A market evaluation is arguably the most important part of any startup ” after all, even the most revolutionary business ideas flop when consumers aren’t ready or willing to get on board. A critical, objective evaluation of the potential market helps you look beyond the initial entrepreneurial excitement to discover if a market for your business idea actually exists, and if it does, how you can refine your concept to make it more compelling and profitable.
Gather Market Data
For a small business, a market evaluation usually starts with basic data gathering to help you get a broad picture of your target industry. Statistics Canada, which collects a huge amount of data about the economy and individual industries, is a great place to start. Choose your industry and browse through reports to find information that’s relevant to your new business idea. The agency’s CANSIM socio-economic database is another valuable resource; use it to find sales stats for individual industries based on province, territory, trade sector, and more. Use your research to look for positive or negative indicators ” if you find that, say, new constructions are down by 20 percent, it could be a red flag if you want to start a contracting business.
If this process sounds overwhelming, head to your local Canada Business Network service centre. Staff members can help direct you to sources that are relevant to your business idea, as well as help you find CBN reference libraries.
For business ideas that involve international expansion, take time to do a similar analysis of potential export markets. Choose the two most promising to start, and look into current product quality, price, and demand. The Canadian Trade Commissioner Service can help you get started.
Understand Your Customers
Customer research is a key component of a market evaluation, particularly for a small business. Start with broad-strokes research: find demographic data with Statistics Canada’s census reports and annual demographic estimates. For province, territory, and city-specific data, head to a CBN reference library for detailed reports that can be difficult to find online. Look for information about your industry, such as consumer spending, age, socio-economic status, family size, and buying behaviour. Keep an eye out for information that can give you a clue about the viability of your idea. If you want to start a children’s clothing store, for example, it would be encouraging to learn that the local birth rate is increasing or that kids under 10 make up 50 percent of your metro area’s population.
It’s also important to get feedback from your target customers. On your own, or with the help of a market research company, gather a focus group of your ideal buyers. Ask questions that help you understand their motivations, buying behaviours, disposable income, and pain points. Identify the problem your business would solve, and find out how they are currently satisfying that need. Don’t be afraid to ask questions such as, “Would you buy a product that did X and Y?” or “How much would you pay for this product?” The responses can be invaluable in refining your business idea to meet the needs of the target market.
Evaluate Your Competitors
The final piece of the market evaluation process is competitor research. Find the businesses that are currently meeting your target customers’ needs, and scrutinize their practices. Can your business compete in terms of advertising, supply, and pricing? What can you offer that’s different, better, or more compelling? How can you adjust your idea to better meet the needs of customers? It’s also worthwhile to compare customer and competitor data. A market with only one competitor sounds great ” but in a small town, it might constitute market saturation. In total, your market, customer, and competitor research should present a clear picture of whether or not your business idea is viable.