Evidence of Demand a ‘Blind Spot’ for Entrepreneurs

Demonstrating evidence of demand tends to be a significant ‘blind spot’ evident among many entrepreneurs, writes Alan Gleeson, founder of Palo Alto Software and Smallbusinesscan contributor.

Providing real evidence that there is an actual demand for the “thing” that is being sold is an important step. Believe it or not, a lot of business owners fail to grasp this concept, as it is their belief that there just needs to be a great idea and great people behind it.

This is why there is such a high rate of failure amongst new businesses. Lack of leadership and planning.

Instead of facing the harsh reality that their idea might be less than stellar, they spend not just their money, but money that was raised by family, friends, or investors, only to see that what they built, no one wanted.

Clearly, if people are buying what you offer they are sending a strong signal that they value what you offer — the more people doing so, the better the evidence.

Many “experts” will claim that you just need to look at the competition in the field to realize if the business is viable and would be successful. This is nonsense. Just because there is competition, doesn’t mean your idea can acquire any market share. You must be clear on your Points of Difference. Why someone should buy from you instead of who they currently buy from. This is paramount.

Pressing need in Ireland

For companies in Ireland, the need to prove there is a real demand for a product and/or service is vital. Just based on geography alone, the domestic market in Ireland is not going to be as expansive as it is in the United States. Because of this entrepreneurs have to be confident that local demand is strong enough to produce corporate profitably. When cash flow is positive, talks about taking the product and/or service overseas can be entertained, but until that time, it should remain on the back burner until the company is ready. The last thing you want to do is overextend yourself and isolate you from your current loyal customer base.

The nature and number of inquiries you receive is another good sign, where people have asked you for a product/service that does not exist/, or you are yet unable to supply. Again this is a clear signal that people are interested in what you can offer. Using the Internet is another useful means to assess demand. There are tools available to assist you in understanding what is being searched on the main keywords related to your offering. This will enable you to evaluate the landscape, i.e., are their Pay Per Click (PPC) adverts displaying on Google?

If there are, it suggests others see value in the search term and are spending marketing money trying to attract those searching on the words. Again, if there are no PPC adverts displaying for the top keywords for your business, it may be clear evidence of weak demand (or that the market calls the offering by another name).

If you cannot find evidence using the methods outlined above it may be that you are a true visionary building products that create new markets.

However, it’s probably more likely that the lack of a clear market and weak demand is a clear signal that your energies may be better focused elsewhere.

A high-risk strategy

In summary, while it is tempting for entrepreneurs to run with an idea they have, and spend countless resources in building mode, it is a very high-risk strategy to adopt.

It is essential to establish up-front the level of likely demand for the product or service using whatever means you have at your disposal. If no direct evidence is available, using proxies or seeking evidence of need for close substitutes is a good alternative.

If after this research you are not finding the necessary evidence, the risk profile of the venture has lengthened considerably, and it is best to talk to some more prospective customers to ensure you are producing something enough people will value for you to create a sustainable business.

For some people, this advice may seem pretty basic. However, one only needs to look at the ghost estates, empty shop fronts and golf courses in the administration to evidence the impact on supply and weak demand can have on a market.

This is an edited version of an article which first appeared on Business Achievers, which is powered by Ulster Bank.