Who needs what you're offering

New business owners often rely on gut feel to determine whether there’s a market for their product or service - but it pays to take a more structured approach.

In this article you’ll find some questions to help you assess whether your business idea has a viable market - plus some simple ways to research your market and your competitors.

For example, have you made any sales already, through a different channel or hobby business? Do you have orders in advance, or have you secured any contracts? Have you trial marketed your product or service on a small scale to determine its wider demand and accessibility?

Even if there’s a large demand for your business idea, it might not be profitable. If the margins are low or your overheads are high you may struggle to make a profit. And if there’s a risk of an innovation usurping your business idea, you may want to reconsider.

Markets tend to run in cycles as they grow and decline. But there are opportunities in both situations – for example you might be able to take advantage of a declining market in which larger competitors have lost interest.

Timing is everything. If you don't have the resources to wait for demand to build in a new market you should consider waiting for someone else to take the risks until the market grows. If you decide to blaze a trail in a new market, reduce the risks by researching the market thoroughly and dispelling as many assumptions and uncertainties as you can.

In New Zealand we’re lucky to have a wide variety of government data resources available online, free of charge:

• The Statistics New Zealand Business Market Mapper can help to locate your market by age, sex, income, household or family type, plus you can zoom in on your target market regions, areas and suburbs.
• Your industry or trade association and local Chamber of Commerce will be able to provide useful data.
• Several of the larger New Zealand corporates publish research papers and economic outlooks - check out the publications from the ANZ Economics Team.
• You may also find that the best advice comes from other business people who understand the issues you’re facing. For example if you’re thinking about starting a new bakery in your town, you could approach a bakery owner from another similar sized town who could give you some idea of the market. Many business owners are happy to share their knowledge and support new businesses – but it’s probably best not to approach your direct competitors!

If you're looking to market overseas you're more likely to have to pay for access to market reports or consult a local expert. But still look for free information online as a first step - you might be surprised at what you discover.

Knowing who your competitors are will help you anticipate what market share and sales volume and value to expect. If you can’t find this information from the sources listed above, other ways to find this out include:

• Consult a credible accountant with experience in your industry.
• Look for articles on industry media and trade press websites.
• Check the sales literature published by your competitors.