You have a great business idea. Maybe you want to open a cool clothing store in your neighborhood, create an app, or start an online business. That’s awesome! But before you get too far along, it’s important to do some research to see if your idea will actually work. Market research and analyzing your competitors can help you understand if there is demand for what you want to sell, what prices make sense, and how to stand out. I know all of those marketing terms sound intimidating and boring – trust me, I thought so too at your age! But spending some time upfront to understand your business landscape can save you tons of headaches (and money) down the road. Let me break it down for you with some real life examples that will hopefully bring these concepts to life!

Say you have dreams of opening a boutique clothing shop catering to young women. Killer idea, right? Before you sign a lease at the trendy new development downtown, let’s take a step back and assess the market. First, look online and make a list of other similar clothing boutiques in your city. Browse their websites and visit their stores to get a feel for their vibe and offerings. Pay attention to their pricing, sales and promotions, and customer demographics. This will start to give you an idea of the competitive landscape.

For example, you may notice that most boutiques charge $50-150 for dresses and tops. Only one store has prices below $30. Hmmm…maybe undercutting everyone on price isn’t the right strategy then if no one else is doing it. However, you realize that no boutiques sell men’s clothing – a lightbulb goes off that you could differentiate by selling both men’s and women’s apparel!

Beyond checking out the competition, you should do some broader market research to size up potential customers. A great way to start is talking to people – your target customers, mentors who are business owners, or even asking friends and family for opinions. You want to find out if people would be excited about your idea and actually spend money there. Learn about their needs, preferences, and hesitations.

Continuing our example, you poll your classmates and friends to gauge interest in your proposed boutique. Most seem enthused and offer suggestions on popular brands and styles to carry. When asked about price points, many say they shop for clothes mostly at Forever21, H&M or thrift stores – not higher-end boutiques. Aha! This gives you an idea of what budget you may need to stick within. If you mostly hear crickets when you pitch your boutique idea or get a lot of, “Um, I don’t really wear women’s clothes” responses from dudes – that’s valuable intel too. Maybe you need to revisit your concept.

In addition to talking to potential shoppers, experts suggest running an online survey through a site like SurveyMonkey to validate demand. You can get quantitative data around how many people would shop at your store, what they’d want to purchase, and how much they expect to spend. No need to make it long – limit to 10 questions max. Offer a gift card incentive to get more participation.

For our boutique, you create a quick survey and receive 200 responses from people in your metro area aged 18-30. Just under half say they would likely shop at your boutique at least once per month, suggesting you may draw enough traffic. T-shirts, jeans, sundresses and formal dresses rise to the top as the items they’d most be interested in purchasing there. Nearly 60% expect prices under $75 per item. Hmmm…good to know! You can use this info to inform your inventory and price point selection.

Competitor and market research take some legwork upfront, but they set you up for success by ensuring there’s a need for your offerings and that you can lure customers away from existing options. Plus understanding the competitive landscape prevents you from making decisions in a vacuum. You’ll better know how to carve out a unique space with appropriate pricing.

As a final step, run the numbers! Make forecasts for costs and sales projections based on your market research learnings to determine if your business idea pencils out financially. Account for expenses like inventory, marketing, payroll, etc. as well as potential sales revenue. It’s easy to get caught up in fantasies of instant success, but you need to go in eyes wide open. Crunch these numbers yourself or work with a small business councilor.

If the math indicates you may struggle to turn a profit in year 1, it’s okay to retool parts of your concept, narrow your product mix, or lower inventory buys. Many entrepreneurs (myself included when I launched my custom tee startup) are overly optimistic on first-year projections. Better to set reasonable expectations and then hopefully be pleasantly surprised!

I hope this beginner’s guide gives you a helpful starting point for conducting market research on that ingenious business idea swirling around your mind. While the upfront work isn’t glamorous, nailing consumer insights from the beginning can set you up for achieving those entrepreneurial dreams! Let me know if you have any other questions – happy to provide guidance. I believe in you!