We are living a particularly relevant moment as far as entrepreneurship is concerned. More and more people are creating a new company, and more and more of them are doing it by vocation and with a clear and solid project.
But do they adequately evaluate the market they are targeting, their target audience or even the location of the business? We believe that not enough: there is still a false belief that a market study is only within the reach of a large company’s budget and that SMEs cannot afford it.
Why do Businesses Fail?
The question applies to any type of business, but today we ask ourselves this question, and we answer it, thinking about small businesses. Small compared to large corporations, giants from the point of view of those who launch into the business adventure. We are talking, therefore, about SMEs, micro-SMEs and all those who decide to venture into the world of entrepreneurship.
We are living a particularly relevant moment in terms of entrepreneurship. There is a real boom, in great part sponsored by the real possibilities that technological innovations put on the table to help start up potentially disruptive business models.
Market Research for SMEs and Startups
More and more people are creating their own or shared company, despite the fact that many countries are still far from few European countries. And, although it is difficult to have robust data on this subject, in the collective imagination a ratio of 1 to 20 in terms of success of such professional / business projects.
In fact, if there is something that distinguishes most of us from the rest of the countries around us, it is that, according to research published on Niche Beasts the Organization for Economic Cooperation and Development (OECD) is behind in the rate of incipient entrepreneurs but advances relative positions when the rate of established companies is analyzed (those more than 3 months old but less than 42).
Take the example of european country like Spain. It does not seem that they are doing badly. However, when someone considers starting up a business in the country, do they really ask themselves why business fails? Let’s suppose that yes, which is the most likely. In that case, the real question would be: and does it come to be answered rigorously? And the answer is up in the air.
Research to Reduce Uncertainty
From our point of view, one of the probable causes of failure is not properly evaluating the market one wants to address, not knowing in depth our target audience and even not studying the location where one plans to establish the business.
To solve this, we need to ask ourselves questions such as: Who are my competitors, both direct and indirect, what kind of people make up my potential market, what age are the people around me, are they families or couples without children, and what is their socioeconomic level?
Or more complex questions: What needs do they have, how does the business connect with their desires and what place can it occupy in their emotional map, among others. All these questions can help to understand the environment that can occupy the business project you want to start.
And we understand that the problem does not lie so much in not being aware of the need to ask these questions and, above all, to answer them, but rather that it is perceived as really complex to find the way to do so.
Even more so in the maelstrom of starting a project. And in a moment where the stomach is filled with butterflies because of the vertigo.
But it is precisely the perfect broth to resort to solutions that help reduce uncertainty and increase the chances of success in the adventure. Market research is one of those possible solutions.
Market Study in Large Companies
We have the feeling that there is still a false belief that conducting a market study seems to be something that only large companies, which generally have the assigned budget, can aspire to, and that, on the contrary, for SMEs, because of the few resources they have, it is something that is beyond their means.
For this reason, on many occasions, having a clear idea of the suitability, they do not even dare to ask for a budget from a research agency.
That is why small entrepreneurs prefer to face the risk based on their hunches, instead of making sure that the project has a chance of success. But to really explore the real possibilities, to know the market the project is targeting and to understand what place it will occupy within the category is beyond the reach of SMEs and startups.
In absolute terms. Market research, in recent years, has undergone an important process of democratization. And for the same reason that access to entrepreneurship has been democratized, because technological developments and innovation processes help to have more cost effective solutions than a few years ago.
Perhaps it is not possible to access large scale developments, but optimizing decision making by incorporating the certainty provided by market research is NOT inaccessible.
In relative terms. Whether it is 1,000, 3,000, 5,000 or 10,000 dollars, what does that represent compared to the enthusiasm, time, energy and money that it takes to launch a project?
Probably a very small percentage, and yet, to what extent does having robust information on transcendental issues that impact yes or no on the business increase the probability of success.