Research is the Key to Your New Small Business’s Success
Planning to start a new local small business? There is one thing over anything else that will help ensure your new small business’s success. Research!
With almost 50% of small businesses failing within their first few year, doing your research is probably going to be the most important thing you will do to ensure your businesses success. However, your research will save you lots of time and money in your first year of business and this alone can be the difference between success and failure.
I can hear all the “A” type personalities hating this step already. Let’s face it, you want to just jump in and start running! It is what you do. You like to kick butt and take names! That is what makes you so successful in so many ways. But you need to slow down turbo! Jumping in without doing your research will cost you tons of money and a lot of needless mistakes.
WHY IS RESEARCH SO IMPORTANT?
Before we dive into what type of research you should be doing, it is critical that we first take a look at why research is so important in the first place.
Here are just a few of the benefits to doing your research:
It Helps You Discover Who Your Target Customer Is – You don’t want to waste time and energy chasing sales from people that are not interested in your products and services.
What Are the Primary Needs of Your Target Customer? – Way too often we assume what our customer wants or needs. However, many times they are seeking something else from us. You want to be crystal clear that you are providing what they actually are looking for from you and your company.
Saves You Money and Time in the Future by Keeping You from Making Mistakes that Come at a Price – Why waste time and money on things that a simple Google search and a little leg work could provide the same results? Plus, your competitors have already made most of the mistakes you can learn from. (more on this in a bit)
Prevents You from Getting Fined for Doing Things Wrong – Research is more than your customers’ needs or what your competitors are doing. There are governmental requirements that if done wrong could cost you money. You need to be aware.
Listen to Part 1 of the Research Podcast Episode
Now that you know why you want to do your research, let’s dive in a little deeper into the different types of buckets of research you will want to do.
RESEARCH YOUR COMPETITION
The first thing we need to discuss is, why you need to study your competitors & what they are doing right. Here is where you will learn tons of great intel on how to shoot out the gates with a bang! Our local small business competitors, as well as any big box retailers, or corporate companies, are a wealth of information that you need to tap into. Remember, if you are going after the same customer or client, you are competitors.
When we think of our competitors, we tend to automatically jump to how we are better than they are, or in this case, how much better you plan to be. We think, there is no way we will make the same mistakes as they have.
Please don’t be arrogant and think like this. Be open to learning from them. You will be glad you did. Trust me, I’ve been there. You will need to fight your natural inclination to pick on what they are doing poorly. We’ve been trained since we were young, to pick on our competition and taunt them. To believe we are better than they are.
But you can’t assume that just because they aren’t meeting the standards you think they should, that you can just dismiss them. Let’s face it. They are in business for a reason. They are making money for a reason. Your goal is to find out why.
Maybe they are the only game in town, maybe they have poor service yet do quality work so people are willing to overlook their weaknesses. Maybe it is the opposite… they do horrible work but people love the great customer service and are more forgiving.
Or it could be, they have been around so long that folks don’t know any better but to use them thinking there are no better options in town. Don’t underestimate this one. You hear about these all the time.
Don’t get me wrong, knowing what they are doing poorly is great for you. You can take these areas and leverage them in your business. If they are bad at customer service, then you can set your bar so high, it really stands out. If they do poor quality of work, then you make sure your work is superior to anyone else’s.
It is just as critical that you study what your competition is doing well. What are they doing a fantastic job at? Why do people love them so much? As we discussed earlier, there is a reason they keep getting business. Your goal is to find out why. You need to know what you are up against and how you can improve upon their strengths.
HOW TO RESEARCH YOUR COMPETITORS
The #1 thing that you can do is to start to talk to people. Talk to those that use these local small businesses, these big box retailers. Why do they use them? What has been their experience? Maybe they do a great job targeting a certain type of customer. How are they getting them? What is their hold on these folks?
Here are a few areas you will want to make sure you look at:
What does their Customer Service look like?
How about their Quality of work?
