When starting a business comes to your mind, do you make sure proper plans are put in place to conduct research before going into the market? Or you just carry out the business once? My advise today is that you carry out a proper market analysis before you start.
According to surveys done amongst most successful entrepreneurs, it’s seen that they take the time to plan their business strategies extensively before making any decision.
In order to succeed in any business, you need to understand the processes involved in carrying out market analysis.
Definition of Market Analysis
This is the process of data gathering about the market in your industry. Your analysis studies the dynamics of a market and what attracts and keeps a potential customer.
Though market analysis seems complex but it’s crucial for the survival of your business.
You learn the following when you conduct market analysis;
- Who your potential customer(s) are?
- Buying habits of my customers?
- How big is my target market?
- Who is my competition?
- How much is my potential customer (s) willing to pay
- What are the statistics gotten from SWOT analysis on my competitors.
Market analysis helps you reduce risks because you will have a better understanding of your customers and market conditions.
Your market analysis can make or break your startup.
Market analysis also makes it clear to you what makes you different and stand out from your competition.
You will find that analysis of the market in your industry is necessary in all cases of growing your business such as introducing a new product, growing your small business etc.
Lots of time and effort go into conducting and writing out a market analysis. You will find the steps below necessary in guiding you through the process of market analysis.
1. Determine the purpose of your study
There are lots of reasons that will make businesses conduct analysis on their market. It is necessary in the assessment of business risks for example threats, reduction of issues or creation of opportunities.
You can study the past problems to reduce possible future risks. And, look at past successes to see what is necessary for you to continue doing in the future.
Determine whether the analysis is for internal or external reasons before you conduct any market analysis. Internal reasons involves things like improving cash flow or business operations. External reasons entails processes needed to access loans or raise capital from investors.
When effective market analysis is done, investors will be more interested in your business, as this makes them believe that you know your industry so well.
Your research type depends on the purpose for which it is carried out. For instance, say you conduct an analysis for internal purposes. You may likely not collect as much data for the internal purposes, as you will for external purposes.
Before moving on with your research make sure your if study will be internal, external or both.
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2. Observe your industry outlook
During your analysis, study the current state of your industry. Take note of the direction where the industry is heading using statistics such as size, trends, and potential future growth. Make sure to back up your claims with relevant data.
This will convince investors that you have done a proper check on the industry and know how best to manage your brand. They will then know whether or not it is worth their money and time.
3. Note target customers
All industries have a specific part of the population that will be their customers. Not every person can and will be your customer. That’s perfectly normal.
You must carry out target market analysis to determine the characteristics of your potential customers.
You need to know and understand well who your customers are and their locations. Your target market analysis should give you a clear picture of the following about your customers;
- Education level
- Marital or family status
When you’re able to note who your customers are, analyse more to know their needs, interests, personalities and demographics.
Gathering information to create customer personas is very important for your business growth. This makes your brand to interact well with it’s customers and other audiences. It builds brand trust, and awareness.
It also puts you in a position were you’re able to best see the welfare of potential customers and market more efficiently.
However, you have to note that with time your business will always evolve or change. So you have to recheck your market analysis frequently
In this guide, we covered extensively the effective ways to carry out market research to determine your target market.
4. Compare your competition
You need to understand how your competition works.
Ensure you take time to conduct analysis on the market of other businesses in your niche. Consider characteristics like their competition’s offerings, location, targeted customers, and disadvantages in the market.
Draw out a list of your competitors and conduct SWOT analysis. This helps you know their strengths, weaknesses, opportunities and threats. You get to understand advantages that their business has over yours, why a customer will likely choose them over you, and threats that they pose to your brand.
After these analysis, you will then know how best to move forward.
5. More information gathering
Information is very important when it comes to carrying out a market analysis. Your business will have more advantage as you gather more information.
Your data should be real and unbiased. You should be able to make better decisions based on accurate information.
Gather your data from credible sources. You can take advantage of different resources, such as:
- The Bureau of Labor Statistics
- The Census Bureau
- State and local commerce websites
- Trade journal articles
- Competitors’ strengths and weaknesses
- Target market surveys or questionnaires
- Information from interviews or focus groups within your target market
6. Analyze your findings
At this stage after analysing the market, study your findings (information gathered). Organize your research in different sections. These should include sections for your purpose, target market, and competition.
Here are some other options you should include in your findings:
- Industry’s size and growth rate overview
- Share percentage of your projected market
- Industry outlook
- Discounts offerings
- Buying trends
- Forecasted growth of your brand
- How much customers are willing to pay
- Prices of your offerings
- Your cash flow projection
- Your customer groups
- Results of your other analyses
You will be able to forcast from your research options such as your gross margin, customers’ buying habits, and cash flow cycle.
7. Put your analysis into action
Your business will be so grateful for all the hard work you’re willing to put into your market analysis. Though it’s a daunting task, but it holds lots of promise cards.
All the time and effort is worth it. But this is only possible when you put it in action. Make sure all your extensive research don’t go to waste. Put your analysis into action.
For internal purposes learn ways that you can use your discovered options to improve your business. Try your best to make your business processes more efficient with your analysis.
For external purposes research, make sure you’re able to pitch it well to promising investors.
Always make sure you recheck your analysis frequently for necessary tweaking.
Market analysis entails keeping a close observation on your books. Narrow your accounting process(es). Keeping your records up-to-date to keep your business on track. These and others are what was explained in the article above. Waste no more time and get this ball rolling now.
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Thank you for reading at WealthOnPoint
I’m the cofounder of WealthOnPoint. Business has always been where my interest lies. If you have any business, finance or investment related issue, feel free to contact WealthOnPoint via email [email protected]
Our team is more than happy to help you out.