Why is Market Research required before starting a Business?
This is a question which most of us do not want to answer as it requires a lot of work.
Yet, it remains an important part of starting a business and your business might just fail because you forgot to do market research.
Like me (in my initial years), you might have hundreds of ideas running in your mind.
Trust me, 99 out of the 100 ideas are either impractical or are already implemented.
That brings me to the next question – How do you differentiate a good idea from a bad or as I jokingly referred to into the startup world as a “copy-paste idea”?
You do that by learning more about your idea and giving it a proper shape.
The ‘fundamental’ step to learn more about your idea and give it shape is doing proper market research before starting a business.
Let me ask you a simple yet relevant question – How well do you know your Business Idea?
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That was me above – learning new things before I realized – Too many drinks make me sound wise ‘only in my head: D.’
On a serious note – Knowing your business idea is discovering your idea further and evolving the concept in your mind (idea) into something realistic.
A startup idea is usually like “My startup will improve the efficiency of food delivery business by providing real-time stats of employees that deliver food.”
As you can notice, the idea summarises your Startup in one good sentence.
However, it is at a 10,000 feet level.
The idea statement addresses ‘What your startup stands for?’. However, what it misses is how you will achieve what you plan to do.
Before your startup starts, we must get your idea to 100 feet level above the ground.
Remember the 5Ws and 1H from the world of Journalism!
They are the ones that will help you figure out your idea better.
You must ask more questions around Why, What, Where, When, Who and How!
The simple step to do that is knowing more about your Startup that just the Startup’s mission statement and the right step to get started with that is “Market Research.”
How does Market Research help a Business?
Yup – Market Research is like the dog above that will stick with you in all parts of your business journey from idea to execution to growth.
At this stage, when you are just sure about going ahead with your idea – “Market Research” is the step that will help you discover more about your business idea.
It is a step that will make your Startup look in the mirror and find flaws in the reflection.
Market Research will help you turn imperfection into perfection.
Do not be scared by the word ‘imperfection’!
The flaws are not there to make your Startup look ugly. On the contrary, the flaws are for you to work on and make your idea better.
Most importantly – Market Research will help you make ‘informed decisions.’
The concept behind Market Research is to identify:
- Market size.
- Issues in the sector your Startup is in and how other startups are tackling it.
- A Revenue Mechanism.
- Customer Feedback on existing players.
- Your Competitors.
I won’t confuse you with “big words” to do Market Research (that would defeat the idea of lessons at Startup. Remember – we simplify entrepreneurship, not complicate it).
Let me teach you some simple steps to do Market Research.
My Struggle with "Market Research"!
And all of the learning came at the cost of time and money. Something that ultimately slowed down our progress.
We learned how to price our product, the market size, and the competitors after starting our venture.
We just put the cart in front of the horse and lost precious time rectifying our mistakes.
Holy Cow! What a blunder that was.
Well! You can’t blame me for my naivety.
I was young, inexperienced, and from a tech background. Market research was the last thing I wanted to do before starting the venture 😉.
And I am not alone in this world that shies away from doing market research.
I know of a failed business (worth millions) that failed explicitly as they did not do market research to identify their end customer’s paying capacity.
Unfortunately, they overestimated their service and launched it based on their misconceptions that customers would pay more for high-end service.
Predictably, they could not sustain as the end customer refused to pay the prices set by them.
Reducing the price was not an option for the Business as they had spent a fortune establishing their Business.
End Result – The business failed due to a lack of proper market research.
Market Research is the most crucial step of becoming an entrepreneur as it helps you understand your Startup better.
Also, market research helps clear any doubts you had about starting the venture.
As per CB insights,42% of startups failed because of no market need. Incidentally, it was also the first reason for the failures of startups.SOURCE-5RF
You, my friend, can be better equipped to avoid this catastrophe by getting your ears to the ground.
How to do 'Market Research' before 'Starting' a Business
Starting with Internet Research
So, as per our usual daily habit, let’s open “Google” and start with the first market research step.
Do a keyword search on the internet for topics related to the Startup you plan to start.
