and determine what works best.
When you're ready to get started, be sure you're selling where your target market
is likely to buy. "Your marketing plan and budget should include a well-crafted
distribution strategy," notes Shenker. If you'll sell over the Internet, budget for
media to drive new customers to your site. If you'll sell via retail distribution, you
might need workers with industry experience to help you reach your target
market.
Remember, too, that you can always seek help in this long, arduous process of
bringing an idea to fruition. The Internet, your local library, the U.S. Census
Bureau, business schools, industry associations, trade and consumer publications,
industry trade shows and conferences, and new-product development rms can
be invaluable sources of information and contacts. "It's just a matter of seeking
knowledge from as many sources as possible," notes Keller. It's also a matter of
putting your ego aside and being willing to create a business that will not only
survive, but thrive. "If you have an idea, don't be afraid to rene it, retool it,
rethink it," adds Keller. "The more you do before you launch, the less you'll have
to do [afterwards], and the less painful the lessons tend to be."
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KAREN E. SPAEDER
Karen E. Spaeder is a freelance business writer in Southern California. Read
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1/23/2017 HowtoResearchYourBusinessIdeaEntrepreneur.

Somewhere between scribbling your idea on a cocktail napkin and actually

The Idea Stage

The type of information you'll be gathering depends on the type of product or

1. Company. Think of your idea in terms of its product/service features, the

4. Collaborators. Think of organizations and people who may have an interest in

Another approach is to research is SWOT analysis, meaning analysis of the

enables an entrepreneur to quickly understand whether their product or service

Checking Out the Competition

When Your Idea Looks Like a Flop

When Your Idea Is Ready to Go

LATEST FEATURED CONTRIBUTORS

I Used Social Media and Blogging to TalentSmart

Become Famous for Nothing

The Growth of Arti cial Intelligence COHEN

ROSE LEADEM Next

Find the Right Franchise forNot

Make More Happen

Not Having a Phenomenal

12 Things to Stop Doing

Find the Right Franchise for You

11 Ways to 3 Short Books to

BUSINESS PLANS LOW-COST BUSINESS

Find Your Franchise

VC 100 VENTURE CAPITAL

How 3 3 Shifts That

How McDonald's Origins Became JASON FEIFER adjusting their

Find Your Franchise

Find the Right Franchise for You

Find Your Franchise

Find the Right Franchise for You

Find Your Franchise

Find the Right Franchise for You

Find Your Franchise

Find the Right Franchise for You

Find Your Franchise

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