How they do their marketing?
How have they branded themselves?
How do they get their people?
These are just a few examples to explore. You want to know everything, both good or bad. What can you discover about your competitors and their business?
Remember, these will typically be the areas that they set the bar for you to match or exceed. If they are great at customer service, you will need to blow them out of the water.
Think about it, if you take the best of all your competitors, you will have an unfair advantage over them. Right now, you are starting from scratch, but with all these questions answered you will have a leg up on what it will take to beat them. You will know exactly how to create the reputation you want in your community.
WHAT DO THEY CHARGE FOR THEIR SERVICES / PRODUCTS?
In addition to learning what your future competitors do right in the marketplace, you need to study them also from services & products perspective.
What products & services are they offering? What products & services aren’t they offering? Are there similarities to what you were going to offer? Are there services you didn’t even think of?
How about any add-on products or services? Look for anything that confirms you are on the right track and anything that you might not have even thought of. Your main goal is to make sure you can be competitive and provide what folks are looking for.
By the way, it is also important to identify anything they offer but rarely sell or maybe has a horrible return rate. Remember, just because others offer a product or service, if it doesn’t sell or produce value, don’t make the same mistake!
An Important Note: Do not carry inventory you do not need or rarely sell. All you do is tie up cash you could be using to purchase stuff you need or to more hire help. Or better yet, your profits can be invested back into your company or take-home pay.
Another area you will want to take a look at is… What types of materials are they using? Top notch or poor quality? Is there a standard your customers will expect? Is there an opportunity for you to take it up a level?
Whatever you do, don’t sacrifice quality to save money. But then again, don’t go crazy and way overdo it either. Find the balance by doing your research
PRICING for YOUR LOCAL SMALL BUSINESS
Now, before we move to pricing, there is one more area that crosses into both categories. Is there a niche that you can carve out? Something, that you can become a specialist in to stand out from the competition? Maybe this niche is a certain product or service you can offer a great price over the competition. A great example of this is the folks that say something like “Home of the $49 tune-up” or something similar.
So, with that, let’s talk about pricing. What is your competition charging customers for their products or services? How can they charge that price? Are they overpriced? Underpriced? Can you determine what their profit margin is on their products or services?
Use the information you find to also help set your pricing. In the early stages of your local small business, you will need to stay competitive. Later, once you build a reputation and following, you can charge more, but the first year is about remaining competitive.
But it all starts with studying what your competition is charging. Please remember though, it all comes down to service and quality of work. These two things must always remain top notch!
HOW ARE THEY MARKETING?
The next part of your research on your competitors will be how they market their business. For example:
Do they have a website? If so, what do they include? How can you ensure you match or improve on theirs? Caution. If they have a high-tech website, do not try and match them out the gate. Focus on the key items you need and have a plan to improve yours down the road.
Do they have a Facebook page? If so, how many “likes” to they have? Do they engage with their “fans”? What types of posts do they do? Can you get any ideas from what you see?
I want you to go to Google and type in your business type in your town and see who pops up when you “google” similar businesses just like a customer would. This will tell you who has done the right stuff behind the scenes to be found. This is a critical piece of your marketing. In today’s online world, you want to be found.
Make a note that you need to “claim” your business on all the big search engines as well as key websites. I know I sound like a broken record, but this step is critical.
You will also want to learn how do they market in the community? Flyers? Post Cards? Car Decals? Newspapers? Sponsoring Teams? What opportunities are you finding? What ideas are popping in your head? Write them down. Be creative and think outside of the box. Especially any low-cost ways you can get out there.
Researching what marketing your competitions is doing will give you some great ideas as to what is working and what isn’t. Remember, if a competitor is sending out postcards yet getting little business ask yourself, is it the postcard or the message on the postcard? Can you create a better one?
REPUTATION IN THE COMMUNITY
Finally, I want to go over one last thing on researching your community. You want to identify what type of reputation your future competitors have in the local community. This one is critical. Not just for what you find out about your competitors but what it will show you are the opportunities or challenges.
