market research – GoForth Institute Blog | Canadian Entrepreneur Training

Six questions to help you understand your business’ industry

Every small business owner is part of a wider industry, and is affected by that industry to some degree. To help you determine the health of your industry, do some research to answer the following six industry health questions:

Is the industry growing?
Where are the opportunities in the industry?
Who are the key players in the industry?
Are there young, successful businesses in the industry?
What are the typical financial results for businesses in this industry?
How is new technology being used in the industry?

You can search for secondary data sources using your North American Industry Classification System (NAICS) code. Your NAICs code classifies companies to collect, analyze and publish statistics, and to provide collective industry definitions across Canada, the United States, and Mexico.

Finding your NAICS code

Visit Statistics Canada’s website to find your NAICS code and figure out which sector, subsector, industry group and industry your business falls under. Here, you can either browse through industries or search for example activities that these businesses perform.

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What is Achievability Analysis?

Many first-time entrepreneurs are so excited to start their new business that they don’t take the time to see if their great ideas will actually fly. They’re also overly positive, optimistic and confident about their new business idea.

Achievability Analysis helps you spot holes or fatal flaws in the business idea before you invest some savings and dive right in. It’s like running your business on paper first to make sure you’ve planned it out properly, thought through your business model critically, tested your business concept with potential customers, answered fundamental questions ahead of time and achieved a higher level of confidence about your chances for success.

Think about how much easier it would be to make changes to a business on paper than on a business that’s up and running with real customers and real invoices needing to be paid. Try increasing the price of a cup of coffee in month six of operations after finding profitability too low — your customers won’t be your customers for very long! Or what if you find out that there just aren’t that many buyers for your new product that you have 2,500 cases of? Or what if your biggest competitor responds swiftly when you arrive on the scene, dropping their prices and driving you out of the market?

These are all real life examples of small business failures. But you’re smarter than that. That’s why you’re here! If you spend the time prototyping and testing now, you’ll know the likelihood of your success sooner and you’ll be able to make critical changes to your strategy before you open your doors.

A thorough Achievability Analysis takes time, patience and objectivity. You may find out at the end that there’s no way you could turn your idea into a profitable business. It may sound depressing, but it’s better to find that out now than $50,000 of personal investment later. On the other hand, you may find out that there’s a huge market and no competition for your product or service and that you should consider a more aggressive launch to secure a dominant position in the marketplace.

The point is — and we can’t stress this enough — you should know if your business will succeed before you start it. By taking the time to prototype, research, and analyze your business idea thoroughly, you’ll improve your odds of success. And that’s never a bad thing!

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Can your small business make money? Try Market Testing

Market testing is a great way to estimate sales. What’s better than the opinions of potential customers and their own estimates of their annual purchasing?

Let’s review the steps of market testing:

Develop a prototype, model or description of the product or service that you can show to others. Most ideas for new products or services don’t work the first time. With a model or prototype, you can photograph it or create a picture of some kind and demonstrate it to a prospective buyer. It also allows you to try it out for yourself to make sure it works. (Be sure to keep accurate notes of your research; you may come up with an even better idea later.)
Seek out potential customers with your sample or prototype and ask if they would buy it, how often and how much hey’d buy. Be sure to call on the individual who makes buying decisions. Then ask them how much they’d pay for this product. If people criticize your new product idea, ask them why. Ask how the product could be modified to make it more attractive.
Listen carefully to comments and objections of the prospective buyer – their feedback is priceless. Most importantly, listen for their interest to purchase and comments on what they’d pay. From there you have the beginning of your sales forecast.

Even if you haven’t actually started your business, this live market test of interest will be an inexpensive way to see if you really do have what it takes to run a successful business. Good luck!

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Why you should diversify your small business’ offerings

Now that you’ve proven your great small business idea is a great small business, what’s next? Your business plan may already account for diversification, or it may have never occurred to you. Either way, consider ways to diversify your business to stay ahead of the game.

Diversification is a buffer against slowdowns

You may have perfected a certain product or service that your customers love, but what happens when demand drops? As a rule, customers love variety and innovation. If your coffee shop has offered the same four styles of coffee and same four pastries for years, of course the new place down the street will attract some of your customers.

Resting too heavily on your laurels can leave you unprepared in a changing market. Diversify your products or services and you’ll stay competitive in times of reduced customer demand or economic slowdowns.

Planning your small business diversification

When planning ways to diversify your small business, ask yourself two things: 1) Does it make sense for my business? and; 2) Will it be profitable? Offering small, easy breakfasts at your coffee shop might make sense, but opening a dog grooming centre won’t (that’s not to say, however, that opening a second separate dog grooming business is a bad idea).

As we always like to say at GoForth Institute – do your research! What are your customers asking for, either directly or indirectly? What are your competitors doing to stay appealing? What trends is your industry loving – or hating?

Ways to diversify your business

Here are a few ways you can diversify your small business:

Target new markets – Some customers might not care so much about your coffee shop’s amazing lattes, so why not become experts in tea as well? Get creative and look for markets that complement your own.
Consider partnering – What opportunities are out there for partnership with companies related to your business, but not directly competing? Back to the coffee shop example – getting involved as a coffee supplier for local events will expose your killer espresso to people who may not have heard of you before.
Go out of your “comfort zone” altogether – Were you the first to introduce fair-trade coffee beans in your town? Do you know everything about espresso? Why not offer your expertise outside the coffee shop? Consider speaking engagements on the importance of fair trade, consulting services to other cafés looking to make the switch, or offering “espresso-at-home” lessons to private groups.
Go virtual – Can you use technological solutions or the internet to increase your business? Perhaps you can sell your café’s special roast online, or even your favourite coffee-related products.

Diversification in small business is often tricky to figure out, but infinitely rewarding. Not only will you have a bit of protection against reduced demand, but you’ll be learning a thing or two as well. As always, plan everything out on paper first, consult your advisors and – most importantly – have fun!

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