“Is there likely to be substantial demand for a new, environmentally friendly dry cleaners throughout the city of Laurelwood?” Or, if you plan on developing online applications for the management of medical records nationwide, you might ask, “Is the U.S. market for medical records management applications large enough for me to succeed?”
Research resources
To research your company and complete the worksheets and exercise in this chapter, be sure to refer to Chapter 20 on pages 483–500 for a comprehensive list of research resources. You’ll find resources for researching your industry, your target market, your competition, and more.
In the case of the dry cleaners, your question would lead to other questions, such as the number of dry cleaners in Laurelwood now, the nature and strength of competitors, the number of potential customers in Laurelwood based on information about the demographics of people who use dry cleaners, and so on.
Industry
No matter how good your idea, you never build a business in a vacuum. Trends affecting your industry affect your business, too. If your industry is booming, your business has a better chance of succeeding than if your industry is shrinking or in trouble. Knowing what’s happening in your industry enables you to better compete and to anticipate structural issues that will likely confront you.
In addition to educating yourself about your specific industry, it’s a good idea to look at the health of the broad economic sector to which your industry belongs (for example, manufacturing, retail, transportation, information, or services). Information about past performance in this broad economic sector, and growth projections for it, gives you a sense of the economic environment in which your industry operates. If you want to open a bookstore, for example, find out what’s happening in the entire retail sector in your area.
Still, the most important data you can collect concerns your specific industry. After all, even if the retail sector as a whole is thriving, bookstores may face unique pressures.
FINDING INDUSTRY DATA HELPS YOU
Understand
Understand conditions and trends your business may encounter, so you’ll be better prepared to deal with them.
Gather
Gather solid facts and figures to help you prepare a more realistic business plan and build a stronger company.
Demonstrate
Demonstrate to potential investors and lenders that you have a good grasp of external business conditions as well as a realistic plan for your business.
TIPS FOR FINDING INDUSTRY INFORMATION
1. Begin with an industry overview by reading a few articles that give you a sense of an industry’s history and trends. Good sources for overviews like this include general business media websites and publications, industry-specific publications, and industry analyst reports. Remember to refer to Chapter 20 on pages 483–500 for research resources.
2. Find the NAICS code for your industry. Knowing the numerical code that identifies your specific industry makes it much easier to find information, especially statistical data. To find the NAICS code for your industry, go to www.census.gov/eos/www/naics.
3. Make a list of terms that describe your industry or its key aspects. Most industries can be identified in more than one way. A dairy, for instance, can also be called a “milk producer” or be referred to as “cattle farming.” Having a variety of relevant terms at your fingertips to describe your industry will help when you conduct keyword searches.
4. Check out your industry’s trade association. Trade associations are good places to find statistical data, projections of industry trends, and links to other sources of information. A list of many trade association websites is available at www.planningshop.com/associations.
When exploring a trade association website, look for tabs or topics such as:
— Press/media, or news
— Research
— About the industry
— Industry publications
Searching by NAICS codes
Every type of business in North America has been assigned a numerical code, called a NAICS code. NAICS (pronounced nakes) stands for the North American Industry Classification System. NAICS was developed by the governments of the United States, Canada, and Mexico as a way to standardize industry categorization.
You’ll often be asked to provide a NAICS code as part of a search for business information. Knowing the NAICS code for the industry you’re interested in makes searching for, and finding, data about it much faster and easier—and produces more accurate results.
See pages 60 and 68
Market
Understanding your customers is essential to business success. You need to know who they are, where they are, what they want, how they behave, and what they can afford. Most important, you have to know that they exist—and in numbers big enough to support your business.
If you seek financing for your company, anticipate that your investors will grill you about the size of your potential target market. They’ll want to know that this market is large enough to sustain your business, even in the face of existing competition.
Your target market may consist of either consumers (in which case yours is a B2C, or business-to-consumer, business) or other businesses (a B2B, or business-to-business, business). In either case, before you begin to research your target market, you must narrow the market definition even more by identifying the particular market segment you want to reach.
ENTREPRENEUR’S WORKSHEET
Types of Industry Information to Research
From this list of suggested industry topics, select which issues you will focus on.
☐ General industry overview and analysis
☐ Key technological, sociological, distribution, or other factors dramatically affecting your industry
☐ Current and historical financial performance of the industry, including:
— Total revenues, overall and by product lines, if possible
— Total number of units sold, by product lines, if possible
— Total profits and average profit margins
— Growth rates over the past few years
☐ Companies in the industry, including:
—