You want to know what the community is saying about them? For example, do they do great work but have horrible service? Do they show up on time? By the way, don’t underestimate this one. Being late bothers customers tremendously as it is a sign of a lack of respect for your customer’s time.
Other things to keep an ear out for… is their help dirty and rude? Is the business owner also considered rude? Are they known to have terrible communication and never call people back? This one is another big deal breaker for customers and clients. Doing the right research for your new business can help you find this stuff.
Remember, these are areas you can leverage to grow and develop your new business. After doing your research, you will want to know how will you build your reputation. How will you take your competitor’s weaknesses and leverage them? How will you take their strengths and improve on them?
For example: Let’s use the fact that they are late. How could you leverage this to your advantage? How about creating a catchy promo about you being on time? You could wave your service fee if you are late. Or maybe they get a free add on product if you are late. Make it fun and a challenge for you to live up to your word.
And don’t forget!! Don’t focus on just their negative reputation items but also their strengths as these are what you will be going up against. It is easy to beat someone at the stuff they suck at, but it is much harder to start at their high bar and then raise yours even more.
BEFORE WE MOVE TO THE NEXT RESEARCH STEP
As we wrap up this part of researching your competitors, you want to remember, research will give you a tremendous advantage over those already in business. They have already paved the way, all you must do is research their business. So many answers are waiting for you. You just need to go get it.
RESEARCH THESE ITEMS TO SAVE TIME AND MONEY!
So here in part 2 of our research topic, we are going to dive into all the other items that you will want to research as part of our journey into opening your new local small business. Now don’t forget to get your downloadable checklist that you can use. Just click the resources tab or type in startalocalsmallbusiness.com/researchchecklist
RESEARCH THE TRADE AREA YOU WILL SERVE
As a bridge between our competitors and other types of research, I want to make sure that you are also considering the trade area that you plan on servicing.
If you plan on having a brick and mortar, statistically, your trade area is no more than 5 miles unless you are a destination place that folks will seek out and are willing to drive further. For example, those in remote areas will drive hours just to spend a day at Walmart. Odds are, you aren’t this type of business, so you are looking at the 5-mile rule. So, when determining a location, make sure that you are looking at the 5-mile area and how many potential clients or customers you might have.
Each business is different. When I had my ice cream shop, it was great, I had all single-family homes within the 5-mile radius. However, if I had been surrounded by businesses only, that would not have been my primary demographic and my sales would have suffered. If you are a garage door repair company, and the 5 miles around you are all carports, this would not be a great business location as well. So you can see, it is important that you research the community and what is around your local small business.
Now, if you are a mobile business, take it to them type of business, then you can have a little more of a trade area as long as it makes sense. If your jobs are worth the extra time and gas, and you can make thousands a pop, then 25 miles might make sense, but if the jobs are only $100 then it wouldn’t be smart idea.
Besides, it is much easier to dominate a smaller market place then a larger one. So, if you have a business that allows you to crush it and stay close to home, go for it. Be the #1 business in your own backyard.
Special Requirements of the Business Such as Training or Certifications
Since each business is slightly different, some will require you to have special certifications or training. Sometimes this will be directed by the state, county or city and other times by the profession itself. For example, in some areas, a dog groomer needs certain training and hours in the field and in other areas, nothing. (although I do recommend having some experience…lol)
The best areas to check for this is the government websites as well as the core websites for the profession you are entering. There are usually some accredited certifications in many businesses, you might even be required to be a part of them. Google is great for this type of research. Plus, you will want to speak to others that are already doing the same business. They might be willing to share how they got their experience or which companies they would recommend.
For example, I have a friend who is thinking of becoming a home inspector, so I got him hooked up with a few local home inspectors to get more information on doing the job as a business owner, as well as the schools they might recommend. He has a long handyman / contractor experience so he is a good fit. Currently he has been researching all week the needs and the costs associated with this transition. Yes, he is doing his research!
