The importance of market research
Our sixth blog raises the importance of market research for your business and is brought to you by guest blogger Wendy Foster, Business information specialist at the City Business Library.
The first question, is WHY? Why do research? The simple answer is that it is empowering. And the best place to be when you are starting or growing a business, is to be empowered.
The slightly longer answer is that market research gives you an invaluable insight into your prospective audience and gives you a huge amount of knowledge to work with. And with this information you can compile a comprehensive and accurate business plan.
Business plans are essential, whether or not you need it to apply for funding. If you do want to apply for funding then your informative and detailed business plan will show your prospective investor that you know what you’re talking about, and that your business venture is a fantastic opportunity for them.
Even if you do not need funding, a business plan is still essential for your own knowledge, and a great boost towards your success and future growth.
And… believe it or not, researching your market can also be exciting and great fun. Honestly!
The second question is, WHAT is market research? Hmm, okay, so the simple answer is that it is researching your market. But to be honest, that doesn’t always mean much to people. So, here are a few examples of what you can find out from secondary research, and what the benefits are:
- Find out who your customers are – what is their potential income, eg, will they be able to afford your product/service, and do their interests and/or needs make them likely to do so. Does the area you are looking at have a good number of your target audience that you can reach?
This information will help you identify which area is potentially a good place to set up your business, and it will also help you when it comes to pricing up your product/service. Pricing of goods/services is essential, as this is the bottom line of whether you can break even and then make a profit (even if you are a not for profit businesses, any additional money can be reinvested into the business, and you will need some profit to help with your cash flow). It is also a starting point to help you work out your budget.
- Identify your potential competitors – is the market taken up by the big players, is it saturated already, or is it made up of small businesses with plenty of space for more. This will help you understand whether you have a viable business idea, or if you need to tweak it to bring something new to your potential customers and fill a gap in the market.
- What is forecast for your sector – over the next 5 years, is it expected to grow, stay stable, or decline. Will it grow in different areas to where you could move to increase your target audience.
- Learn about your supply chain. A chain is only as strong as its weakest link, so reading up about the supply chain is really important. You may beleive there is a large enough customer base for your business, but will you be able to find a supplier [if you need one/more] with low enough costs for you to be able to provide your service at a price your customers can afford. An example of a supply chain for running a café might include the following
- Economic drivers, eg, your customer’s disposable income, world price of coffee, etc.
- Who are your customers and what need/want will you fill.
- Supply industries. Who are your suppliers and what is happening in their sector, eg, coffee production, juice wholesaling, bakery production, etc.
- Related industries. Will these impact on your business, eg restaurants, pubs and bars, juice and smoothie bars, etc. They might compete for your potential customers.
Thinking about the steps of how you get your product to your customer, including your own suppliers, is a great checklist to help you start thinking about what you need to research.
I fully recognise that the thought of research can be daunting, and I have seen my fair share of eyes glaze over at the thought of research, but once you start learning these things about your industry it genuinely becomes fascinating. The information itself is exciting, and the fact it helps you towards your end goal of running or growing your business is definitely exciting.
Final point to mention here is the HOW. I will make a heartfelt plea to everyone to not rely on a general internet search. There is a lot of great and fun stuff on the internet, but it is not always easy to know what data is accurate, current, relevant, and basically right. So, the best way is to use recognised and authoritative sources. There are companies out there that commission, research and write up reports on market sectors. Use these! And better still, use a Library that subscribes to these so that you can access a wide range of these reports.
Okay, so one more point – WHERE can you find this information. One place is the City Business Library. The whole purpose of the Library is to support and help people start and grow their business. With a wide range of specialist resources, the Library can offer you access to amazing data. Data that can help you get a solid basis for your business venture and give you the edge over your potential competitors. You can find out more details about our resources, along with seminars and workshops via our website www.cityoflondon.gov.uk/cbl.
We can even offer you remote access to some of our fantastic resources, including invaluable market research databases. Membership is available to anyone living in the UK, and you can find out more about our membership on our website www.cityoflondon.gov.uk/cbl.
We are here to help you so please do ask us any question you may have about what the City Business Library has to offer. The City Business Library is a public business support service, funded by the City of London Corporation. We are open to all! As well as the information on our website, you can also contact us directly via email email@example.com, phone 020 7332 1812, or even just pop in and speak to us!
About the author: Wendy Foster, Business information specialist at the City Business Library.
Wendy, a Chartered Business Librarian, has worked at the City Business Library since 2002, and in 2016 she gained her SFEDI qualification as a Business Adviser, specialising in start-up support. Wendy delivers 121 business start-up advice sessions, as well as delivering group training sessions and presentations, at the Library and at external business support organisations as part of the Library’s outreach programme.
The City Business Library supports anyone with a business need. Although specialising in start-up support, the Library also helps established businesses grow, and supports freelancers, investors, students and job seekers, or even those who just want a quiet place to work. The Library is based in The City, at the heart of London, and is free to use. It also has a remote access option so that customers have the choice of visiting the Library in person for research or accessing specialist databases remotely. Visit their website for information on how the Library can help you with your business venture.