Lesson 1, Topic 1
In Progress

1.4 Market potential and limitations are analysed in order to plan for the capacity need to profitably operate a new venture.

ryanrori January 7, 2021

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Before investing any money in your business, you must gather information about your potential customers and the demand for your product of service.

This information, or market analysis, is a necessary part of planning a profitable business.

Invest time in this crucial step now and reap the rewards of a successful business.


1) Faster Cash Flow

 Knowing who your customer is, what they need, and where to find them is vitally important. Targeting the right people is crucial for generating cash flow in the shortest time possible.

2) Greater Market Share

An examination of current market conditions tells you who your competition is, the size and location of the market, current competitor pricing and promotional strategies, and types of market niches which are underdeveloped.
Positioning your product for greatest exposure, while creating an image of quality and value for your product, allows you to become a serious player.

3) Reduced Expenses

A leading cause of business failure is lack of capital – the business runs out of start-up funds before becoming profitable. It’s important to make every penny count. You reduce expenditures by trying to predict outcomes before taking action. There is always a certain amount of risk with any business venture, however, analyzing your market reduces that risk.


To collect the kind of information which will be most helpful, you’ve got to ask the right kinds of questions. The more you know about the business climate you are entering, the more successful you will be at finding the right customers and making the sale.

1) Do you have a niche? Does your product or service fill a need or solve a problem? Can you appeal to cross-segments within your market by highlighting different aspects of your product?

2) How should you price your product or service? Should you price lower than the competition, or enhance your product’s value and charge a higher price? Is your pricing adequate to meet profit expectations?

3) Who are your potential customers? Where do they live? How much money do they make? What is their education level?

 4) Who are your biggest competitors? What are they doing right? What are they doing wrong? What can you do better?

5) What type of media will you use to advertise? How will you measure the results of your promotions?

6) How will you deliver your product to the customer? Will you offer a guarantee?

 How will you handle complaints?


Where do you find useful information for your analysis? Here are some great starting points:

1) Discussion Groups

Congregate with like minds for an inside look at your market. Joining an active forum will help you spot trends, gauge sentiments among market participants, and provides an avenue for you to make contacts for further research.

2) Internet Search Requests

Get a snapshot of demand by Internet users for your product of service with a look at the keywords people use on search engines. Investigate how often a phrase is used in searches and the competition for those phrases. You can use online services such as those provided by Yahoo, Google, DigitalPoint.com. For more sophistication, try using a software application such as P.I.P.E. and get complete keyword analysis.
3) Online Competitor Research

Investigate your competitors by analyzing what they are doing right and what they are doing wrong. You want to know what works and what you can improve upon. A good way to find, investigate, and out-maneuver your competitors is by keeping an eye on keywords common between you and the competition using tools such as Product Idea Evaluator and UrlTrends. This research is vitally important and can make the difference between success and failure.

4) Trade Publications

Subscribe to magazines, newspapers, and ezines within your target market. Not only is this a great way to keep up with current market conditions, but you’ll also stay in the loop as your business matures.  Find appropriate publications at these directories:

  • EzineLocater.com
  • NewsDirectory.com
  • KnowThis.com

5) Industry Surveys / Research

Here are several professional organizations which gather statistical, economic, and demographic data:

6) Public Libraries

Your local library has a wealth of information. Search for specific data within the Statistical Reference Index, the Wall Street Journal Index, and the Business Periodical Index. For economic data within an industry, or even a particular company, try the federal government’s Standard Industrial Classification Manual.

In conclusion, there is no substitute for analyzing your market. Spend as much time as you need using all of the above as a guide. All your time and effort will be rewarded with a business that does what it should: make money.