So make sure that you are doing your research on any special requirements that your new business might have.
Listen to Part 2 of the Research Podcast Episode
Licensing Needed by City, County and State
Your next stop will be to go to your city hall, your county offices and your state’s website. You will probably need a license to run your business. Each of these areas will have different requirements. So, make sure to check with each of them on any special licensing you will need. These folks can be a great resource for several other questions we will talk about shortly.
Taxes Your Will Need to Collect
While checking on your licensing, make sure to ask them about any taxes you will need to collect at the time of your services. Brick and mortars will have sales taxes for example. However, don’t assume that because your state might not have state sales tax it might still have other taxes. Some areas collect taxes on service based business and some don’t.
Plus, there are different types of taxes to be collected. So, you will want to make sure that you know exactly what your state and the government will be expecting from you each year when you file your taxes. This is especially true if you plan on having employees. There are a few different taxes you will want to become familiar with.
Please don’t skip this section. It is so difficult to get out of tax problems. This area bites many a small business owner in the butt especially if they are new to self-employment and your taxes have always been taken out for you. They will put you in jail and it isn’t worth it!
By the way, the IRS has a great website for you to visit before starting your new local small business. IRS Website for Small Business
Permits Needed by City, County and State
The other area that these government websites will be a great help with are any permits you might need. Sometimes it will be a permit for your building or a permit to work out of your vehicle.
Some businesses require permits to set up shop on the streets; for example, a snow cone business using parking space. I’ve even heard of some folks needing a permit if they use too much water as part of their business. For example, a hair salon or maybe even a dog groomer.
Don’t forget, if you are doing anything with food, you will definitely be required to have permits in order to serve the public in any way.
So, to recap, when you are speaking to the city, county and state, not to mention the federal level, make sure that you are asking about licensing, permits and taxes. Also as the most important question of all, “What are you forgetting?”
Your next research item is the insurances you will need. You will probably need some general insurance to cover you and your business. Most small businesses need some type of liability insurance when working with the public or in their homes.
You will also need insurance on all brick and mortar businesses. Your landlord will let you know the amount they will require. If you have a franchise, they also will let you know the amount they require.
If you have employees you will require certain insurances as well such as workers comp. So, make sure to dive into this area and make sure you have adequate coverage and meet all requirements.
Now, not all businesses will need to be bonded. If it is an industry standard, then you will need to probably do it. In some cases, it will allow you to get paid more since there will be times someone needs a licensed, bonded person. Do your homework on this one. There are quite a few businesses that require you to be licensed and bonded so make sure you double check.
Zoning Laws and Other Regulations
You will also want to check with the city, county and state on any zoning laws or other regulations that they will require your business to comply with. You will also want to make sure the area you planning to run your business out of will meet any standards or zoning. Whether it is a brick and mortar, your vehicle or your home, you will want to make sure that it is zoned for what you plan on doing. So make sure to check
Leasing and build outs for any brick and mortar businesses
Now here is a whole mess of research needed. I'm not going to cover everything, but I did want to make sure that you know there is a lot of research needed if you plan on opening a brick and mortar business. In addition to the items we covered earlier, there are tons of costs and needs for leasing a space.
Location is a huge thing that needs research. Leasing costs can vary from shopping center to shopping center. For example, in my town, we have 3 shopping centers across and side by side. The price per sq ft varies dramatically. It might be due to the landlord feeling the space is worth x a sq ft or it could be the main anchor store drives more business than the others. A Walmart or main grocery is worth more than say a hobby lobby as the anchor. More cars drive into the parking lot vs the other.
Costs for mobile business for vehicle and other related costs like gas, insurance, etc
A growing trend in response to the high costs of brick and mortar leases and build outs, are the new wave of mobile businesses where you take your business to them vs the traditional store fronts. Now, this is slightly different than normal businesses that go into folks homes like plumbers, handymen, & painters. I’m talking about mobile dog grooming, mobile glass repair, and mobile food trucks for example. The vehicle becomes the brick and mortar.
