5 things you must research before you start your new business

Once you’ve decided to start your own business, the natural instinct for many is to jump headfirst into getting it off the ground immediately.

Starting your own business might have been something that’s been at the back of your mind for years, and now that you’ve finally decided to take the plunge, you don’t want to waste any more time.

Well, despite the urgency you probably feel, it would be sensible to spend some time examining the true viability of your business.

Many people rush into their first business and live to regret it down the line.

Important decisions made in haste tend to have implications. And while you shouldn’t use that as an excuse not to get on and make your dream happen, there are five things you must research before you start your business.

1. Research the market

Just because you can do something doesn’t mean people will buy it. Or, just because you can do something doesn’t mean people will pay enough or buy enough of it to make you a profit. There’s nothing smart about working flat out running your business for no profit. You won’t be an entrepreneur; instead, you’ll just be a busy fool.

Sometimes the gap in the market that you’ve spotted is there for a good reason. Maybe it’s difficult to make money from it. That doesn’t mean it is impossible – there are opportunities everywhere – but if the gap seems obvious, ask yourself why no one else is capitalising on it. When you go looking, you may find a graveyard full of businesses that did what you intended to do and failed.

Market research can be as simple as talking to potential customers, spending a few hours on the internet, or acting as a potential customer and checking out the competition.

Consider using AI-powered tools like SparkToro for audience research or SEMrush and Ahrefs for search analytics. These tools help identify what people are searching for, discussing online, and buying, giving you a better insight into current customer interests and trends.

2. Get real information

Your research becomes even more valuable when backed up with solid information compiled by professional researchers and reliable industry sources.

A quick search online will lead you to numerous guides and industry reports, which can provide valuable insights into the sectors you’re looking to operate in or target.

Many reports and summaries are available for free or at a low cost from sites like Statista, IBISWorld, and MarketResearch.com. Even high level reports, which might not be directly related to your small business idea, may help focus your research.

For detailed, data-driven insights, take a look at sites like Crunchbase or PitchBook. These tools explore current market trends, competitor information, and startup funding data. This might be particularly useful if you’re looking to enter a rapidly evolving or tech-focused area of business.

For ongoing insights, subscribe to industry newsletters, podcasts, and webinars offered by market research firms and business publications.

3. Is there a demand for your product or service?

This is something you won’t find in a report – will people buy what you have to offer? Many people that start in business do so because they’re good at something and want to do it for themselves, rather than someone else. But just because they buy something from your former employer doesn’t necessarily mean they will buy it from you.

To determine if there is demand, assess the size of the market (using the information reports) and the number of companies serving it. Then look at the existing offerings: is there an opportunity to be cheaper, more expensive, higher quality, lower quality?

Go back to step one and do your research to see if customers are there. Be brutal and remember that people who are nice to your face in the research phase won’t necessarily turn into work when your business starts.

Try creating a minimum viable product (MVP) or running a pilot program to gauge actual demand.

Tools like Productboard can help test product ideas, while survey platforms like Typeform help to gather targeted feedback.

At an even more basic level, you could validate your concept by building a simple landing page on your site and directing traffic through paid ads to measure actual interest before you fully commit to an idea.

4. Work out the figures – do they add up?

So, you’ve established there’s demand for your product in a growing market. Well done, but now you need to determine if it’s profitable. If the opening is to be the cheapest in the market, will your pricing allow room for profitability? If it’s to be the highest quality, can you deliver the best product for a reasonable price?

Put together a budget for the first three years. It’s easy to work out costs; but beware with your sales forecasts – most business people wildly overestimate the sales they think they will get. If anything, be pessimistic with your sales forecast… you’ll enjoy being pleasantly surprised when your business performs better than you have anticipated.

If the figures don’t stack up, don’t ignore the message they are giving you. Figures don’t lie, and you will have much more fun running a profitable business than one which turns over plenty, but doesn’t leave any profit for you!

Accounting software like QuickBooks or Xero can help manage and forecast your finances, enabling you to better plan for expenses and revenue.

Try business financial modelling tools like LivePlan or ProjectionHub for more detailed projections.

5. What do you want to be doing in five years?

Even though it’s probably one of the last things on your mind when you are getting your business off the ground, it’s very important you think about your exit strategy before starting your business. This can drive everything you do in the years to come.

If you want to sell your business in five year’s time, you must develop a business that thrives without you.

If you want to sell to your management team, you must pick your key players carefully. Want to make a million? You will need to be able to scale the business up (while remembering that none of your employees will work as hard as you will).

Armed with the research and information you have already gathered, setting your five-year plan will be much easier, and you will be ready to start your business.