For example, if you were planning to start a startup that disrupts the food delivery industry.
Start by typing keywords:
- Food delivery business + “location.”
- Problems in the Food delivery business
- Why food delivery businesses fail
- Food delivery business size in “location.”
- How food businesses can succeed
- Startups in the food delivery business
A generic keyword search combination to help you get data for the initial search will be:
- “Startup Business Industry “+ location – this gives you insights about the food delivery startups in the location you plan to target.
- Problems/issues/fail | “Startup Business Industry ” – the keyword provides you with problem areas in the business lines you plan to disrupt. It will help you understand the struggles of existing startups.
- “Startups” | ” successful startups” | “Startup Business’s Industry” – Time to look at the successful players in your industry. 8 out of 10 times, you will see names of funded startups on the internet. Read about them and update your notes.
By the end of internet research, you will have a lot of random data to start putting in a structure.
The structure will get you answers to the following questions:
- Why do I need to start a startup in this area?
- What is the market size?
- Why are my competitors struggling, and how can my Startup help fill the gaps?
- What have been the critical areas for the failure of past competitors? How will I ensure my Startup will not fail?
- What will be my Startup’s revenue model?
- What are the requirements to start this Startup?
Gather as much data as possible to understand the market.
Do not forget that with internet research, you are trying to give shape to your idea.
You are working in a direction where you should be able to make some assumptions, projections about your Business and understand the pitfalls in running this Business.
Get answers to your questions and write your analysis based on what you research.
When I did my internet research for food delivery startups, my key observations were:
- Thin margins for restaurants.
- Cold food on delivery because of the long time it takes to deliver the food.
- High accident rate with delivery vehicles (remember – they must deliver food in committed time)
How about you pick a few of the critical issues and find a solution to them?
Validating "Internet Research"
Awesome! You just finished a vital step in market research called ‘internet research.’
Time to move to the next stage of internet research to verify what you discovered on the internet.
How do you do that?
You do it by field research – by talking to peers in the industry, talking to end customers, taking help from mentors, and competitor research.
What you discovered through internet research gives you a vague idea of what your Startup will look like.
A field survey or a first-hand interaction will further help you validate what you have researched.
The interaction and survey stage is where you further update the answer to questions listed at the end of internet research.
Again, taking the example of food delivery startups, how about you talk to a few restaurants listed on food delivery apps and then talk to food delivery boys?
A first-hand interaction will help you dig deeper into the issues identified through internet research.
You are (obviously) better equipped to do filed research, but for internet research, I recommend using Survey Sparrow.
I used Survey Sparrow last time to get the pricing right on a course I was about to publish on udemy.
The survey helped me get my ears to the ground and understand the right “money” people were willing to pay for my course.
To subscribe to Survey Sparrow, all you got to do is, visit Survey Sparrow.
Clicking on the link will get you to the following page:
Before i forget – please visit your inbox and activate your email id.
STEP 2: Once you fill in the “Signup For Free” form, you are directed to the screen where you create the formsOnce you login, time to create survey campaigns
And you are all set to start sharing the survey with your friends, family, prospects, or anyone whose opinion you value to get feedback.
Personally, I am a sucker for surveys. They help me assess my idea’s value and get me insights like:
- How much are clients willing to pay?
- What are the pain areas of clients?
- What are the features that are ‘must-have’ in the first launch?
- Etc, Etc.
Before I jump to the next section – you can register to Survey Sparrow and get started by getting some feedback on ideas.
Next Step of Market Research - "Competitor Research"
Moving forward – Another crucial factor in doing market research is “Competitor Research.”
You would obviously get to know more about your competitors by speaking to clients on the ground.
However, if your competitors are big enterprises or companies that do a lot of online business – I would suggest that you add “Internet-based competitor research” to your to-do list.
I recommend using a complete Digital Marketing Tool like SEMRush for this activity for the sake of ease.
Again, you are free to use hundreds of other complete digital marketing tools to do the research. I (personally) find SEMRush as :
- It is a tool that gives you a complete insight into your competitor’s web presence. SEMRush provides you with information like – web traffic, keywords, social media presence, and a lot more under a single roof.
