Market Research for your Business Plan: A Definitive Guide
It’s marketing time! Technically, the first thing you should be doing after you have an idea for a business is to check if somebody else is doing it, and if they are, how they’re doing it. Knowing what else is out there will help you immensely in building the offering and positioning for your business in the market.
For example, if you want to launch your vegan ready-to-eat meal business, you’ll have to examine the ready-to-eat meal industry, the vegan industry, and who else is selling ready-to-eat meals (i.e. restaurants, caterers, individual, but also ask yourself “can somebody with a shitload of money just copy me instantly?”). Moreover, you’ll have to research different locations such as Montreal, the province of Quebec, Canada, U.S., or whatever location that could potentially have businesses that can be a threat to yours. Why? What if someone in British Columbia is doing the same thing as you and gets into the Quebec market before you do? Or what if you wish to expand your market to British Columbia and there’s already major established businesses?
Now, you should focus on your competitors. There are both direct competitors (businesses offering similar product or service) and indirect competitors (businesses who offer slightly different products and services, but target the same group of customers with the goal of satisfying the same need). Before jumping into the analysis of your competitors, you must ask yourself some questions: Who are your competitors? Who could become your competitors? What product or service are they offering? What is their business model and is it different from yours? What are their strengths and weaknesses? How big of a threat are they to your business?
Furthermore, a part that is extremely useful for your competitor analysis of your marketing plan is creating a chart for each of the following: main competitors, the indirect competitors, and the similar projects. Here’s an example of a main direct competitors chart from our founder’s previous catering business:
This is an example you can use as a basis for your competitor analysis charts. However, this chart is outdated and is by no means a perfect one.
Once you’ve figured out the main direct competitors, it is important to do a larger competitor analysis of the market. Think big! For example, looking at the market in Toronto or Ottawa will allow you to see who does what you do that are indirect (for now) competitors. Also, a competitor analysis will allow you to sell your business, as you’ll be able to compare to the competitors in what they do great and what you need to work on.
It’s important to keep in mind that, with a food-based business, it’s important to embrace the competition rather than seeing it as a war. Be friends with them, especially if you have a similar product! Why not organize contests like the one that happened a few weeks ago in Montreal between the Landry & Filles, Le Tuktuk, and Pas d’cochon dans mon salon food trucks? The possibility for collaboration is infinite. What if your archnemesis is just great at marketing, but your product is “really” so much better? You might just end up merging your businesses!
Also, an assignment (which doesn’t need to be included in your business plan) that you should definitely do to strengthen your marketing plan is to research the previous businesses that were similar to yours, but fell flat on their faces and had to close down. Why did they fail? What can you learn from it? Do they have any advice? Speak with the people behind these businesses! Don’t shy away: It can be really worth it to have a conversation with them. Use their old websites if it’s still up , or use your network (Facebook, Twitter, LinkedIn) to contact them. More often than not, these people will want to help you, since failure is emotional and you went through all this trouble to reach out to them. They might just become one of your mentors! This research will also show to investors that you’re serious and dedicated. All of this will allow you to have greater insight as to why these businesses failed, and what you should do in order to avoid such failure.
Finally, keep in mind that you constantly need to look out for new players in the field, and like many things, a competitor analysis isn’t something static. Keep it up to date! You should be an expert in your niche and know all the players, and the potential ones.
Interesting links on competitor analysis:http://sherpablog.marketingsherpa.com/marketing/competition-types-to-watch/
Industry analysis (A.K.A be an expert)
First, you’ll have to do an industry overview: in general, what’s happening in the industry you want to release your product or service in? You have to find out what makes this industry (i.e. catering or ready-to-eat) favorable and appealing for your business. Also, you’ll have to mention why it is a good timing for you to launch your business: Is it because there is an increase in vegan consumers? Is it because there is more than ever a demand for ready-to-eat meals? Or a combination of the two? The industry analysis helps answer the “Why now?” question. For example, us, it was a good timing to launch The FoodRoom because people want to launch their business more than ever. The millennials have this passion and we’re taking advantage of it.
Here is an interesting link for your industry analysis:http://www.sbtdc.org/pdf/industry_analysis.pdf
Next, you’ll have to look at the opportunities and risk that are part of that industry. What’s going to affect the growth of your business in the long run? For instance, it may be the increasing rise of vegan customers in the food industry for your vegan ready-to-eat meal business. If they are indeed increasing, you need to bring up the fact that people are concerned with what they are eating and that we’re over exploiting the planet, and because of that people are becoming vegan consumers. Give us numbers, give us facts, and make it painful! After reading this part of your marketing plan, I should totally agree with your business because it’s a perfect solution!
Equally as important are the risks that are part of the industry. How does the industry endangers the flourishing of your business? Is there a barrier to entry for your type of business? It may be the high costs to start off your business or the increasing number of competitors in the industry. How do businesses in your field typically do? For instance, us, we use coworking to do better in a niche where people usually do okay.
Finally, you cannot forget the legal and economic factors of the industry you wish to enter. For the legal factors, you must point out what may hold you back and regulate the product or service you’re providing. What kind of rules and regulations are part of the product or service that you wish to sell? For example, it could be a change in law that makes it illegal for food makers to work from home, leading them to renting a kitchen. It may be the types of certifications you need to have to prove that your product or service requires. Or it could be the environmental, privacy or salubrity laws that you must abide to.
Here are some links to the Quebec food, salubrity and privacy laws:
As for the economic factors, you’ll have to look at why your business idea will eventually be profitable in this industry. How will you make profits in this type of industry? What will allow you to do so? For example, what will differentiate your ready-to-eat vegan meals from the competitors and allow you to gain market share? At this point, it is more about showing why your business makes sense, and to have investors, bankers or mentors understand that the industry and market is ready for your service/product and that you know what you’re doing.
You’re now ready to do your market research for your business plan!
As for the target market and segmentation, we’ll be covering it in another blog post in the upcoming weeks.