Arizona Hispanic Chamber of Commerce

Stop, Think and Research Before Starting a Business

Q: We have an idea for a new business we would like to try. I am ready to jump in and get going. However, how do we know if it will work? I don’t want to invest in a loser.

Jake — New York, NY

A: Yes, you may be anxious to get started, but no, you cannot start, not just yet. What you need to do instead is do your research and think. Your idea may be a winner, but it might not. The key is to analyze your idea, the market, and make sure you are not the only one who thinks that you have a great business idea. A hunch simply will not do. You need hard facts.

One trait that great entrepreneurs have in common is that they endeavor to reduce their risk as much as possible. Research helps you do that. But the problem for many an entrepreneur is that they so fall in love with their idea, they become so convinced that it “can’t miss,” that they skip the feasibility analysis stage. Rather than thinking, they start executing. More often than not, such endeavors end with a pile of bills and a hill of broken hearts.

To avoid that unenviable fate, you need to conduct a thorough analysis of the “3 Cs” of your new business: Your company, your customers, and your competitors.

What is your company going to do? What products or services will it be providing? How big or small would it be? Retail or wholesale? Where will it be located? How can you best position yourself?
Who will your customers be? Will you be selling to other businesses or to individuals? Are your customers going to be young or old? Men or women? Blue or white collar? How big is the market? What is it that they need? Why would they buy it from you? What do they and will they pay for it? How can you get them to change vendors? How can you reach them? What is it that they read and watch? The more you crystallize your thinking, the more specific you are about who you are trying to reach, and the more you know about that market, the greater the chance that you will be able to find and entice them to your business.
Who will be your competitors? What are they doing right and wrong? What are their strengths and weaknesses? How can you capitalize on their weaknesses? Why would their customers leave and come to you? Can you undersell them, do you want to?

There are many resources available that help you track demographic data, learn about your intended industry, uncover vital info about your potential competition, see whether there is a market for your proposed business, and generally plot your course. Here are your best bets:

Trade Associations. Every industry has a trade association connected to it and these groups are a wealth of information. Find one associated with your industry and contact them. Explain what you are doing and ask about survey data and research reports available. Get copies of their publications. Ask whether they have a start-up resource kit available.

Trade Shows. Consider also attending the leading association trade show. These shows will put you in touch with hundreds of like-minded individuals; people who are already successfully doing what you want to do. Meeting them and picking their brain can:

Save you a lot of time
Tell exactly who your customers will be
Provide experienced feedback about your plans
Let you know how much it should cost to start your business
Give you a fairly accurate idea about how much you can expect to make
Warn you of potential pitfalls
Save your from overly-optimistic plans

Trade Magazines. Each industry also usually has one or more trade magazines which may or may not be part of the leading trade association. Find the magazine for your industry and get several back copies. You should be able to notice industry trends, mistakes to avoid, potential costs, and much more.

I think the words of Laura Ashley sum it up best: “We don’t want to push our ideas on to customers, we simply want to make what they want.”

Today’s Tip: Here are some Web sites that may be helpful:

www.entrepreneur.com/formnet/0,6574,,00.html: This site offers free forms that help you analyze your plans.
www.census.gov: The U.S. Census Bureau site has a lot of free demographic data.
www.uschamber.com: The national chamber of commerce, as well as your own local chamber of commerce, both have plenty of resources for the new startup.
www.tsnn.com: This is a searchable database of trade shows worldwide.
www.sba.gov/sbdc: The SBA’s Small Business Development Centers offer low cost help to entrepreneurs.