So, you want to start your own business? GREAT!
According to data from the US Census Bureau, the nearly 5.5 million businesses that began in 2023 is the highest year on record, beating out the previous record of 5,380,477 new companies that started in 2021.
How many are still around?
Do 90% of businesses fail?
23.2% of private sector businesses in the U.S. fail within the first year. After five years, 48.0% have faltered.
After ten years, 65.3% of companies have closed.
Why do they close?
Easy: they do the fun stuff first and always.
They buy tools and buildings, hire people, and develop and manufacture products.
All that is easy: you get a dopamine hit just by trying to do those things.
What do those companies forget to do or never try to do?
These businesses needed to remember who they were building a business for, their customers, where they lived, what they liked to do, and how the customers would find their business.
So, where to start?
Know your market!
This is collecting and analyzing information about target markets and competitors.
Market research involves gathering information about the people who use products like yours and the companies you compete against.
Understanding your market helps you make smarter business decisions.
“What gets measured gets managed.”
— Tim Ferriss, who was paraphrasing Peter Drucker
WRITE THIS DOWN: Three ways to measure your market:
Psychological Measurement: Think surveys but without the annoying paperwork. Understand potential customers’ opinions, preferences, and satisfaction levels.
Don’t just ask them questions or fill out a sheet of paper.
Show them a product sample and take a pre-order before you make it.
Don’t make it and then sell it.
“People don’t buy what you do; they buy why you do it.”
— Simon Sinek
Financial Measurement: Use Sales Data to determine your market’s size. How many can you sell a day, week, month, or year?
Then prove it on a lower budget before you buy that big machine or building or employ people.
If you buy the machine first, you have a mouth to feed beside you! Your machine cost!
Don’t do the fun stuff first. It’s too easy.
Technical Measurement: Utilize analytics to see how many people are searching for your product online.
Google Analytics works great. If you have a website, what keywords do people look up that bring them to you?
If you don’t have a website yet, that's good! Use Google to find the technical data to base your potential sales.
If somehow your company isn’t internet-based, even better, find the data that supports your dream.
You need it.
Knowing your potential customer’s needs and wants can help you tailor your products and marketing strategies. This can make your business more successful.
“When you understand the people you serve, you can build lasting connections.”
— Andy Andrews
A specific group of consumers will likely respond positively to your promotions, products, and services.
Figure out who is most likely to buy your product. Consider their age, where they live, and what they like.
“Marketing aims to know and understand the customer so well the product or service fits him and sells itself.”
— Peter Drucker
Look at what businesses similar to yours are doing.
What can you learn from them?
What can you do better?
“Observe the masses and do the opposite.” — James Caan
Do the opposite, think Doordash.
If you had asked me ten years ago if people would pay double or even triple the cost of their food order to have it delivered to them cold and old, I would have laughed in your face.
No way is someone that lazy to pay someone else triple the cost to deliver food to them.
I’ll be eating my cold-delivered crow now.
Hand me a fork.
DoorDash Market Cap $55.91 billion as of April 15, 2024.
Many tools are available to help with your research. Surveys, interviews, and focus groups are some standard methods.
But stop and think, what are you going to do?
AirBnB started in San Francisco in an Apartment bedroom. There was no need to be fancy. They used the tools they had, not the tools they had to buy.
“Effective executives put their best people on opportunities rather than on problems.” — Peter Drucker
Build Tools, Methods, or instruments into your business to collect, organize, and analyze data.
Without Data, you can’t see what has happened or what will happen.
Use the insights gained from your research to plan your product development, marketing, and sales strategies.
“Strategy is not the consequence of planning, but the opposite: its starting point.”
— Henry Mintzberg
Market trends can change quickly. Regularly update your research to keep up with the market.
Don’t relax on your research.
It’s not fun to do the research, so schedule a day a week to do it.
Set aside a day each week just for research.
If you don’t have a day each week set aside two hours a week, surely you have time for that.
“Both desire and imagination are stored in the individual’s mind, and when stretched, both have the potential to position a person for greatness.”
— Ed Mylett,
