Financial planning: The competition

No doubt you've done at least a "shoe-leather" market study. That doesn't mean you wore out a pair of Doc Martens while counting the number of doughnut shops in your area, but you should at least have checked out the local competition. Is there a market for your business? Will there be customers, or is the area already saturated?

When considering competition, you have to look at it at all levels, not just the obvious rivals. For example, if you plan to open a discount shoe store, you would look at other shoe stores. But how many full-product-line discount centers nearby also sell shoes? Make sure you are aware of all the choices the consumer has of places to purchase a product similar to yours.

Telephone books, Chamber of Commerce listings, business development centers and even real estate brokerages are great places to start your search on local competitors. To save on foot fatigue, you can go to the U.S. Census Bureau Economic Surveys for business. The Lookup Tools offer the choice of nationwide statistics on business patterns, or you can narrow it down to your metropolitan area. You may not find the exact number of doughnut shops in downtown Mytown, USA, but you will see the number of Eating and Drinking Establishments, as well as their annual sales figures, payroll expenses and number of employees.

Other sources include Rotary Clubs, local banks, city planning commissions, minority-aid offices, state business and economic development offices, state banking associations, the Small Business Administration, the Service Corps of Retired Executives and the Department of Commerce.

Still in the development stages is the U.S. Census Bureau's American FactFinder, a new data access and dissemination system that provides useful information about your community, your economy and your society. It's a great place to start your market study on competition and consumer behavior.

Who are your target consumers? You'll have to determine the demographics and lifestyles of your buyers if you want to attract and keep them. Secondary research -- the type found in other people's studies -- is easily located in industry surveys, in trade association publications in your library reference section or from census reports.

You can also conduct your primary research by going right to the buyer for answers. Conducting street surveys, or gathering focus groups, of your target audience should net you firsthand knowledge of consumer acceptance of your product, price and design. You can continue this type of research when the business is under way to keep up with buyer demands. Don't be afraid to approach competing businesses with your questions; they have time and experience on their side.