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Market Research

June 4, 2006

Q- I’m ready to start a new business that I estimate will need $250,000 in start-up funding. What is the best way to convince investors that I know I have a good idea that will make their investment worth it?

Starting a new business is so wonderful and rewarding. Before you even get to raising funds or doing anything else, you must make sure there is a demand for your services.

Believing and hoping there is a demand is not enough, however. Some in-depth market research can give you sufficient evidence to help ensure that you have a workable idea. The solution could be as simple as a survey of potential customers to find out whether they would be willing to purchase your service or concept and how much they would be willing to spend on it.

One of my students offers a demonstration of how not to conduct market research. He was putting together a business plan for manufacturing a new type of motorcycle. He surveyed a group of bikers about whether they would consider his new motorcycle. Since few of us would flat-out refuse to consider a new product, he got an almost 100-percent positive response.

While he got the appropriate response to the question he asked, it wasn’t the response he needed. He should have asked, ”Would you consider buying this new motorcycle at this given price?” If he had asked this question he would have discovered there was not a true demand for his product. Asking the appropriate question in marketing surveys is so critical.

Please, please do some market research to ensure whether your concept is viable and if is demand out there. You can do your own survey or you can hire a marketing research firm to help you.

You might also want to research whether there are other firms with similar products on the market and find out how they are doing. This will give you an indication of whether your product will sell.

The first thing potential investors are going to ask is whether a demand exists for your product. You need to be ready to answer this question before you proceed any further in the development of your concept.

One final word of advice: Do not fall in love with your first idea, but fall in love with your best idea. Since you have come up with this neat concept, I know you can come up with other great concepts, and have probably done so already.

Now go out and make sure there is strong demand for your idea.

You can do this!