Getting Started

What? Where? How Much?

Getting StartedResearch is for your business what the four food groups are for your body: it is fuel; it is nourishment; it is essential for health and growth. Before starting a business, the entrepreneur needs to prepare a business plan. Before preparing a business plan, the entrepreneur needs to do a little homework, otherwise known as research. Research provides the “what,” “where,” and “how much” that every business owner needs to know to be successful. Keep up with your homework, and the whole process of starting and running a business will go much more smoothly. Your research will also create the foundation for all financial projections that you will make related to your business. Do a thorough job conducting your research and you will create a sound foundation for your future financial projections and for the future health of your business.

The first thing an entrepreneur needs to figure out before starting a business is:

Product or Service: What do I want to sell?

Look at your interests, your past experience, your skills. For example, if you spend your weekends taking car engines apart and putting them back together, perhaps you could operate a successful auto repair shop. If your whole family raves about your cooking, you may want to consider opening a catering business. If you have a knack for creating beautiful flower arrangements, consider becoming a florist.

If you need help coming up with ideas for your business, you may want to visit your local library. Ask the librarian for assistance in finding a helpful book or magazine. Here are some ideas for books:

  • 201 Great Ideas for Your Small Business: Revised &
    Updated Edition
    , by Jane Applegate
  • Turn Your Talents into Profits: 100+ Terrific Ideas for
    Starting Your Own Home-Based Microbusiness
    , by
    Darcie Sanders and Martha Bullen
  • What Color is Your Parachute, by Richard Nelson Bolles
  • The 100 Best Businesses for the 21st Century, by
    Gregg Ramsay and Lisa Rogak

Here are some web sites that might help you come up with ideas for your small business:

http://www.entrepreneur.com/ – This is the web site for Entrepreneur magazine.

http://www.sba.gov – This site will take you to the U.S. Small Business Administration on-line. Here you will find interactive tools and articles related to developing an idea for a business to start.

http://www.sbomag.com/ – This is the web site for Small Business Opportunities magazine.

http://pandecta.com/index.html –This web site contains ideas for starting on-line businesses.

http://www.frannet.com/ – If you aren’t sure what kind of business you want to start, a franchise may be the right fit. This web site offers assistance and information on franchise opportunities.

The Next Step

Once you know what you want to sell, the next step is finding out as much as you can about your chosen business. Skipping this step is like building a brick house without mortar. The research you complete here will help you determine sales and income projections, the size of your market, and facts about your competition. In the United States, all types of businesses are classified with a number. This classification system is called the North American Industry Classification System, or NAICS. Formerly it was known as the Standard Industrial Classification (SIC) system. The NAICS classifies 1,170 industries, of which 565 are service-based. It is very specific in its classification. For example, a search using the word “food” produced forty-three matches, ranging from “Food Service Contractors” (number 722310) to “Food Machinery Repair and Maintenance Services” (number 811310). Each match is broken down even further. Select “Food Service Contractors” and the classification is broken down into seven more specific categories ranging from “Airline Food Service Contractors” to “Industrial Caterers.” For more information about NAICS codes, visit the Small Business Administration for “Size Standards” .

To find out the classification number for your business, go to the U.S. Census Bureau’s web site (http://www.census.gov/epcd/naics/framesrc.htm). You will be prompted to enter a word related to your business. For example, if you want to manufacture garden furniture, you could enter “garden.” From the list of businesses with “garden” in the description, there are three related to “garden furniture.” Once you know the NAICS number assigned to your business, you will be able to find out a lot of information about your specific industry.

To find out more about your industry once you know your NAICS number, go to the part of the Census site that contains data from the economic census (http://www.census.gov/epcd/ec97/us/US000.HTM). On this page, you can find information such as the number of retail trade establishments in the Richmond/Petersburg (Virginia) area. At the top right-hand side of the page, there will be a drop-down box from which you can select a location in which you are interested. Then once the data appears, click on the arrow located on the far left in the row next to the category in which you are interested. Clicking this arrow will make your search more specific. Continue clicking the arrow until the industry you are interested in appears.

