IT'S NOT ENOUGH TO BOUNCE AN IDEA OFF FAMILY AND FRIENDS

By ROB LEVINSON
StartupJournal.com

Why do so many bright people with sound ideas think it's OK to launch new businesses without doing a speck of formal research?

I've been wondering about this ever since I met with an entrepreneur who sought my advice when preparing to start a business. When I asked how he had tested his business concept, he said he knew "in his gut" it would work-plus his wife, family and many friends believed it was a breakthrough and would be successful.

THIS MONTH'S COVER STORY: WHAT IT TAKES TO GO INTO BUSINESS--AND SUCCEED

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Entrepreneurs Must Do Research It's Not Enough to Bounce an Idea Off Family and Friends

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News flash! Families are generally supportive of new ventures, and friends lie. In reality, neither is fully educated about the market or the opportunity, so they can't be objective. Plus, they wouldn't want to hurt your feelings.

But the other reason why many entrepreneurs resist research is they don't know where to begin or think they can't afford it. The truth is, you can't afford not to do research, and some methods that can provide valuable insight are relatively inexpensive. Here's a primer on what type of market research is available and how to get started.

HARD FACTS, AND THE SOFTER SIDE: There are essentially two types of research-quantitative and qualitative.

Quantitative research, such as a survey, produces data based on questioning a broad cross-section of individuals. Surveys provide insights on the "who, what, where, when and why" of a product or service. The questions are then analyzed and summarized into statistically valid conclusions that can help businesses make decisions. For example, Wal-Mart Stores might use quantitative research to determine if a particular store has enough customers in a 50-mile radius to warrant it stocking above-ground pool covers.

Qualitative studies represent the "softer side" of research and are best for determining if people are aware of your product or service and their specific preferences about it. This type of research is most useful when you want to know how customers, prospects and other groups think or feel about what you're offering. So instead of asking, "Do you need an aboveground pool cover?" qualitative researchers would ask queries such as, "When you buy your pool cover, what would you prefer-aqua blue, white or polka-dot?" and "How does your choice make you feel about the product and how does it reflect on you as a consumer?"

BEST STUFF MAY BE FREE: Most fledgling business owners can't afford quantitative research, which can be costly. With the Internet, it also may be unnecessary. If you are patient and resourceful, you can find plenty of no-cost data to substantiate your concept from government agencies, large research firms, companies, trade associations and media outlets. I turn first to Google when researching a new idea. The right search terms can sometimes produce enormous amounts of data that help build a case for your business with colleagues, partners and investors.

Qualitative research is more affordable and can provide the insights required to successfully position your venture. In fact, I know of a local business-school professor who charges just $500 to do "focus" or small-group interviews with students.

If you decide on qualitative research, don't run out to the mall armed with a clipboard and begin asking random questions. Instead, seek advice from a trained, independent researcher who will view your product and service objectively. You can take the pulse of your most likely customers a variety of ways, but a research professional can help you choose those that will work best and cost within your means.

FIRST THINGS FIRST: Before calling and interviewing prospective research subjects, you need to take two steps. First, develop a "screener." A screener is a written document that defines whom you should query. By determining the characteristics each interview subject should have, you'll be more likely to get the insights you need (and crave). Naturally, the criteria are based on the nature of your product or service.

For example, I recently helped with the research for a shopping mall-based travel company that wants to compete more aggressively online with other Internet travel services, such as Priceline.com or Travelocity. The company wanted to speak only with people who went online at least 10 hours weekly and took a one- to two-week vacation annually, spending at least $5,000 per trip. Anyone not meeting these requirements was excluded. After identifying a pool of possibilities, the company then sorted interview participants into those most likely to buy its services online. The goal was to pinpoint the most likely customers and learn how they wanted to be served.

Then, once interview prospects are identified, you'll need to craft a script, a thoughtful and purposeful line of questioning that will give you the insights you seek.

LET'S TALK: The next step is to decide how to conduct interviews. Here are some options:

One-on-One: Customers tend to be remarkably candid with you in private, so meeting one-on-one can be an effective way to find out what people really think of your product or service. The researcher you choose will follow the prepared script, but talk informally, putting subjects at ease so they'll share pertinent information. I've done one-on-ones with people who have said things I know they wouldn't have when talking face-to-face with a business owner.

Online Surveys: Using the Internet to survey a target group is popular, effective and relatively inexpensive. You can survey a large audience about a number of subjects this way. While Internet surveys can't replace looking into someone's eyes or reading body language, they can provide some valuable direction.

Focus Groups: Focus groups generally consist of eight to 12 people who are encouraged to speak freely and openly about a product or service. An experienced moderator is essential since typically one person often dominates the group and can adversely sway opinions. Focus groups are my favorite form of research because I can observe and hear firsthand what customers think-from behind a two-way mirror.

Observe Customers: Another way to gauge customer behavior is to observe it. Place yourself where your customers might congregate-a shopping mall, airport, conference center-and observe what they do. Do they gravitate toward certain stores, exhibits or people? Do they like to interact with salespeople or learn independently from brochures?

Regardless of your research method, stay open-minded and pay attention to the findings. Chances are good that if a small group of well-chosen individuals doesn't share your opinion about your concept or company, many others won't either. Embracing research and listening to your audience from the beginning can save you time, money and the heartache of launching a product or service no one wants or needs.