After working out if there is adequate demand for your business idea, it is time to assess the level of competition. The last thing you need is to enter a market that is already swamped.
Start your startup business research with a Google Search?
For most business models the best approach is to do a Google search and see how many local firms are offering the service. If you find that nobody is offering the service or product you are interested in, it is very important to ask yourself why that is.
It makes sense to once again assess whether there really is enough demand. Sometimes the reason nobody is offering that service or product in your area is because people are really not interested in it. You really do not want to join the list of firms that have tried doing so and gone bust in the process.
Competition is not necessarily a bad thing
If you do find other firms already in the market, do not be immediately put off. For the most part this is a good thing. It is an indication that there is money to be made.
Get some quotes from local business competitors
Your next step is to contact some of the firms you find and ask them for quotes. This will help you to understand the type of service they offer and how much they charge for it. It allows you to work out what is included in the price, which will give you a good idea of what your potential customers would expect from you.
The more questions you ask the better. At this stage, you are learning about both your competitors and your customer base.
Assess potential profitability for your startup idea
You should have a good idea of how much it will cost you to offer a service or product. Now you need to take the quotes you have and work out how profitable your business model could be if you were to charge something similar.
Can you compete on price?
If you can make enough profit you now need to assess if you could potentially beat the competition on price. Usually, if you are prepared to do a job for less than your main competitors you will be able to secure yourself customers. In many cases, you can still enter a crowded marketplace and still make a success of your business. However, if your competitors are already operating on tight margins the chances are you will struggle to make your mark. Usually, in that situation you are better off moving on and finding another business model.
Finding an alternative business niche
However, before you move on it is worth just pausing for a moment and considering if you could offer something a little extra or different. Often, if you specialise you can still compete even in an over-crowded market place. For example, in a town with lots of fast food joints it could be that offering something like sushi or making sure you cater for people with food allergies you could build a loyal customer base.