Look Before You Leap (Heather Robinette Expert Advice)

by Heather Robinette  on Monday, Jul. 21, 2014 12:00 am  

Heather Robinette

Successful small-business owners are often risk takers. No matter how confident entrepreneurs are about their ideas, though, the reality is that many small businesses close their doors within five years of opening.

Careful research and planning give a business its best chance for success and help ensure the venture will provide an adequate reward for the risk involved. Prospective business owners brimming with confidence may want to rush through this step.

Don’t do it. Careful planning and preparation will be time well spent.

From evaluating a new concept’s feasibility to selecting the best site for a new store to understanding their competitive advantages, Arkansans starting or expanding businesses need market research to help them make informed decisions.

You should acquire this knowledge before signing a lease or committing your funds. And speaking of funds, lenders usually want to see a plan supported by data before risking their money. Market research can make or break a loan proposal.

So where should you begin and what will it cost?

At a minimum, research the two Cs — competitors and customers (current and potential) — before launching any new venture.

Underestimating the competition can quickly kill a business. Identify direct and indirect competitors and check industry trends. Don’t forget that in today’s world, the Internet is a main competitor for small businesses.

Understanding who your perfect customer is informs every part of your business strategy. The small businesses that succeed stay focused on attracting and serving their niche, not everyone.

Before spending time or money on marketing or inventory, you should have a clear picture of your target customer. Consider not just demographic characteristics but also lifestyle, buying patterns and motivation. Drill down to your customers’ needs and how to fulfill them.

Esri, a worldwide leader in geographic information systems, classifies U.S. residential neighborhoods into 65 unique market segments based on socioeconomic and demographic characteristics. For each group in its Tapestry Segmentation system, Esri layers valuable information about life stages, buying patterns and preferences onto maps. Using this information, small businesses can learn more about what consumers buy as well as why they buy and where they are found.

Market research can be costly — but does not have to be. Just Googling your competitors’ names is helpful. U.S. Census data and other resources are free and available online. And in our state, the Arkansas Small Business & Technology Development Center offers high-quality market research and analysis, including Esri Tapestry reports, at no charge to small-business clients.

 

 

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