In order to do this type of business, you will want to verify once again the rules that your city, county and state have. You also will want to look at all the costs associated with this type of delivery method. For example, what would it cost you to get the vehicle? Do you need a trailer or box truck? What special equipment will you need? How much in gas will you typically spend a month? What special insurance will you need?
Once again, a great resource might be others doing the same mobile business. Ask them what they forgot to research. What do they wish they knew back then? You can also call others out of your area; these folks might be more open to answering questions since they will not see you as a threat. Just Google them and reach out.
Costs for Products & Equipment Needed
No matter what your business is, you will have products and equipment needed. From the low end of say a window cleaning business to pizzeria that needs a giant oven and topping stations. Not to mention all the little items that add up like utensils and supplies.
You will want to make a detailed list of everything your new business will require you to have and what the costs are. Plus, how you will pay for it? We will go into more detail in other posts about financing your new business, but here you want to get an idea of what you are looking at.
Now, an important thing to keep in mind when you are working this section of your research. There are 2 buckets to put these items in. The MUST have Bucket and the LIKE to have Bucket. The must have items are those that you must have to start the business. For example, a handyman will need a screw driver in his must have bucket but a drill press would be in his like to have as there are few if any jobs needing a drill press.
Keep in mind, your “like” bucket items can be purchased along the way. Either as you need them or by saving up for them. In some cases, you can rent them as needed vs owning them out right.
All Start Up Costs for the Business
In this final area, you will need to brainstorm any other items that you will need to dive into. Think of things that don’t fall into the other buckets. For example, if you will have employees, you will need to have a section on what it will take to hire, training and pay them. Will you use a payroll service or do it yourself? What taxes will you need to hold off? How will you find folks? I will not dive into this one much deeper as we will have posts diving into hiring people coming up.
But think of all startup costs you might have. Research on the various suppliers for example. Research the seasonal swing periods of the year. What categories sell the best during certain times of the year? Dive into the various ways you can market your business.
As you can see, there are all kinds of stuff you will want to look into.
DON,T SKIP YOUR RESEARCH!
I know I said this before. DO NOT SKIP YOUR RESEARCH! I can’t stress this enough. By skipping any parts, you risk costing yourself tons of money by learning the hard way.
While this will not be the sexy part of starting your new local small business, it is an important part, probably the most important part of starting your business.
Don’t forget, there is a checklist to help you get going. You will find a research checklist at startalocalsmallbusiness.com/researchchecklist.
Please take the time needed to know what you will be going up against. You will save yourself lots of time by not having to learn the hard way.
When you go into anything blind, you fall down a lot. When you fall down, you cost yourself money. Do you really think you can afford to spend your first year losing money? Or would you rather maximize your sales and profits out the gate by just spending a day or two learning all you can up front?
Don’t be foolish. Just do it. Remember, you need to know the good, the bad and the ugly. You want to mirror or exceed their strengths and leverage any opportunities you find so you can really Stand out.
Business owners who invest up front, will come out the gate with the cards stacked in their favor for success!
Helpful Links for Your New Local Small Business:
Get a FREE Audiobook! Take your Business Books on the Road with You! CLICK to GET YOUR FREE AUDIOBOOK
My Recommended Bookkeeping Program for Local Small Business Owners: Freshbooks Link
Why? Helps you invoice quicker and more importantly, get paid quicker. Let’s you know when your clients have opened the email and they even help send reminders. Clients / customers can pay right from their phone or computer. Give it a Try: Freshbooks
**Freshbooks & Audible are affiliate links. This costs you nothing. I only recommend due to how much folks have loved it. I am paid a small commission but trust me. Even I use it. Try it for free for 30 days and see if you don’t love it too!
DON'T FORGET YOUR YOUR FREE GUIDE!