Do your homework!

There was a line in the movie Sentinel where Keifer Sutherland said that “once a forensics investigator has a notion of how a crime was committed all of the evidence they find is used to support their assumption”.

Many of us in business and life do the same thing. We guess, have a hunch or have talked to a few people and then look for evidence to support our theory rather than try to poke holes in it. The danger in that way of thinking is that you can quickly end up married to an idea that leaves you in debt and a year down a path that doesn’t really make sense. Don’t feel bad, there are a lot of great ideas that don’t make great businesses and we have all had that moment where we realize our great idea would be a terrible business.

The key to making good decisions is information. Whether it is an article, a traffic report, a lecture or a look that says I am going to slap you...Everyday we react based upon information, information that we seek out because knowing that Microsoft has just launched a competitive product, there is a back up on 76, your significant other is upset because their cousin passed away or the CEO of your company was arrested for streaking through city hall helps us to decide how we should act or react.

So why do entrepreneurs and business owners guess? Because, quite honestly gathering information is a pain in the you know what. We all hated homework when we were in first grade and nothing has changed. It may not be fun, but you have to do it. Knowing where potential customers live, work, what they buy the most, what they read or watch, how many competitors are in the area, how much it will cost to advertise, your advertising ROI and how much it will cost to start or grow your business… this type of information is either used to create an effective business plan or turns out to be an “oh #!&*” moment when it is too late.

Conducting effective market research starts with identifying what you need to know. What questions do you need to answer to ensure success? I will give you a few hints.

1. Size of the market opportunity/demand (how many consumers currently or could buy your widget?)
2. Market competition (how many businesses already serve this need?)
3. Operating costs (how much does it cost to run this business?... from office to supplies and marketing to staffing)
4. Revenue projections (how much can you make from this business?... this is the result of your marketing and advertising plan)