Market Research Comes BEFORE the Business Plan…

So just about every source on starting a business always says you need to write a business plan. Have you looked at the outline for one of those? You have to know how many cupcakes, cinnamon rolls, pies, etc. you are going to sell, so you can estimate your gross revenues. Knowing how much of each product also determines how many ovens, how big a fridge, how much freezer space, etc. — so that’s your startup equipment cost. How much product and how many customer determines how much space you will need — so that is your rent. It also determines how much help you need — so that’s your labor costs. So ultimately you can’t get anywhere with a business plan until you know about how many customers you can expect and how much of each product they will likely buy.

Now for me, I am not comfortable just making up those numbers. So what I’ve discovered from my market research and entrepreneur classes is that I need to conduct a survey and do some spying on the competition to get to the truth. One of the first things to do is make a list of all of your competitors — this includes not only direct competitors like other specialty bakeries, but also bakeries in grocery stores and Costco, plus coffee shops and other cafes where baked goods are sold. Then you need to set a schedule and go to each of these places during various times of the day and week. Plan to spend around 30 mins hanging out and count how many people come into the shop and make notes on what they buy. Ask the counter staff what their best selling items are, order them, and try them. Ask the sales people when they are busiest and try to come back then. Plugging this info into a spreadsheet and getting average purchases for each of the competition types can help you estimate how many people you might can expect to come to your bakery, and how much they may buy. For the first year, put your approximate visitor count and sales at just below average because you won’t have an established name yet. Also, if there are bakeries just like the one you want to open in other cities or towns, but in cities or towns that have a similar type of population, then go do the same thing there. This may give you an even more accurate estimate of the number of visitors to expect daily.

Next, it is a good idea to conduct a survey in the neighborhoods you hope to serve. For me, I’m limiting my target market to my zip code, as there are plenty of people in that small area. A more rural location may need to target a larger region. I’ve opted to enlist the help of a market researcher to help in writing my survey. First, my reading led me to understand that there was too much I didn’t really understand. Basically if you ask the questions in the wrong way or wrong order you can introduce bias into your results and invalidate the results. Since I intend to self-fund this venture, accurate research is VERY important to me. But I thought it would be helpful if I gave you the basic outline of my survey so you can get an idea of what might be important to ask. I am working on those details now, but I’ll post the outline next time. There is also the problem of how to deliver the survey – I’m hoping to have a good plan for that next time as well. I’ll keep you updated, and hopefully your venture will involve less work than mine!

Until then…

Bake Happy,

“Real knowledge is to know the extent of one’s ignorance. ”
Confucius

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