getting started in business |

biznetwork webinar

Researching New Business Ideas

An entrepreneurs key question about his new start-up is: will it work? The answer to this lies in thorough
market research. By Greg Fisher

omewhere between scribbling your idea on a serviette

and actually starting a business, there is a process that
an entrepreneur needs to carry out to try and determine
whether the business is viable and how it should be set up.
Often, would-be entrepreneurs get so excited and energised
by their initial epiphany that they forge ahead without taking time
to find out whether the idea can actually work. Of course, sometimes the idea works anyway, in spite of lack of market research.
However, more often that not, those who proceed without researching their idea tend to be halted in their tracks by telling
market forces. Market research is a key tool to manage the risk
associated with launching a new business venture.
The market will always give the final evaluation of the quality
and execution of a new business idea. There are, however, specific things that an entrepreneur can do to assess whether the
market is likely to embrace or reject the idea.
Entrepreneurs should use market research to gain insight on
issues like the market size, market growth and customers needs
for a product or service, and to answer the fundamental questions on the viability of their proposed business model. The reality
is that an entrepreneur is invariably limited by time and money
constraints and can therefore not afford to engage a consulting
firm to do a full analysis of the market.
How should an entrepreneur engage in a research process to
maximise their return on time and effort? The starting point for
engaging in a process to research a new business idea is to work
out what it is you need to find out, so establish your research
objectives. Many entrepreneurs are guilty of diving into a research
effort without establishing what it is they need to know; as a result, they feel overwhelmed, frustrated and directionless.

Stipulating what you need to know gives you an excellent

launch pad for gathering data and insights. So what should an
entrepreneur aim to find out when researching a new business
idea? Meaningful market research should focus on the four Cs:

Customers. It is important to ascertain the size of

the market that is, approximately how many potential

customers there are and how fast the customer base
is growing. It is also advantageous to try and ascertain what
causes customers to buy in other words, find out what the key
influencers are on the buying decision.

2
3

Competitors. It is useful to research who the potential

competitors are, what their offering consists of, where they
are situated and their strengths and weaknesses.

Collaborators. Entrepreneurs invariably rely on other

people and organisations to make their business model

work. They need to form alliances with suppliers, funders,
distributors and professional advisors. It is important to carefully
research these relationships so as to make wise choices.

Company model. Researching the company model

involves doing the necessary calculations to understand

where revenue will come from, what costs will be incurred
in generating revenue, what investment is required to keep the
company cash positive, and identifying what the critical factors
for success will be.

Sources of Research Information

Customers
1. R
 efer to trade journals, market reports and
industry associations
2. Interview experts in the industry
3. Interview, observe or survey prospects
Competitors
1. Become a customer of the competition
2. V
 isit competitor websites and stores and read
their promotional material
3. Interview your competitors customers
Collaborators
1. V
 isit suppliers, talk to them and talk to their
customers
2. D
 iscuss funding options with other SMBs
3. M
 ake an appointment with the bank manager
4. O
 btain and read the National Venture Capital
Associations handbook to identify all venture
capitalists who offer funding for your type of
business
5. S
 earch the Web for entrepreneurial financing
options
6. A
 ttend networking events to find partners
Company model
1. C
 onsider different revenue models, including
subscriptions, unit- or time-based models,
advertising models, licensing, franchising or
transaction fees
2. E
 valuate the costs and the cost drivers.
Distinguish between fixed, variable and semivariable costs
3. D
 o cash flow projections to calculate the
necessary capital funding
4. S
 peak to industry experts and entrepreneurs
to identify the critical success factors

Entrepreneur Magazine SA. All rights reserved.

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getting started in business |

biznetwork webinar

Ensuring Your Start-up Survives

Follow these seven simple rules for ensuring your start-up will be around for the long haul.
By Brad Sugars

H
1

ere are seven guidelines to help you make sure the business youre starting or buying has a fighting chance to
survive for both the short and long term:

Find something youll enjoy. Youre going to be

working a lot of hours each week, most weeks of the year,

without much time off at the start. Its important that you
enjoy both what your company does and what running the company entails.

Dont start if you cant ensure a solid profit

margin. So often people try to get by on the slimmest

of margins and wonder why they dont enjoy owning their

business for very long. Make sure your business will have a solid
profit margin, which is vital to long-term success.

Consider buying an existing business or a franchise. Youll already have enough to learn about running

your own business without having to invent everything

yourself. Your first business will always be the toughest because
you have so much to learn. An existing business or franchise provides a shortcut through that process.

or service in 10 years time.

Demand Repeat Business. Whatever you sell, you

need to make sure that once you get customers and serve
them well, theyll come back. Products and services like
haircuts, vitamins, bread and accounting advice are things people need again and again. Repeat business is where the profit is
in just about every venture. Make sure you have it.

Get Good Advice. A good accountant, attorney, busi-

ness coach or person in any other specific area where you

lack skills or expertise is worth your time and money. Work
with the best and learn from these mentors. Dont just get them
to do a job for you: learn why they do what they do so you gain
knowledge in their field.

Be prepared to work really hard. Too many new

business owners think that all they need to do is hang out

the shingle to get business to come their way. Not true!
You have to work at it. Strong sales, effective marketing and nonstop networking are vital to building a solid cash flow and profit.
At times, youll probably feel like its too hard and youll want to
give up, but if you stick with it, things will get easier.

Buy into a growing industry. Go to your industry

associations website, and make sure your potential competitors arent all going out of business. Then check into
the growth rate of the city that will provide your customer base.
Remember, youre building your business for the long-term, so
think about how your company will evolve over time. You want to
have a good sense that therell still be a demand for your product

Trying to ensure start-up success is far from an exact science.

The most important advice is to keep learning. New knowledge
is vital to the success of any new venture you might choose to
take on.

Take Stock of Your Strengths

Thinking of starting a business, but not sure
which path to follow. Take a few minutes to do a
personal inventory of your goals and resources.
Think about what it is that really lights your fire.
Passion is a driving force in our lives, and thats
never as true as in business ownership. If you
have a passion for your work, itll carry you far.
If you need help assembling this personal
evaluation information, sit down with a trusted
friend, an advisor, your spouse or someone you
know with business experience, and outline your
resources, strengths and weaknesses, as well
as your financial resources. Talk through the
concept and listen carefully. You need a reality
check here. Dont necessarily accept what you
hear, but take it into account.
What type of business activities play to your
strengths? Can your advisor see you pursuing
a certain type of business? Would you be better
suited for a business-to-business sales situation
or a retail setup? Are you good with people, a
good public speaker? Are you detail-oriented?
Can you afford to run a business? Can you afford
to fail? Whats your level of risk tolerance? This
information will be very helpful when you start to
narrow your franchise search.
By maintaining a clear focus on your
fundamental interests, you wont be pulled
off-track by the distractions you encounter
during your quest.

Entrepreneur Media Inc. All rights reserved.

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