Market analysis before starting a business

A good business idea is half the success. The second half is painstaking analytical work and careful planning. Planning is what you need to do before you invest money in your business, so that it doesn't hurt excruciatingly later.

We know many examples where small holes in the plan led to big problems. So market research is not a formality, it is a necessity. The research will allow you to understand what is better to do and when, and what should not be done in principle. And it will give you the opportunity to have a plan B if something goes wrong.

Now let's figure out how to properly analyze the market before starting a business and not lose an impressive budget for it.

The first thing to start with is preparing the goals and objectives. Always and in everything, start by writing the purpose of your work and setting tasks. It's the same with market analysis. Of course, this stage will seem unnecessary and unnecessary to some. However, it is worth taking it seriously. It is the tasks and goals that determine which information is sufficient for analysis. If you explore the market without having a list of questions in front of you, you risk spending a lot of time collecting and processing unnecessary information.

To determine the feasibility, you need to:

1. Find out the capacity and dynamics of the market (Analysis of the volume and capacity of the market will help to assess the potential and opportunities for development. Without calculating the market capacity, it will not be possible to launch a new product or increase sales of an existing one).

2. Assess the level of demand and the relevance of your offer to the needs of the target audience (You will need to understand how to work with the same product price. So, for example, if you have a high elasticity of demand, you can lower prices in order to dramatically increase sales and make a profit more than if the price of the product was higher).

3. Analyze the competitive situation in the market, identify strong players (This will help you understand what you should play from in order to be competitive).

4. To study external factors and global trends that may affect the market. This is useful in order not to get into "unforeseen" situations. If you know the risks, then you can prepare your business for these risks, and therefore you can resist them.

The task list can be used as a specific plan that you will use to guide your market research. So it is worth paying special attention to him.

The second important step is collecting information. Market analysis begins with the collection of data that will later need to be structured and processed.

There are situations when you can quickly understand that a new business has no chance in the chosen niche. Then you don't have to spend time researching buyers and competitors.

Questions for market analysis:

• What is the market capacity?
• What is its dynamics?
• How has the market changed in the last few years?

It is problematic to calculate accurate indicators in some areas, and even more so for specific regions. But this is not necessary for our purpose. It is enough to find confirmation that the market is not falling and there is room for new players. If you are not opening an online store and do not plan to work for the whole country, it is important to consider issues in the context of the specific region where you are going to work. Otherwise, a situation may occur when the market seems to be developing well, but it is in this region that it is going to hell. And in order to understand this, there is not enough comprehensive market analysis, you need to take on a specific region.

Let's focus on the concept of market capacity. Not everyone understands what it is. Market capacity is an important indicator that indicates how much product the market will be able to consume in a given period of time.

Example: the capacity of the mango market in Dubai is how many mangoes are bought in Dubai for a specific period of time (per day/month/year).

I will not talk about what formulas are used to calculate this indicator. All this information is easy to find. But I will only say that all calculation methods are quite time-consuming and time-consuming. In addition, to get more accurate results, it is better to use several methods at the same time, which further complicates the task. However, approximate figures are sufficient to determine the feasibility of starting a business. Therefore, it is not necessary to go far into the wilds, it is enough to estimate the numbers approximately.

It is also worth remembering that the market capacity can be different: there is a potential and real market capacity. The latter is extremely difficult to calculate. At least, you definitely can't do without huge investments here. You need to summarize the sales volumes of all players in the region, and such information is not that easy to find, usually no one advertises it. The only exception may be large companies that publish financial results online. So I do not advise you to do this, especially if you are going to open a small business. Such data doesn't really matter to you.

We also need dynamics. To determine it, you will need indicators of market capacity over the past 5 years. Everything is easy here: if the indicators are growing, it means that the dynamics is positive, if they decrease, it is negative. Such information will allow you to see the prospects of the market. What does it mean? Well, if the market is growing, then new players have a chance to take their place in the niche. If not, it will be extremely difficult to enter the market.

At the third stage, it is necessary to study demand and target audience.

No management decision can do without analyzing the target audience in business. It is logical that it should be carefully studied at the start, because it will not work further without this knowledge. We need to find out:

• Gender, age, marital status, availability of children, geolocation, nationality, level of education, professional field, income, etc.;
• What needs does your product satisfy, how often and in what quantities do they need it;
• What characteristics do they pay attention to when choosing your product, what can prevent and encourage them to buy from you, what is expected from your product;
• The size of the target audience.

This is not a complete list of what you will have to explore. This is rather a base, a foundation that will definitely be needed. You can read more about the target audience and its segmentation in my other article.