External Environment -who else is operating in your sector?
Next we suggest doing a market check of your proposed sector
What sort of companies are operating in this sector?
Which target market are they focused on?
What the they good/lacking at?
Who else is out there and what are they offering in the same space, or meeting the same needs? Look at both competitors and substitutions, (other answers to solve the same issue).
Look also at international operators – are any of them offering services to the local market?
This can be done online initially with a simple google search – We suggest that you keep a record as you go of business name and website and what impression you have about them:
- where are they based?
- who are they targeting?
- are they focused on one particular subset of your products or services?
- are they big multi nationals or small family owned businesses?
Some of them will seem a bit “tired” and out of date, others maybe more serious, occasionally you will come across one that looks really good and you should highlight it on your list. Don’t get disillusioned that there ARE good competitors, if there are no competitors then the industry is ripe for a large experienced player to enter or a major change or customers may be moving away from this sector into another solution/product. If there are one or two good competitors then you need to do some more work on the opportunity, but it shows that there is demand in this sector.
Go and see them if they have premises, do a mystery shop if you can (pretend to be, or be a customer) and see if you can find out what the industry and potential customers think of them.
- Do potential buyers know about them?
- Have they done business with them?
- What is their impression?
- What are they good at?
- What are they not good at?
Don’t get too excited at this point – one dissatisfied client for one competitor does not make a Business. It is a potential opportunity worth exploring.
I often find at this point entrepreneurs are disillusioned; ‘I don’t know any of their clients”. You need to use your contact list and start asking: “Do you know anyone who is in this industry or who has recently bought/used this product and do you mind me ringing them and asking them about their experience”? Even if they used another product/supplier or solution they may have evaluated some of the competitors you are looking at, and have an opinion on them.
If you don’t want to do this, you have to ask yourself serious about your motivations. Are you dedicated enough to this idea and business sector, to succeed or are you just toying with an idea?
TIP: Spend the time asking and thinking abut the SELLING of your product or service rather than the creating of it. When you are looking at this point, you are finding out who wants it, at what price, what their wants and needs are and what issues they currently face that you could solve. Lots of people focus on the buying, making side of the business, because this is where they feel the most comfortable. You don’t have to commission expensive marketing testing but you do need to get out there and talk to some potential customers and industry experts especially if you are new to this sector.
If the initial review of the market left you thinking that the opportunity is worth exploring, or if you can see that here are some segments that are very well catered for and others where there are gaps, then you need to be aware that you might need to mould or flex your original idea to enter the market.
How do you know the difference between good competition and no opportunity? The answer is that people will tell you, if you explain your idea and people say – why would I consider you? when my existing providers are great… then you need to keep looking.
Questions to ask:
- Is there a subset of their market that they are not worrying about?
- Could you start there?
I am not saying that you cannot tackle them in the future, just that we are suggesting that you get yourself into the market and build a platform to trade on and then with those skills and experience decide if you are going to ‘chip away’ at their sector. Head-to-head combat is not usually a good technique for a start-up – unless you have serious funding and experience behind you and a reason to ‘market share grab’ quickly. If you were watching TV last year you would have seen that Australian insurer Youi did this in the NZ market with a near saturation TV advertising campaign. A very expensive exercise.
If this exercise shows some possibility, then you need to do a quick industry review. What is the media saying about this industry sector? Is it experiencing challenging times – globalisation or large technology changes? Most industries are, and in fact some are completely changing. This may present opportunities; you just don’t want to be going in with an outdated model. Take to some existing operators in your proposed sector. What are they saying.
Be very wary of mature or declining sectors – it might seem that nothing much is happening, but although the end was signalled ahead for a lot of music and bookstores and video shops, when the end came it was very sudden and some people got caught out.
At this point and before you make a decision you should look at Step 3 in the next blog. What skills and experience are you (and any business partners bringing to the table? Does that match or balance the risks in the opportunity and business goals?