To fully understand your company, its competition and the nature of your current and potential customers, it is essential to paint a complete portrait of your industry.
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In order to do this properly, it is important to conduct thorough research on the industry your business operates in. This will provide a better understanding of all of the issues your company and competition are facing as well as future market trends and conditions. By conducting research on your industry, you can have a leg up on your competition and be better prepared for the future.
When I discuss industry research with small business owners, the question I most often hear is 'how do I go about doing the research?' Many small business owners are also concerned with the time it will take to compile this information. If these are your concerns, there is good news. There are many resources that have already conducted the research and compiled the information into nice graphs, charts and summaries. By finding this information a small business owner can save time and money while having access to tremendously helpful information.
The first step is to identify what industry your company operates in. While this seems simple on the surface, it can get complicated if your company spans across several industries. Once you've pinpointed one or two industries that your business fits into, you should find the NAICS (North American Industry Classification System) number. This can easily be found via the web or a book that is published annually. Knowing this number will make the rest of your research faster and easier.
There are many published industry reports that cost a hefty chunk of change. These reports are in-depth and contain valuable information. For many small businesses, paying several thousands of dollars for an industry report doesn't fit into the budget. For those companies, there are alternatives.
Many colleges and universities have access to these industry reports. Small businesses should attempt to make contacts at local colleges and universities as they offer cost-effective assistance in exchange for the real world practice it provides students. By establishing relationships with colleges and universities, your company may be able to utilize some of the campus' resources, including these costly industry reports.
For those companies with limited budgets and without access to local schools, there are other alternatives as well. There is a great deal of information available for free on the internet. These include articles, industry summaries and reports compiled by independent parties or even your competition.
For example, some of your larger public competitors provide a good deal of information about the industry and the market conditions in their SEC 10-K filing. While this will take a bit more time to search through this information, the reward can be great and there is no cost involved, apart from the time it takes to read through the filing.
There are specific factors a small business manager should look for when researching their industry. First off, the overall size of the industry is important. This is usually expressed in dollars. A breakdown of the competition is also a critical feature. Is your industry dominated by one or two main players? What percentage of the market is compiled of smaller businesses? This can give you a sense of how much market share is available for the taking and how much of the market is controlled by larger companies.
Consumer trends are also an important factor to research. Who are the main consumers of products in your industry? Are there any trends that you should be aware of? Is the industry growing, holding steadfast or declining? Remember, many of these questions are already answered; you just have to find the reports that contain the answers.