I have tried almost 500 digital marketing tools, and most of them have not been as comprehensive in their reporting as SEMRush.
- Value for Money. Trust me – when I start a business, I make some tough decisions about saving money wherever it is possible. Hence I look for affordable tools that are “value for money.” SEMRush falls into the right slot of maximum features at an affordable price.
Their competitors are either costly or lack the features required to spy on your competitors 😊.
The tool will also be your bridge to the next step of the entrepreneurial process – Business Plan creation.
How do you use SEMRush to do competitor research?
Before I explain to you the steps to use SEMRush to do competitor research, you need to identify the online market research goals.
If I were looking to get into a new market, I would be better equipped to succeed if I knew my competitor’s internet presence quite well.
For their internet presence, I would identity parameters like:
- The average traffic their website gets in a month.
- What are their ranking keywords?
- How difficult is it to rank for those keywords?
- What is the growth of their social media profiles?
- What kind of content do they post on their website and social media accounts?
Since you have a basic understanding of what you should be looking at in competitor research, let us get started with the process of “online competitor research.”
Find your competitors:
I would not scratch my head too much, finding my competitors. I will go to Google and search for the first keyword that comes to my mind regarding my Business.
Since we are talking about the food delivery business, let’s start by looking at online food delivery service in my area (note – I stay in Melbourne, Australia – so most of the results you will see will be about my location).
Ignore the paid ads and focus on the top 3 brands. My focus would be on Menulog, Deliveroo, and UberEats.
Time to use SEMRush magic.
Let’s get Rolling!
Please follow the steps that I do with me. Please register on SEMRush following the steps list below.
Step a: The first step is to register on SEMRush and chose their seven days trial, which is good enough to help you do initial research ( The Trial time also helps you make up your mind on the future utility of the software).
Click on the – ‘Get A Free 7 Day Trail’ Button
Create your account by entering your email id and password.
Step b: Verify the email address by confirming the registration.
You will get a confirmation email directly into your given email inbox with the subject line “Welcome to SEMrush! Please confirm your registration to get started” from SEMrush Team.
Go to the inbox and click on the mail from the SEMRush team with the heading “Welcome to SEMrush! Please confirm your registration to get started.”
Then click on “confirm your email button.
Clicking on the link takes you to the option to select a plan; select pro option for 7 days free trial.
Please note – SEMRUSH will not charge you for 7 days.
After selecting the preferred option, click on ‘get a free trail’.
Step c: Enter your credit card details and click on the place the order button and Eureka! Your Free Trial is all setup.
Well done! You have passed the registration step, time to Go to the next step!
Time to put SEMRush to use and get started with Internet Research.
Our Objective is to research our competition based on three parameters – Their paid ads, search keywords and their website’s traffic.
And then, we try and make sense of our findings.
As soon as you login, this is how SEMRush’s dashboard will look
Do not get overwhelmed with the plethora of options available there.
I will guide you through the simple steps to help with ‘competitor research.’
Time to Focus!
There are numerous ways to research your competitor. However, the simplest is to enter the competitor’s URL in Domain overview which is an option under ‘Domain Analytics’.
I will demonstrate to you – how to research my competitors for parameters like organic search, paid traffic, backlinks, traffic from paid search, etc.
The idea is to understand what my competition is doing in the market to understand better what I am getting into.
Let’s go one by one.
To make sense of the above analysis, let’s look at all the competitor’s presence on internet one by one.
- Paid ads:
The above ads give me an understanding of the branding and the objective of my competitors’ ads.
For example, menulog’s ads focus on the business’s delivery aspect, i.e., it is as crucial a piece to food delivery business as clients.
Furthermore, deliveroo’s ads showcase burgers and pizza as images. It could be that they are a high quantity of selling products in my area.
Lastly, the uber eats ad has ‘mandarin’ that shows many of the Chinese community in Melbourne.
As I mentioned earlier, we are just scratching the surface, I can dive in more and get you more analysis and expand my notes, but at this stage, this should do the trick:
- Delivery is as important as clients.
