How to Conduct a Market Analysis for Your Business in 8 Steps
Do you have a good idea for how to make money, but not sure how many people will actually buy it? A market analysis is an essential step in launching your new business, and can help you find out if your idea has enough potential to really succeed. It’s easy to conduct one on your own with these eight steps
1) Know your business type
As you embark on your research, it’s essential that you determine what type of business you’re trying to start. You will have different needs based on whether you’re starting a small or large business. Large businesses will require more employees and funding, whereas small businesses may just need one or two people working part-time. How many employees do you need? Will your business be home-based or professional? These are all questions that should be addressed when conducting market analysis.
2) Find out the market size
It’s important that you know how big your market is, and where you fit into it. This is crucial information for any business but especially one that’s operating on a smaller scale. There are two questions you should ask yourself: 1) Who is my ideal customer? 2) What are their needs? From there, you can determine what size your market might be and how many customers there may be like them. You also want to think about whether or not there will be competitors in your space—and how you plan to set yourself apart from them. If you don’t have all of these answers now, don’t worry; they will come as you move forward with your idea. But knowing these things at least gives you a starting point for creating your marketing strategy. The easiest way to do all of this research is by doing some primary research through surveys, interviews, etc., or by using secondary research tools like Google Trends.
3) Figure out how you can add value
Now that you’ve thoroughly researched your audience, you should have a sense of what problem your business can solve. However, you may also notice that some businesses are already solving those problems or at least trying to solve them. Now is where you want to figure out how your company can differentiate itself from its competitors. If it can add value and be seen as valuable above its competitors, then it will be able to gain some traction in its market. Here are some questions to ask yourself: What makes my product unique? How do I make my product better than others? What makes me different? How can I stand out? How do I make my product accessible to my target customer? Who is my target customer and how do they behave? What are their needs/wants/desires/values/likes/dislikes? Why would they choose me over another competitor? How much money am I willing to spend on marketing and advertising? How much money am I willing to lose before reaching profitability? How quickly do I expect to reach profitability? How long do I expect my business to survive in the marketplace? What if things don’t go according to plan; how will I respond?
4) Know who your competitors are
A small business may only have one or two competitors, while larger businesses often have dozens. To conduct an accurate market analysis, you need to know who you’re competing against—which means you need to do some legwork and research. Depending on your industry, you may be able to find information about your competitors on websites like Hoovers or Bloomberg BNA. If not, don’t worry: You can still figure out who your competition is by looking at other companies that serve similar customers. For example, if you want to open a fitness studio in New York City, it might make sense to look at how many fitness studios are already operating there (and how much they charge) before deciding where to set up shop. Know what kind of products/services people are looking for: This step involves more research than anything else. When conducting a market analysis, you should look into how many people in your area would benefit from using your product or service—and why.
5) Get your information from public sources
One of your first stops should be the Small Business Administration’s website. The SBA offers great, and free, tools to help you conduct your business analysis. Their Business Planner helps you organize information like customer demographics, competition and market conditions. To get started, just go to sba.gov/businessplanner . Another helpful tool is their online resource directory which lists many state, federal and local resources available to small businesses. For example, if you want to know what programs are available for minority-owned businesses or women-owned businesses, it’s all there. Just visit sba.gov/resources .
6) Analyze Your Results
Once you’ve completed your research, analyze what you’ve found. In your analysis, consider: how large is your market? How much growth is occurring? Are there other businesses offering similar products or services? If so, what are they doing differently? Does it appear that there are gaps in your market that can be exploited? From here, think about some actionable ways you can take advantage of these findings! It may be helpful to create an SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis on yourself as well as others who are involved with your business. This will help you identify areas where you might have an edge over others who offer similar products or services.
7) Get Creative
Be sure you’re doing your research: Next, be sure you’re researching your market comprehensively. Talk to everyone—both small and large businesses—to find out how they conduct their market analysis. (For further reading, check out our previous post on market segmentation.) While there are no hard-and-fast rules here, being methodical is key. From what we’ve seen over time, it helps if you ask targeted questions and organize your findings accordingly before diving into data analysis.
8) The Takeaway
No matter how small or large your business is, it’s critical that you conduct market analyses regularly. These analyses help your business grow by allowing you to pinpoint any weaknesses and create strategies to make up for them. Start conducting market analyses today by following these simple steps listed above.