Have you done your homework?
My wife and I find ourselves asking our children the same question when they ask if they can go “hang out” (children apparently do not “play” anymore) with some friends – “Is your homework done?” Before you can go out and play with your new business idea, you need to do some more homework.
You tested the feasibility of your idea earlier but still have more homework to do. You know there is demand for your idea. You know (not think) that people will buy your idea. You know your idea fills an unmet need.
Your next homework assignment is to see if anyone (i.e. your competition) is already doing what you want to do and then determine if you can compete with their offerings. You are probably thinking – My idea is new. How can I have competition already?
Mark Twain said, “There is no such thing as a new idea. It is impossible. We simply take a lot of old ideas and put them into a sort of mental kaleidoscope. We give them a turn and they make new and curious combinations. We keep on turning and making new combinations indefinitely; but they are the same old pieces of colored glass that have been in use through all the ages.”
There may not be a competitor doing exactly what you want to do but chances are someone has thought of and is doing something similar. You need to find out what is out there. MP3 players were around before the iPod and they essentially do the same thing. Why did Apple make the iPod? Apple’s idea was not the iPod. Their idea was iTunes. The iPod was the tangible version of iTunes. I guarantee Apple examined the MP3 player market and determined if their idea of iTunes would be enough to compete before they pushed forward on their idea.
You need to at least look for the similar ideas to yours. Can they be a substitute for what you want to do? How does their pricing compare to what you were considering? How are you different? How are you the same? What do they do well (Strengths)? What could they do better (Weaknesses)? Who do they see as their competitors? What are their Threats and Opportunities? How busy are they? Who do they sell to? How do they market their products or services? Is there enough of a market for you to participate in and survive? Do they have patents or trademarks that would prevent you from competing? All this is really what people call market research.
After looking at specific competitors, you can also check the industry. Visit your library or search online for periodicals in the industry. Ask for information from trade associations. Ask associations or advisors for comparative financial ratios in the industry (Robert Morris Associates, Hoover’s, and Bradstreets’ Business are some providers). Look at what the government has collected with census information and the Bureau of Labor Statistics.
Another resource is your local Small Business Development Center and they can provide you a lot of industry and market research for free as well as provide other opportunities for business learning.
Once you know your competitors, get ready to do your homework on your customers.
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