The statistics are staggering. Two out of every three businesses fail within four years of opening their doors. The more horrifying story, though, is that many of them operate at a loss for the majority of that time. They only call it quits when they can no longer bear the burden of being in the red.
If you’re thinking about starting your own business, you’ll want to make sure you don’t fall into the ranks of the failed. Follow these tips, and you’ll increase your chances of success significantly.
The Most Important Consideration for Any New Business
If you want to verify whether or not you’re about to open a business that’s likely to succeed, you’ll need to figure out whether or not there is actually a market of willing buyers. Of course, if you’re Steve Jobs, you can create a new market. But chances are, you don’t have the type of capital or resources required to create the next iPad.
Instead, you want to look to see if people are already buying what you’re hoping to offer. This is pretty straight forward if you’re going to be operating a service-based business, such as landscaping, plumbing, or even pet sitting. But if your business revolves around something a bit less obviously needed, you’ll need to collect a bit of data.
Basic Market Research
The process starts by identifying a need and determining whether or not your business can fill it. You aren’t just looking to see if people “need” this service, though. If they want it, they provide a viable market, too. No one needs an iPad, yet millions are sold every year.
Once you have clearly identified a need (plumbing repairs, baby sitting, etc.) you need to figure out how to advertise to these potential customers. If your business will provide services to a specific region, it’s pretty simple. Despite what everyone on the internet is shouting, the newspaper, telephone book, and even the post office all offer great ways for you to spread the word on your new business.
Advanced Market Research and Pricing
Pricing your products or services is just as important as identifying a viable market. If your market can’t afford the price you’ve set, they simply won’t buy it. If your price is too low, they’ll wonder what’s wrong with your offering and look elsewhere.
You can always contact your competitors and see what prices they charge. The best companies for this type of competitive research are established businesses that have been operating in your area for at least five years. This is because they’ve had time to work out any kinks in their pricing and know what works.
But you can further target your market by making adjustments to the price. Perhaps you want to target an affluent demographic. If you do, you’ll need to increase your prices to subtly indicate an increased level of quality. Make sure your offering actually does go above and beyond what the customer expects, though, or you won’t be serving that market for too long.
The same is true for targeting the middle class and low income customers. You will need to adjust your prices to match what they expect. By doing so, you’re subconsciously communicating to them that your service is just right for their needs.
Keep Focusing on Market Research
Once you’ve established a small customer base, you must continue your market research. The difference is that you now have your own, satisfied customers, who will be more than willing to provide important information. Piece together a customer survey script and contact each after doing business with them.
Simply explain that you are hoping to expand your business by offering useful, affordable services that your customers might find valuable. They’ll be more than happy to tell you what else you can do for them. Don’t hesitate to ask them what they would feel is a fair price for these services, too.
Keep detailed records of all of the data you collect. As time goes on, you’ll have valuable information that will allow you to continue the profitable expansion of your business. Market research really is the key to keeping your business from becoming another statistic in the pool of failures.
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