This is article number two in a four part series. If you haven’t read Before You Begin: Part 1, please go back and read that first.
Now it’s time to consider how much do you know about the market you are planning to enter? Who are your competitors? What are their price points for similar services or products? How will you differentiate yourself?
These are all vital questions that need answers before you begin. I’ve seen too many businesses launch with a “ready, fire, aim” approach. If you have deep cash reserves and can find your niche fast enough, you can probably survive. More often than not, the cash runs out before the true market, product, or service is identified.
My advice is to become a student of your prospective marketplace. Attend some trade association meetings. Read all you can about it. Find a successful person who had built a business in your niche, but is outside of your market. Offer to buy them lunch for some time to visit with you about their business. Go shop your competitors and visit with potential customers.
The other half of understanding your business is knowing the costs. Often we assume we can operate at a lower cost than the competition. Unless you have operated a business exactly like what you are looking to start successfully, I guarantee you are underestimating your operating costs.