Ten Tips for Starting a Business -- Tip #3 -- Is There a Market?

There may be a need for your product or service, but is it a BIG need? In other words, how big is the market, and is it growing? You need to go out and do some research. The easy way is to do online research. But your public library can help, too, so can trade organizations in your industry.

Once you find out how big the market is, and if it's a growing market, then you need to find out how many competitors there are. Can you compete effectively? Again, you have to do research.

Maybe there is a small niche for your product, where you can fill a need that others can't.

One of my clients was a high-end fashion designer. Her creations were beautiful but very unusual. The market for unusual fashion design is small, and it is very crowded. Yet, she found a niche for her designs and was able to expand her sales by finding the boutiques that catered to the type of woman looking to make her own fashion statements.

Teroforma, which was just profiled in the New York Times Home Section, is in the crowded, large and growing market of tableware. But the company is positioned in the affordable luxury niche, which has virtually no competitors that can match Teroforma's quality or unique designs or sustainable and artisan-crafted manufacturing stories. Such stories resonate with consumers.

Remember:
How big is the market, and is it growing?
What is the competition like?
How are you different? Can you compete?

Competition

When VCs or other investors hear an entrepreneur claim that "there are no competitors," they immediately tune out the story. I can't tell you how many times I've heard that claim, only to go online and immediately find a slew of competitors. When you think of competition, you've got to think not only of direct competitors, but also indirect competitors. You've got to think of your entire category. If you bake specialty artisan bread, all bread bakers are your competitors because consumers must decide where to spend their bread money and which bread calories they want to consume. Analyzing the competition is very useful. You can find out what they do, how they do it, what their financial structure is, their suppliers, their allies and who they believe their competitors are. You can also learn more about the industry from reading competitive information. Finally, studying the competition is the best way to figure out what your competitive advantage is. If you don't have time to do the research yourself, you can hire an expert to do it for you.