- Burger and Pizza could be high selling items (explore more)
- The Asian community is a big focus of one of the major competitors. Explore more on this aspect of a business.
- Paid ads:
Let’s try and understand the keywords our competitors are using to rank on top of Google.
To find the keywords, head to Gap Analysis:
Select the keyword gap option:
The process is to add your competitor’s URLs and compare all ranking keywords.
Here is an example screenshot:
My Analysis is that ‘food delivery near me’ is obviously a highly competitive keyword, so that I might try an extended search keyword like
‘food delivery near me’ + ‘best’ or ‘fast’ or ‘affordable’
By the way, before I move to the next analysis, I want to link to something that I wrote after the paid section ‘Could it be that burger and pizza’ are high selling items.
Guess what – the top keywords that are targeted by my competitors include:
- Crust Pizza
- Ribs and Burgers | Burger urge
I think I am connecting dots now :).
All I can say is, as we research – we should be able to connect the dots.
Phew! I don’t know about you, but I need a break and a ‘drink’ 🙂
I feel ‘Refreshed’!
So, we have learned – how to use SEMRush to find competitors’ ads, keywords.
Time to put on your spy glasses and snoop a bit further
If you want to view the competitor’s traffic
- Competitor’s Traffic:
Let’s look at the traffic my competitor’s website gets daily.
Head to the option: Marketing insights -> Traffic Analytics :
Now, visit Traffic Analytics Tool.
This tool helps you analyze website traffic of competitors.
You are on the verge of saying ‘akda ka dabda” and let the magic roll.
Just kidding – enter your competitor’s link and get going 🙂
Here is the traffic that all three of my main competitor;s get”
My Analysis is pure and simple.
- As the traffic increases, the bounce rate increases.
- The average visit duration is more or less the same for all 3, which shows the consistency and a trend that users like to spend a lot of time exploring their options. Probably, looking for deals, offers, etc. I can use this point to validate my research further.
And I can keep researching further until I have enough data to validate my idea and use the data to build my business and financial plan.
Coming back to why I recommend SEMRush for this exercise.
To Start with: SEMRush is a one-stop solution for all your ‘competitor research’ needs.
The stats give me a path to discover how much will it cost me to run my digital marketing campaigns and what can I expect as returns.
If I were you, I would be looking at the following data for my business plan:
- My competitor’s SEO data (keywords, search volume, keyword difficulties, etc.).
- Social Media planning.
- Estimated traffic from their campaigns.
I would then get a Digital Marketing expert to plan on a similar keyword strategy for my SEO Campaigns or better learn digital marketing myself.
I would use the information collected in the analysis to build a financial estimate plan.
Using Market Research in Financial Plan, I would put a value on each customer.
- For example, every customer I get on the website gives me an X amount, and it costs Y to get that customer. The cost Y can be calculated based on Converted Leads and Total Traffic. Get the estimated cost to get the targeted traffic and do the maths.
- I need to build formulas that help me calculate the profit each customer gives (keep in mind that repeat customers cost a lot less than new customers).
I can keep using SEMRush more to get the answers I want.
I wouldn’t need a digital marketing expert to do the calculations.
A combination of SEMRush with the next set of tools that I will introduce to you can quickly help you get the answers.
Action Points to do 'Market Research before starting a Business'
Phew! This has been one long chapter with so much textual information for you to digest!
If you are overwhelmed with what you read above, here are quick action points for you:
- Action Point 1: Got to google and type the keywords that come to your mind regarding your business
- Action Point 2: Get as much information as possible about your business from the internet including market size, pain areas, market gap, etc
- Action Point 3: Register to SEMRush (they have a seven-day trial) and snoop in on your competitors
- Action Point 4: Make sense of everything that you have gathered till now by looking at keywords your competitors use to rank their paid marketing campaigns. In short, you want to study their digital presence and then, use it to understand where and how does your business get placed in the market
- Action Point 5: The first four steps must have been exhaustive. Time to chill – Grab a Beer and relax. You will have the next step tomorrow in your mailbox 🙂