Refine your business concept by researching available information 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:
- Industry;
- Market;
- Competition;
- Pricing;
- Personal Alignment
Step 1: Define Your Industry & Fit
- Description: North American Industry Classification System (NAICS); National Trade & 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?
- Segment/Niche: Legal organization; Startup or Established; Do yourself vs outsourced
- Suppliers: Kinds needed; Availability; Reliability
- Business Risk: Product/service short-lived fad or long-term potential? Legal/environmental threats? (SWOT); business interruption; Refer to the SBA’s insurance type guide.
Step 2: Define The Market Need/Idea
- Customer need fulfilled: Problem/pain-point solved (Most founders start with a real problem)
- Product/service offering definition: features focusing on customer problem solution
- Business model concept: How will it be produced/delivered/cost to make
Step 3: Identify 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 & personal time?
- Habits: Where do they shop & how do they buy?
Step 4: Competition Fit
- Number: How many; location & how big?
- Rival strategies: Spot competition/industry tactics (Benchmarking): Pricing strategy (markup; value; competitive; discount); Offering features & benefits; Market outreach strategy (online; networking; promotion).
- Competitive advantage – USP (Different/better than competition).
Step 5: Pricing Fit
- Strategy: Markup; Value; Competitive; Discount; Premium; Niche
Step 6: Evaluate Your Skills/Experience Fit
- How do your skills/experience fit your business model concept?
- Can you modify your idea to fit your experience?
- Does your personal risk tolerance fit the startup risk?
- Do you have the passion to sell your idea to others?
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
If you are planning to start a business or are thinking about scaling an existing one, be sure to read the ebook “Customer Centric Business Planning: A Guide to Optimizing Your Business for Maximum Success”. It is an essential book for business owners, managers, and entrepreneurs looking to leverage real-time insight to start and improve their business operations. Learn how proper customer centric business planning can assess risk and opportunity, and create an actionable roadmap for success.
Copyright ©John Trenary 2010-2021