How to test your business idea
People need what you’re offering – or do they? The only way to know for sure is to research the market and the opportunity. We cover some questions to help you assess whether your business idea has a viable market.
Is there existing demand?
For example, have you made any sales already, through a different channel or a hobby business? Do you have orders in advance, or secured any contracts?
You could trial market your product or service on a small scale to determine its wider demand and accessibility.
Will you make money?
Even if there’s a large demand for your business idea, it might not be profitable. This is usually because the margins are low or your overheads are high. And if there’s a risk of an innovation usurping your business idea, you may want to consider whether you’re able – and willing – to keep up.
Is the market moving in the right direction?
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.
Are you moving into a new market?
Timing is everything. If you don't have the resources to go early while demand builds in a new market, 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. Test as many assumptions and uncertainties as you can.
Do you know your competition?
Knowing who your competitors are will help you anticipate what market share and sales volume and value to expect. To find out:
- Consult an accountant with experience in your industry
- Look for articles on industry media and trade press websites
- Check the sales literature published by your 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 look for free information online as a first step – you might be surprised at what you discover.
Free information on New Zealand markets and industries
In New Zealand, we’re lucky to have a wide variety of data resources available online, free of charge. Here are some that may be useful.
Economic and insights papers
ANZ and several of the larger New Zealand corporates, publish research papers and economic outlooks on a variety of topics – from agriculture and property to consumer confidence. You can check out the publications from our economics team or our business insights papers.
Stats NZ
Stats NZ can help locate your market by age, gender, household income, and view summaries of your target market regions, areas, and suburbs.
You can also compare your business against similar businesses by using the Business Performance Benchmarker tool, which lets you compare a range of benchmarks including financial performance.
Connect with other business people
You may find that the best advice comes from other businesspeople 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.
Your industry or trade association and local Chamber of Commerce will also be able to provide useful data.
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Business performance benchmarker
Stats NZ has a helpful performance benchmarker to help you compare your business with similar businesses in the same industry.
Important information
We’ve provided this material as a complimentary service. It is prepared based on information and sources ANZ believes to be reliable. ANZ cannot warrant its accuracy, completeness or suitability for your intended use. The content is information only, is subject to change, and isn’t a substitute for commercial judgement or professional advice, which you should seek before relying on it. To the extent the law allows, ANZ doesn’t accept any responsibility or liability for any direct or indirect loss or damage arising from any act or omissions by any person relying on this material.
Please talk to us if you need financial advice about a product or service. See our financial advice provider disclosure at anz.co.nz/fapdisclosure