Whether you’ve been asked to explore a new revenue stream by your boss, or you’re looking to go it alone after spotting a gap in the market, it can be a difficult task trying to determine how much potential lies on the other side of the fence. You could just close your eyes and charge head first into it, hoping that the grass is green and there are not too many other grazers about, but business history is riddled with cases of people doing this and losing everything. If you need to get an indication of how hot the water is before you jump in, here is some advice that you may find useful.
Ask people in the industry.
It sounds pretty obvious, but you would be amazed how many people neglect to talk to those already doing the job. Perhaps they are afraid to come across as unknowledgeable, or don’t want to alert others to their arrival in the market? Whatever motive they have for not seeking advice, it will never outweigh the benefits of putting yourself out there and asking around. Thankfully, tools such as Twitter and Linkedin allow you to follow important people in nearly any industry and contact them directly. Believe it or not, most successful people are happy to give advice to those starting out and they have the potential to give you more useful nuggets than all other research techniques put together.
Do Patch Tests
Often people in business think that you need to go all or nothing when testing a new product or service, and that a half-hearted effort will get you eaten alive. Whilst this may have been true a couple of decades ago, technology such as the internet has made this risk far less prominent. Many companies use patch testing to trial many different business avenues and gather data on their success. After a fair trial period, they drop the sources that aren’t working, invest in the ones that are, and start up a whole new series of patch tests. An example of a patch test for a website owner selling clothing online and wanting to test shoe sales, might be to use paid search. By using a service such as Google’s Adwords, you can delivery instant traffic to specific pages on your site and see if they convert. You might set up a dedicated page on the site to sell shoes, buy a small selection of stock, then target search engine users looking for highly related products. By using a relatively small research budget, you should be able to establish whether this new market is going to be profitable or not.
Buy Data
If you haven’t got the confidence to talk to people already in your target industry, and haven’t got the time to run patch tests, you could always buy in market data. Clever companies continually store all sorts of data about their markets and then sell this on to other companies, including those looking to find out if they can make money in that sphere. This information might be things like ‘key demographics’, ‘market buoyancy’, ‘purchase frequency’ etc. All these forms of data can help you build a picture of the landscape without having to physically operate in it first. By warned though, this data is rarely cheap and so it is usually only those with large pockets who can afford to access it. Additionally, you need to be very careful that the data you’re using is applicable to your business model. There is no point spending lorry loads of cash finding out that flip flop sales in Miami are increasing year on year, when you plan to launch in Alaska.
This is a guest post by Duncan, a small business owner who blogs about business and money issues and represents a Tanda client in Mexico, who specialise in solicitar credito.
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