How to Research a New Business Idea,
By Arnold Sandness, SCORE Counselor

Part 1: Analyzing the Market
You have a fantastic idea for starting your own business. But, will others get excited about it too? Who will find that it meets their needs or desires? Business ideas can appear in many forms, but all ideas need to be analyzed to help make decisions that will increase your chances of success.

The first step in researching your idea is to gather data to understand the market and demographic details. Who is your potential customer? Good market research can give you the answers and help you create a solid basis for intelligent planning. So, how do you proceed? Below are some simple steps to get started.

1. Identify the value of your product or service to potential customers. Why would someone buy your product or service? Who will be your potential customers? Where are they? Who is your competition? How do they market their products? What advantage will you have?

2. Assess the characteristics of the market. Is it business-to-business or consumer-oriented? A realistic assessment of the market must include its size, location and competitors. How do you find all the right information that can help you make business decisions? You need to use standard market research methods such as surveys, interviews, focus groups and test markets.

3. If you have a product or service that you plan to sell to businesses, list the types of businesses that are potential customers and get company names and locations from the reference books in main libraries or the Internet. One standard reference guide for business information is the Thomas Register. Two good examples of Internet databases are "http://www.referenceusa.com/" and http://www.netadvantage.standardandpoors.com.

4. If you plan to sell directly to consumers, analyze the consumer market. This is usually more complex than the business market. Research demographics including population, age, sex, location, income levels, housing and purchasing patterns. In addition to the Internet resources mentioned above, you can refer to statistics from the U.S. "http://www.commerce.gov/" and "http://www.census.gov/" data.

Part 2: Analyzing Market Appeal
You have a fantastic idea for starting your own business and you have researched your market in Now you need to analyze the market appeal of your product or service to help you make decisions that will increase your chances of success. There are four basic methods of measuring reactions to the appeal of your product or service: interviews, surveys, focus groups or test markets.
No matter what type of research you conduct, formulating a good questionnaire is a key factor for success.

questions must be straight-forward, easily understood, and able to be completed quickly. Each method also requires a review of the situations in which the questions are asked and detailed summaries of the results. Comparisons of the results of the different methods can lead to reliable decisions to accept or reject a set of data.

Here are some tips on the four main types of evaluation methods.
1. Interviews - When conducting interviews, you can start with friends, neighbors and relatives, but you must include strangers to achieve a more objective set of answers. Be sure to tabulate answers in a way that can also be used for the results from surveys and focus groups.

2. Surveys - Use the same questions in surveys as you did for interviews. Surveys can be conducted by mail, telephone or in public places. Recognize that surveys often involve costs in postage, time and labor. The percentage of people responding will be low without some sort of incentive.

3. Focus groups - Focus groups usually require payment to each individual for the time they spend in each session. So be sure to consider the cost factor in using this method of research. In some locations, the marketing department of a university may be willing to conduct the focus group for a reasonable fee. The facilitator (leader) should introduce each of the questions used for surveys and individual interviews. Comments from the group should be tabulated into the same categories as other results so that they can be compared.

4. Test marketing - Test marketing is a way to expose your product or service idea to the real world. This method of research can be more difficult to analyze because the results, or sales, can be influenced by any one of the five Ps of marketing: product, packaging, price, promotion or placement. Try to isolate one of the factors in order to get meaningful results.
So, is your fantastic idea for a business going to result in ultimate success or plunge you into a world of mystery? Good meaningful research can help you answer that question and make the right decisions.