The key to reading a market before you enter it lies in understanding the people, the numbers, and the space. It’s not possible to remove all risk when you go into business, there is always going to be some level of uncertainty involved. However, as long as you’ve taken the time to get to know the place, its people, and the numbers, then your decisions will be based more on fact than chance.

Start With The Problem In Front Of Customers

Before you even begin to think about opening a new store, launching a new product, or expanding your existing business, ask yourself one basic question: What is the problem you’re trying to solve in front of your target audience in that particular marketplace?

While every gap in the market appears attractive, many areas don’t have versions of your products because consumers don’t want them. Some communities are already finding ways to overcome gaps with homegrown solutions that they find acceptable. Other times, they like the idea of using your product, but not at the prices you’ll need to sell it for. Look for signs of genuine dissatisfaction. Do customers travel to other locations for a similar product or service? Do reviews repeatedly express the same frustrations over and over again? Are businesses or families being underserved by something that impacts their day-to-day operations? Every successful market entry starts with a legitimate pain point, not just a great business idea.

Research Competitors Without Trying To Duplicate Their Offerings

Researching competitors is not designed to duplicate their offerings. Rather, researching competitors enables you to understand what customers have learned to accept. Visit competing stores if you can. Analyze their website content, pricing, tone, processes for interacting with customers, and customer reviews. Pay especially close attention to issues that receive multiple compliments and complaints. Although one negative review may indicate nothing significant, multiple negative reviews for the same reasons may suggest a gap.

However, be cautious. A gap is not always an invitation to enter. For example, if each competitor closes at a certain hour of the night or operates in a narrow pricing band, there may be a reason why.

Be Aware Of The Costs Associated With Operating In That Marketplace

There are two sides to every market: customers and costs associated with operating in that market. Markets are influenced by factors such as rent, employee wages, transportation costs, regulatory compliance, utility rates, availability of supplies, cost of parking, shipping, delivery expenses, and cash flow.

Many companies are doing this. Companies have a lot of interest in their products or services, and they do not take into consideration the operational cost of providing those products and services. Even though you may be located at an excellent retail location, it is possible that high operating expenses could offset the benefit. It may also become costly to run your business from an inexpensive location, especially when employee recruitment issues and delivery problems occur, as well as loss of customer trust in your firm.

If you plan to physically locate your business in a specific location or set of locations (i.e., retail), research available data related to the transactional aspects of retail properties, including transaction history changes per square foot of property and overall market conditions. This information will allow you to evaluate opportunities for visibility, access, foot traffic, lease terms, and flexibility to evolve over time. 

Understand The Local Economics

A market is more than customers. A market includes the cost of rent, wages, supplier access, transport routes, regulations, taxes, utilities, parking, and delivery costs. And while cash flow may be quiet, it is not hidden. 

Many businesses misunderstand what a good fit is for their business. They focus on demand but underestimate the high overheads to serve that demand. A busy location does not always make sense if your overhead is too high.

For companies considering stores, restaurants, showrooms, service hubs, or mixed-use spaces, retail real estate research and transactions can become part of a wider decision-making process rather than a last-minute property exercise. The site itself can influence visibility, foot traffic, staffing, customer confidence, and future flexibility.

Conduct Testing Prior To Committing Too Much Resources

Test your concept in a limited form, either by running a small-scale marketing campaign or offering service coverage in only a few select areas, and test your concept by selling your products or services online first, or even creating a temporary pop-up storefront, or generate interest in your business by developing a waiting list, or develop partnerships with other businesses in the area. The purpose behind testing isn’t simply to determine if people are interested in your concept, although that is important. The ultimate goal is to confirm if people will act on it.

Testing also allows you to refine your messaging. Sometimes your product or service is correct, but the way you’ve positioned it is incorrect. And sometimes customers react differently to individual components of your offer. Controlled testing provides you with opportunities to make adjustments before investing too much in your entry into the market.

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Know When To Abandon Ship

Disciplined thinking is not pessimistic; disciplined thinking is about knowing when to invest resources wisely. Perhaps profit margins are too thin, perhaps customer acquisition costs are too high, perhaps the success of the area relies too heavily on one single employer (season) or trend, perhaps the demand for your product or service exists, but not from the customers you’re best suited to serve.

Abandoning the pursuit of an unfavorable opportunity conserves your energy for pursuing an opportunity that’s likely more favorable. That counts.

Move Into The Market With Greater Confidence

While you’ll never know everything about a market before entering it, knowing enough allows you to enter the market with greater caution.

Knowing the problem facing customers, how customers spend their money, what competitive offers exist, what local costs are associated with doing business there, and practical risks associated with operating in that market, provides you with factual context-based decision-making instead of relying solely on optimism.

Better businesses aren’t created overnight, and certainly not without some trial-and-error, but they can be developed incrementally by taking informed steps one at a time based upon having obtained relevant insight into the marketplace.