Chapter 10: Know Your Market

What's the first thing, the most essential element, you need in business? No, not a plan: you need customers.

Market Research

In Fundamentals: Initial Assessment, you took a good first look at whether or not your business has (or will have) enough customers to keep it healthy. For the next step, you need to go further into a market analysis. It doesn't have to be academic, necessarily, and it doesn't have to be a huge project that stalls your planning process. What you want, ultimately, is to know your customers.

Some of the best market research is simple, practical, and even obvious. You don't get it from reference sections in libraries, or even from the Internet. You get it from real people, particularly customers or potential customers. Here are some practical examples.

Simple and Practical Market Research

Look at existing, similar businesses. This is a very good first step. If you are planning a retail shoe store, for example, spend some time looking at existing retail shoe stores. Park across the street and count the customers that go into the store. Note how long they stay inside, and how many come out with boxes that look like purchased shoes. You can probably even count how many pairs of shoes each customer buys. Browse the store and look at prices. Look at several stores, including the discount shoe stores and department store shoe departments.

Find a similar business in another place. If you are planning a local business, find a similar business far enough away that you won't compete. For the shoe store example, you would identify shoe stores in similar towns in other states. Call the owner, explain your purpose truthfully, and ask about the business.

Scan local newspapers for people selling a similar business. Contact the broker and ask for as much information as possible. If you are thinking of creating a shoe store and you find one for sale, you should consider yourself a prospective buyer. Maybe buying the existing store is the best thing. Even if you don't buy, the information you gain will be very valuable. Why is the owner selling? Is there something wrong with the business? You can probably get detailed financial information.

Always shop the competition. If you're in the restaurant business, patronize your competition once a month, rotating through different restaurants. If you own a shoe store, shop your competition once a month, and visit different stores.

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