Refine your business concept by researching available information/knowledge to see what works … try to duplicate those things that don’t affect your unique concept. Validate your product/service value proposition by customer testing using the least costly modeling method (minimal viable product) to find product-market fit & gather feedback from potential customers. SIMPLIFY your “vetting” research into:
- Business Concept & Target — What customer pain-point do you solve; Business value proposition (VP)
- Product & Service Offering — Features & benefits focusing on customer benefits
- Pricing Strategy — Markup; Value; Competitive; Discount; Premium; Niche
- Business Structure — Legal organization; Established or new; Do yourself vs. Outsource
- Competitive Comparison — See if you can spot competition / industry tactics (Benchmarking): Pricing strategy (markup; value; competitive; discount); Product Unique Selling Proposition (USP); Target market/s; Market outreach strategy (online; networking; promotion)
Step 1:Define a Market Need – Business Idea – Feasibility:
- Need fulfilled or problem solved – (Most founders start with a real problem)
- Product/service features (components of product/service) and benefits (created by the features) – (Fill a need or solve a problem).
- Competitive advantage – (Different/better than competition)
- Business model – (Your fit in the industry; Business Value Proposition (VP); How produce/deliver/market/make $)
Step 2: Evaluate Your Skills/Experience Fit:
- How do your skills/experience fit your idea.
- Does your personal risk tolerance fits idea.
- Can you modify your idea to fit your experience?
- Do you have the passion to sell your idea to others?
Step 3: Define Your Business Industry:
- Description: North American Industry Classification System (NAICS); National Trade and Professional Association Directory (NTPA). – (Benchmark industry ratios)
- Profitability: Risk Management Association Annual Statement Studies (RMA).
- What kind of profit can you expect to make? (Product/service life cycle)
- What are average margins in the industry?
- What current & future trends (demographic, economic, global) are affecting the industry?
- Growth trends: How fast can a business in this industry expect to grow?
Step 4: Consider Your Target Market:
- Channel Position: Where in the sales chain will your customers fall? Are you selling to retailers, wholesalers, consumers or other businesses.
- Number: How big is the potential market?
- Income level/ability to pay: Are your customers upscale or bargain hunters?
- Demographics: Location; company size; sex; age; marital status; education level?
- Psychographics: Attitudes; aspirations; worldview?
- Lifestyle: Customers urban or rural? How do they spend their work, leisure and personal time?
- Habits: Where do they shop and how do they buy?
Other Key Factors:
- Competition
- How many? How big?
- Product/service features & benefits
- Suppliers
- Kinds needed & availability?
- How reliable?
- Business Risk
- Product/service short-lived fad or long-term potential?
- Legal/environmental threats? (SWOT)
Key Data Websites To Start Assessing (“Vetting”) A Business Concept:
- NAICS: https://www.census.gov/naics
- United States Census: https://www.census.gov/topics/
- American Community Survey: www.census.gov/acs
- Small Business Administration: www.sba.gov
- Bureau of Economic Analysis: www.bea.gov
- Securities and Exchange Commission: www.sec.gov
- Bureau of Labor and Statistics: www.bls.gov
- Risk Management Association Annual Studies (RMA): www.rmahq.org
- Dun & Bradstreet: www.dandb.com
Key areas to think about when assessing (“vetting”) a business concept include:
- Industry
- Customer
- Competition: How many competitors are there? How big are they? What product or service features and benefits do they offer?
- Suppliers: What kinds of suppliers will you need? Are sources of supply readily available? How reliable are they?
- Business Risk: Is the product or service you’re considering a short-lived fad or does it have long-term potential? Are there legal or environmental factors that could threaten your business, such as pending legislation that might restrict your operations?
SOURCES OF INDUSTRY DATA — Suggested places to start researching your industry:
- The North American Industry Classification System (NAICS) is the standard system federal agencies use to classify businesses. Search it online or go to http://www.census.gov/eos/www/naics/ to find your industry description.
- Trade associations also have valuable industry information. Search for associations online or consult the National Trade and Professional Associations (NTPA) Directory, available at libraries or online at http://www.associationexecs.com.
- Risk Management Association (RMA) Annual Statement Studies, available at libraries or online at http://www.rmahq.org, provide benchmark financial ratios for businesses in over 370 industries.
SOURCES OF CUSTOMER DATA — Suggested places to start researching your customer:
- Trade Associations: Trade groups typically maintain data about market trends. Search for trade associations online.
- Reference Librarians: A good business reference librarian can be immensely helpful in finding what you’re looking for.
- Government Websites: You’ll find a wealth of information at: http://www.sba.gov; http://www.bls.gov; http://www.nber.org; https://data.census.gov/cedsci/; http://www.fedstats.gov.
- Focus Groups: Get a group that represents your target market—whether that’s college students or moms—together for a short focus group.
- Surveys: Online tools like http://www.SurveyMonkey.com and http://www.SurveyGizmo.com offer free options for conducting surveys to ask potential customers questions; http://www.ConstantContact.com is a competitively priced fee-based option.
- Read Conducting Market Research at https://smallbusinessthoughts.com/2021/03/12/conducting-market-research/
SOURCES OF COMPETITOR DATA — Suggested places to start researching your competition:
- Trade associations
- Reference USA (available at libraries)
- Risk Management Association (RMA) Annual Statement Studies (At libraries or www.rmahq.org)
- Bureau of Economic Analysis http://www.bea.gov
- Bureau of Labor Statistics http://www.bls.gov
- D&B http://www.dnb.com
- Hoovers http://www.hoovers.com
- NAICS http://www.census.gov/eos/www/naics/
- SEC www.sec.gov
- U.S. Census www.census.gov
For more help refining your business concept, view the free video entitled Roadmap For Starting Your Business.
Copyright ©John Trenary 2010-2021
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