A few phone calls may save your nest egg

Unsure about a new business or product, try a little "down and dirty" market research. Pick up the phone and find out about your chances of success.

Column 11 0 September 23 2002
Entrepreneurship

     A Few Phone Calls May Save Your Nest Egg
                                                

The ability to find information when you need it and then act on it is what gets things done." Anonymous

                                                Dr. Paul E Adams

How do you know if your business or product will make it? Gut feelings and wishful thinking are skimpy on facts. And trusting to your good luck can prove disastrous. You may be kidding yourself with blind optimism or wishful thinking if you dont have any facts about your chances of success. Just as 80% of new businesses fail; so do most new products. Much of the tragedy of any new business failure can be traced to the entrepreneurs ignorance of customers and markets. Dont be foolish by acting hastily on hunches. Just because you think your new business will succeed does not make it so. In the business world actions without facts can be risky and ruin you.

Do your homework before you gamble all those dollars it took you so long to squirrel away. May I suggest you check out some market research tools before committing to a decision that has no back door. While you may not like what you find out, the information may spare you pain. If you are to be a wise entrepreneur, you need hard facts. You need answers to the basic questions: Who are your customers? Where are they? And how many will buy from you? Your success depends on replacing wishful thinking with facts-pro or con. If the market is telling you your new business will be marginal at best or your new product idea is
"no great shakes," count your blessings- take your nest egg and look elsewhere for a better opportunity.        

How Much Do You Need To Know?

Enough to do the right thing. Market research can be costly, it can be complex, or it can be simple. It will depend on what you need to know to make money. As you will find out, information is expensive. You can do surveys, you can do statistical research, or you can hire focus groups. It is easy to spend more than you can afford. Be cautious and crawl a bit. Dont rush to your nearest market research firm just to feel safe. Limit your research to the important facts. Get enough data to reasonably answer the questions; who, where, and how many-too much research will waste your money and time.

     For starters, try my approach. I like first hand data. I like a simple approach to market research. I like to play" investigative reporter and make a few phone calls. It is amazing what you can find learn in a short time. It is simple and may be accurate for your needs. It can give you a quick insight telling you if you need more data to make a decision, how to avoid a potential problem, or pursue a market.    

A Market Dud!
     Steve is an independent sales agent for a few companies in the construction and landscape supply business. Recently, he came upon a unique" contractors tool designed and manufactured as a sideline by a neighbor. After a brief chat, the neighbor asked Steve to sell the item for him. "Sure," said Steve and he began promoting it to his tool and hardware distributors. Initially all seemed well with a rash of orders. But after two months and no reorders or checks, the neighbor sensed something was wrong. There certainly was. The unique" tool was not moving off the distributor's shelves. No one was buying it. Contractors would look at it, comment about the price, and walk away. It was not long before the distributors demanded to send the product back. The owner of the tool company was given the choice of bad debt or a warehouse of dead" inventory. Wonderful!
     While Steve and his customers liked the item, it failed because if was not selling to the end-user. A call or two may have sounded the warning bell alerting the tool maker that a problem was brewing. If it had been my company, and my money, almost from day one, I would have phoned my distributors to find out if people were buying my product.    
     Like many executives who blame the sales force when a product is not selling, Steve was the culprit in the eyes of the toolmaker. Yet, the real culprit was the entrepreneur as he did no research on pricing, packaging, or the best way to distribute the item. Steve did his job- his neighbor did not.

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Dr Paul E Adams, Professor Emeritus Business, Ramapo College of New Jersey & Retired Entrepreneur. Author of Fail-Proof Your Business," Available @ Amazon Dot Com. Comments, questions, or suggestions to: xpaul@pikeonline.net