You have an idea for a new business. You love it … but does anyone else? The following may be the single most important information you’ve ever read on the subject.
I recall reading a news story a few years ago about a five-alarm fire in the Haight-Ashbury district of San Francisco. The unfortunate victim: a Thrifty drug store that was under development. (The Thrifty chain later became Rite-Aid.)
“The Haight,” as it’s known to locals, was the center of hippie culture during the Summer of Love. The free spirit of that era prevails, in the abundance of independently-owned shops and restaurants in the area. There are few chain stores.
Citizens and Haight-area preservation groups protested the development for a year prior to the fire. Had the developer known the importance of surveys to his business, he’d have recognized the protests for what they were.
Statistics for New Business Failures
Anyone who has started a business (or even thought out loud about it) has probably heard the enduring statistic that eight out of 10 new businesses fail in the first 18 months. In researching this, I have not found any hard numbers to back that up. However, Scott Shane of Small Business Trends did a very handy analysis of US Census Bureau and US Bureau of Labor Statistics data that shows that the typical new business started in the United States goes out of business within five years.
Neither the U.S. Bureau’s statistics nor Shane’s analysis provides any reasons why but if you Google “reasons new businesses fail,” you’ll see plenty of articles and blogs on the topic. Some of them include what I believe is the primary reason.
Frighteningly, some of them don’t.
The Primary Reason for Failure
New companies that succeed and existing companies that launch successful new products all have something in common: They survey before they act. Those that don’t have a higher risk of failure.
Failure to survey is the primary reason for business failure. This can take many forms.
In the case of the Haight Thrifty debacle, the developer failed to heed the results of a de facto survey (in the form of sustained protest).
Do What You Love and … the Money Might Not Follow
Some people reading this might be thinking “Survey … ridiculous! I have nothing to worry about.” And perhaps it’s true, too. There’s only one way to find out.
It’s certainly not my intention to shut down anyone’s dream or scare them away from trying. But just because you love it is no guarantee that others will share your enthusiasm.
It would be ideal to be able to make a healthy living doing something you love. Those who can do it count themselves fortunate.
But if you start a dog-walking business and your phone never rings, it might be because you live in cat territory. A survey would have uncovered that key information.
Survey for Success
By now you should have the idea that surveying can be key to your success. So how do you do it?
A full-blown how-to is beyond the scope of this article, but here are a few ideas to get you started:
Take it to the street: Ask your neighbors if they ever use a product or service like what you’re thinking of providing. If they do, find out who they get it from. How much do they pay? What do they like about the product/service? What do they like (and dislike) about the company they now use? Would they be open to trying a new provider? What would make them more inclined to do so?
If your product/service is something unusual that’s not locally available, find out if they are familiar with it: “Have you ever heard of ______?,” “Do you know what it is? What it does?,” etc.
Really take it to the street: There is nothing stopping you from talking to the larger community. Write up a sheet with no more than seven questions and make copies of it. Put them onto a clipboard. Grab some pens and go out to a public place. Smile. Go up to people and ask if you could ask them a few questions. Be upfront about what the survey is about.
You can also put together a team to inexpensively do this for you. Advertise at the local college or on Craigslist (under “Gigs”.) Make sure your survey takers are well-groomed, neatly dressed, and polite.
Survey your industry: Industry conferences are an excellent way to put your new product or service in front of a more targeted audience. It’s best if you buy a table or booth at the event, rather than just walk in off the street and start surveying attendees. (These conferences often take place in hotel ballrooms. Hotel management won’t usually authorize outsiders to “annoy” their guest with surveys. Other businesses attending the conference won’t appreciate you, as an outsider, distracting the public they paid to get in front of.)
Hire an expert: You might be thinking “I’m a business person, not a market research expert.” An established research firm will know how to design and conduct an effective survey for you. They will be able to reach a large enough sample of respondents to come away with a reliable result. You will end up with information you can act on.
Shopping for a market research company is like shopping for anything else. Ask plenty of questions. Ask to see case studies for their other clients.
If you are inclined to do it yourself, there are a number of market research how-to books available for the beginner.
However you approach it, surveys are the “pennywise” that save you from being “pound foolish.” They can be the difference between total failure and straight-up success.