Atlanta is the fourth most popular market in the United States for self-employment, according to research by NerdWallet. There are plenty of great reasons to start your own business such as flexible scheduling, tax benefits, and an ability to exercise your creativity. But the fact remains that small businesses are tricky to establish with 20 percent failing within the first year, 50 percent within the fifth year, and 70 percent destined to shutter their windows within 10 years.
Many factors can contribute to a business’s demise, and it’s often more than a sole thing that causes the failure. But surprisingly, it isn’t competition that’s the primary cause – only 19 percent are out-competed in their product market. Pricing is seldom the issue with only 18 percent unable to sustain business due to pricing or cost issues. It’s not even the team in place, with ‘Not the Right Team’ being selected only 23 percent of the time as a factor.
Cash flow is considered a factor in 29 percent of business failures, whether with mismanaged funds or lack of capital to sustain the initial business startup. But even cash flow comes second to one other reason for business failure. CB Insights identifies it as ‘No Market Need’.
Does the Market Need Your Product?
As an entrepreneur, a great idea can be the catalyst to start a business. It’s often a product or service with solid reasoning – it solves a problem, improves quality of life, or provides entertainment to the consumer. Yet, even these solid ideas can fail within the first few years, unsustainable or unprofitable simply because there isn’t enough need in the market.
It doesn’t mean the product you’ve developed, the restaurant you’ve established, or the service you’re providing is innately flawed. To succeed, it’s important to identify key factors about whether or not there’s demand enough for your product.
What seems like a brilliant, innovative, or disruptive idea might be less original than you once thought. Before entering the market with a product or service, research into competitors is invaluable. You may be surprised at how many other businesses engage in the exact market you’re trying to enter.
That’s not to say it won’t be successful. By identifying your direct competition, you can assess whether there’s an opportunity for another provider or if there’s something you can do better or differently to help ensure your success.
Measure the Demand
A good idea may not take flight if the demand simply isn’t high enough. If your product is especially niche, measuring demand is even more critical. It can be valuable research to contact other businesses that offer similar products with questions about demand. Even more important is discovering others who have not succeeded in the space. Lack of previous success can be a clear indication that demand isn’t high enough.
Consider the Local Market
If you’re setting up shop in an affluent suburb compared with an area of subsidized housing, there’s going to be very different demand based on location. You wouldn’t set up a thrift shop in a multi-million-dollar neighborhood, nor would you establish a lawn care business serving downtown Atlanta. Of course, these are ridiculous suggestions, but the need to consider your local market is important.
Market research for a small or medium business can be extremely challenging as the entrepreneur who’s breaking ground on the project. With lofty ideas and often an overly positive view, being unbiased in next to impossible.
To help prevent closing up shop without realizing your potential, consider hiring a market research firm. By understanding buyer trends and insights, you can maximize your time and effort without reinventing the wheel.
The Atlanta Small Business Network, from start-up to success, we are your go-to resource for small business news, information, resources.