Q&A: Avoid analysis paralysis
Amy Hazelton of Paddington, Queensland asks:
I am establishing a business. I want to make it an immediate success, so have spent seven months doing market research including speaking with my family and some friends. I feel like I have more to do and will spend more time adjusting my analysis before proceeding. I would appreciate your advice about market research at this point.
Kenelm Tonkin, Chairman, Tonkin Corporation answers:
Here are two frequently occurring errors with market research. The first is limiting it to family and friends - the too insular mistake. The second is failing to apply a research deadline and allowing market research to become a never-ending excuse not to launch - the analysis paralysis problem.
The reality is that serious business aspirants need to ensure their market research strikes a careful balance between casting a wide enough net to be useful and finite enough so launching is possible.
Entrepreneurs do pre-launch market research well when they engage the following six groups: prospective customers, companies offering substitutes, competitors, likely employees, future suppliers and former proprietors.
From customers, substitutes and competitors, it is possible to discern future revenue and its stability. From employees and suppliers, one is able to assess future expenses and how easily they are controlled. From proprietors formerly in the business, you can gain untold insights! From all of them, the necessary initial and future cash requirements reveal themselves.
Savvy entrepreneurs jealously guard their hard-earned capital and therefore do not skimp on market research. Before launch, they talk to all six groups.
Exceptional market research comes from asking 57 universal market research questions. The questions should shed light on revenue, income stability, expenses, cost control and capital requirements. As long as the would-be entrepreneur asks enough people from the six groups so that a consensus in the answers emerges, the market research is sufficient.
There comes a time though when further market research yields little more. Knowing when to stop is important. Really, the process takes weeks, not months. In the end, one must take a punt. Delay, and an excellent opportunity may be missed.