Exposing the gaps in your strategy — The importance of Market Research
By Kevin Purves on The Capital
Hi there. Happy Tuesday.
And a belated “Happy Woman’s Day” to all the ladies in our group:)
There have been a lot of new subscribers to FutureProof in the last few weeks, so let me take this opportunity to welcome you all to our group.
As a collection of like-minded entrepreneurial folks, we are all committed to chasing our goals and building our dream businesses in these challenging times. I hope that being part of our community will give you the direction, support, and inspiration to chase your own dreams.
This week I want to discuss the importance of conducting effective and comprehensive market research. It’s a key step before taking any critical business action. The best way I can think of doing that is by giving you an example of what can happen if you get it wrong.
For those of you in the community who have gotten to know me, you’ll know that of all the businesses I’ve started and run, literally half of them have failed.
Now, years ago I would be embarrassed by the statistic. But I’ve since realised that failure is often the biggest part of success . . . That we learn so much more by analysing our failures than our wins.
Each one of my failures has been a significant stepping stone to the successes that followed.
So let me share one of my more traumatic stories with you.
It’s 2007. One of my companies, Adventure Academy, is doing well. It’s a team-building and adventure-sports business that has just reached a seven-figure turnover in three years.
Since launching in 2004 we had:-
- Sourced an ideal plot of land in the ‘Cradle of Humankind’
- Built our own kick-ass team-building facilities with paintball arenas, obstacle courses, and an archery range.
- Gained access to great hotel facilities for conference rooms, etc.
- Built-up a solid base of corporate clients who use us regularly.
The business was doing well and growing steadily.
Never underestimate an entrepreneur’s ability and desire to tinker with something that’s working — it’s in our character
We were doing so well that by 2007 we’d outgrown our existing offices and were looking around for a second office or larger facility. At that time we started toying with the idea of going into a retail environment, (with additional offices in the back). From there we could start selling equipment to the general public. The equipment and apparel we would sell to the public were for hiking, camping, rock climbing, paintball, and adventure travel.
After weeks of analysing the feasibility of this, we finally decided that it was the right call. It would give us a second revenue stream, and the extra volume would allow us to import our own goods directly; instead of sourcing them from local distributors. The resultant lower input costs would make the team-building more profitable too.
This decision was not a knee-jerk reaction. I had done a comprehensive study of the market and analysed the costs, risks, and benefits of each possible scenario. I was sure that I had addressed every possible variable and had rationalised the risk as best I could. It was a go!
I have since changed my mind — hindsight is a wonderful thing!
Anyway, in May 2007 we started preparing and shop-fitting our new store. It was in a brand new and very sexy shopping-centre in an upmarket suburb in Johannesburg north.
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It was beautiful. State-of-the-art shelving. Perfect lighting. Awesome equipment and shiny “big-boy toys.” We even had an 8-metre climbing wall built in the back of the shop.
When the centre opened its doors the flow of traffic was very slow. I had anticipated this and planned accordingly. A gradual increase in foot traffic was to be expected in a brand new shopping mall — my research had told me that. It would take time for customers to adapt their buying patterns and start spending time in the centre.
It was only after about 6 months of trading (or complete lack of trading) that we acknowledged something was seriously wrong.
The centre was deserted all day, every day.
The only people visible were the centre employees and the odd customers attracted to the anchor tenants downstairs.
It was only then that I started researching the mall itself, the contractors who built it, and the sentiment of the community in which it was built.
The results floored me. These contractors had been very uncaring and invasive during construction. They had created a very poor relationship with the community which resulted in a communal decision to boycott the centre. The battle between the landlord and the community was well documented in the local news feeds. I just never thought to enquire.
It never dawned on me that moving into a new complex was completely different from moving into a well-established and ‘accepted’ centre. You have to ask a whole bunch of extra questions. Questions that I only thought of after the fact.
In a nutshell, almost every tenant that opened with the centre either abandoned their stores before the expiry of their 3-year leases — or simply closed their doors and shut their businesses down.
It was carnage, and it was a tragedy.
We held on and saw out our full three-year lease, but had to close the business immediately thereafter. Not even our stable teambuilding income stream could cover the overhead of a noose like that.
I had effectively killed a perfectly good business and given 8 awesome people the gift of unemployment. Basically, because I did not conduct enough research before taking action.
In retrospect, the decisions taken to move into retail and diversify our brand were not the problem. The only problem was that we chose to move into a retail space that removed any prospect of us succeeding.
So, my message here is that even when you’ve done all the research you can think of (and tolerate), make sure you’ve asked yourself ALL the right questions. And if you can’t come up with ALL the answers, keep on researching until you can.
Or else you could give me a call and I’ll help you come up with the right questions to ask. My contact details are below.
I hope you enjoyed my story as much as I enjoyed sharing it. I trust you’ll be able to learn something from my mistakes so you don’t have to make the same ones yourself.
Until next week, take care and keep the dream alive.
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Exposing the gaps in your strategy — The importance of Market Research was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.