Who will my customers be?

Once you know what product or service you want to sell, you will want to find out who will buy it. Years of experience may have given you an excellent idea of who your customers will be. For example, if you are opening a shop that sells designer wallpaper, you may know that your customers have higher incomes and own their own homes. If you don’t really know who might be interested in what you are selling, do some homework. In both cases, once you have a general idea about your customers, you will want to find out their specific characteristics and where they can be found.

Decide what you know.

The first step of all research is to write down what you already know. So write down what you now know about your customers. The next step is to write down what you don’t know. You know that the customers for your designer wallpaper shop have higher incomes and own their own homes. You don’t know their age, their race, the neighborhoods they live in, their religion, their education level, etc. What might motivate them to buy your product? So make a list, and then find the answers to these questions.

How?

Determine what information is already available. Much of the information you seek is probably on-line, in a book, in a magazine or in some other resource available through your local library. This information is called “secondary data.” Demographic and psychographic (social) information about Chesterfield’s residents and about the people who live in the greater Richmond metropolitan area is provided by the U.S. Census, is available by clicking here.  In addition, the Chesterfield County Economic Development Department web site (http://www.chesterfieldbusiness.com/) contains all kinds of information about the people who live there.

If the information you need is not currently available, you can gather it yourself. If you are opening a designer wallpaper shop, stop by the designer wallpaper shop in the neighboring town and see what its customers look like. Develop a brief survey and take it to an area of town where people who would purchase your product shop, live or congregate. Ask the questions on the survey to some of these people to gauge their interest in your shop. Offer coupons for a discount in your store (once it opens) if they answer the questions. You may also direct your survey questions to people on a random basis.

Surveys can be used to find out more than information about your customers. You can use them to help you price and market your product or service and to find out more about the competition, as well.

Another way to increase your understanding of your potential customers is to form a “focus group.” Gather together a small number of people whom you think may be interested in your business. Ask several open-ended questions and encourage a discussion. Take notes.

The type of information you gather from this kind of research is known as “primary data.”

Who are my competitors?

Before deciding where to locate your business, you will want to find out about your competitors. Who are they? How many are they? Where are they located? Although there are exceptions, you probably will not want to locate your small business close to someone who would be in direct competition with you.

Finding out as much as possible about your competitors will help you in many ways. You may be able to avoid mistakes they made. You will gain information that will help you with decisions about where to locate your business, what to charge for your products or services, and ways to advertise your business.

How do I find out about my competitors?

If you have completed research about your industry and about your customers, you have already done some of the necessary homework for finding out about your competitors. Industry research will let you know, for instance, how many other businesses like yours are operating within your city or county. Customer research will guide you to where your potential customers are shopping and why. As part of your competitor research, you may want to ask potential customers survey questions geared to discover information about the competition. If they currently use products or services like yours, where are they buying them? What are they paying for them? What do they like and dislike about your competition?

Once your industry and customer research guides you to who your competitors are, visit their web sites (if they have them). You can learn a lot from a visit to your competitors’ web sites. For instance, they may have information about prices, services, locations and contact information. The look and features of each web site itself will give you an idea of each competitor’s professionalism and possibly his or her resources as well.

After visiting web sites, you may want to call your competitors directly to find out more about them. Ask the kinds of questions a customer would: questions about the prices they charge, the types of products and services they sell, turnaround time for service, etc. If your competitor has a shop, visit it for ideas about products and advertising.

Another way to find out about your competitors is to talk to other business owners who have had dealings with them. What kind-of service did they provide? What were the pros and cons of working with them?

Here are links to web sites that provide information about researching your competitors:

http://www.usabilitynet.org/tools/competitoranalysis.htm

http://www.robertwinton.com/competitor.htm