- Category: Market research
Studying the market
Look, we get it. You’re about to start your business, you’ve got a ton of things to do, and you’re eager to move things along. Why should you spend some of your precious time to do a market study when you already know the market like the back of your hand? Well, unfortunately, a market study is one of those things you just can’t escape: you’re going to have to do it sooner or later. As such, you should do yourself a favor and do it right now, before your business has started going; it’ll save you a lot of headaches.
If you’re not convinced: here are the basics of the market study so that you can get your business started on the right foot.
- What is a market?
- The market study: its usefulness
- Our advice
1- What is a market?
The market is the environment in which the company will evolve, and where the supply of a product meets the demand for a product. In simpler terms, it basically consists of the potential customers and the competition.
A market can be national, regional, seasonal, concentrated, diffuse, captive, closed, traveling…
Each characteristic of the market entails specific constraints and keys to success that need to be identified.
2- The market study: its usefulness
The main objective of the market study is to reduce the risk of failure, by allowing you to make the right decisions when you enter the market and, in the longer term, to allow you to better identify the forces involved.
In the shorter term however, the market study has other, equally important objectives, such as:
- checking the business opportunity before getting started,
- evaluating its projected revenue,
- Making the right choices to get the project done,
- Allowing for better credibility when meeting with partners.
Checking the business opportunity before getting started:
At the end of your market research, you should be able to answer the following questions:
- Are the needs that I identified covered by the competition?
- Will the added value of my product or service allow me to take some market share?
- Is the market large enough for a new entrant (a new business) to be able to prosper?
- Does the evolution of the market allow me to consider my project in the long term?
To make a market study you need to gather as much information as possible in order to identify market opportunities, and to decide whether or not to keep going in your project.
Indeed, the main mission of the future entrepreneur is to be able to see the bigger picture, as not doing so can compromise your project.
Then, you should try to identify the obstacles and the factors of success of the market.
In particular, you should identify the criteria that are absolutely necessary to follow or know in order to durably enter the market.
Examples of factors of success: needing to set up in the city center, to have a large network, to have a strong sales force.
Example of obstacles: having to pay an entrance ticket to work with large retailers.
In some cases, some keys to success can look like obstacles. This is the case, for example, when it is necessary for a trader to have a large sales area, which generates very heavy operating expenses. In these circumstances, entering the market may be beyond your financial abilities.
Evaluate your projected revenue and validate the project financially
Too few project promoters know that the market study makes it possible to estimate their projected revenue.
By being able to qualify and quantify your market, you will have all the information you need to make estimates.
Several techniques to calculate projected revenue already exist. It is recommended to use at least two to make an average.
The calculation of projected revenue, in turn, validates the financial feasibility: will the project generate enough money to allow me to live and develop my business?
Make the right choices to bring the project to a successful conclusion
Once the market survey is has been completed and the project has been validated commercially and financially, you will know your environment, the strengths and weaknesses of your competitors and the needs of the demand.
You will also know which sectors in your market are promising, and will ensure the best development in the medium term.
Make your approach trustworthy when you meet with business partners
Finally, the market study aims to make your approach more credible in finding partners, whether financial or commercial.
Indeed, not only will a structured study justify the choice of the commercial orientations taken, but it will also explain the investments to be made. It will also emphasize how trustworthy and accurate the financial projections are when engaging with the banker. After all, you should remember the banker is above all a potential partner, and that he is also taking a risk.
3- Our advice
As we have explained already, the market study needs to be done at the beginning of a project, as it allows you to put the odds on your side and to be more rational in your decision-making.
However, it’s also worth continuing this market research once your company has been created, because it’s incredibly important to keep track of the new entrants, to follow the trends, to keep your competitive advantage, and to know if your commercial strategy needs to be changed.
As such, everyone is concerned by the market study. Even if you already have good knowledge of your market, materializing your assets can only reassure you and your partners.
While some might deem it a waste of time, others see the market study as an essential investment for the success of their project, and the latter are usually the ones who prove to be right.
Do you want to make a market study, but you’re not sure how to get it done? Here is everything you need to know about making a market study!