How do you determine whether your business succeeds or fails? By doing a research project. You will need to adequately research the validity of your business plan. It can be difficult to gauge what “adequate” really means. Here’s a checklist of some elements that any sufficient business research will contain:

Market Research – It may be surprising, but many entrepreneurs start a business without really understanding the market they plan to serve. You must know the potential size of your market and, in turn, what sort of response your service or product will attract.

Demographic Data – Don’t try and sell something unless you know the buyers have money to spend. Know the numbers behind your market, including income levels, age breakdowns and if your target market is growing or shrinking. Sources of demographic information may include various governmental or taxing authorities and, on a more local level, voter rolls (invaluable if you want information on the ages of your market target).

Customer feedback – An equally important element of market research is getting a personal sense of your customers. Ask what they genuinely value, no matter if it’s a low price, customer support or a particular element of your product or service. If you’re gearing up a new business or modifying an existing product, ask if your business can solve some sort of ongoing problem. It’s really effective research to identify problems that aren’t being solved. Do interviews on a regular basis and, if someone isn’t a customer, ask them why not. What product could you offer to make them a customer or what problem could you solve to achieve the same goal?

Related: How Customer’s Needs Impact Your New Product Success

Competition – A third element of market research is knowing who you’re up against. Rest assured you will be competing with someone, so never assume that you’re the only company to have spotted an opportunity. On-site research is particularly helpful. Observe customer traffic patterns, noting ebbs and flows in both the number of customers and what they are buying. If it’s a retail outlet, try shopping there yourself.

Other research options include visiting a competitor’s website. If a competitor happens to be a public company, you can obtain every piece of literature that a publicly held firm must provide. Finally, while it’s tempting to focus on a competitor’s weak spots, pay close attention to what they do well. Understand how they make their money. Don’t just look at what they screw up; find out how they’re able to stay in business.

Related: Competitive Strategy: How To Get Better Than Your Opponents

Pricing – An ancillary element to market research is doing work to decide what you’re going to charge customers. It’s important to gain a feel for going rates to remain competitive. Pricing competitors’ services and data from trade and professional associations is exceedingly helpful. Pay attention to every element that contributes to your eventual prices or fees. Price really is more of a marketing tool than it is a vehicle for cost recovery. People will pay more for a high value product or solution, so be sure to research your total value.

Research Your Costs – Knowing your expenses is essential in estimating how much you’ll need to bring in to stay in business. Research prospective costs thoroughly. Include everything from salaries to rent. For at least the first year or two, break down those costs in three-month increments. It actually helps to be a bit macabre when forecasting expenses: Things are probably going to cost more than you expect, just like it’s probably going to take longer to land your first client than you anticipate.

Patience and persistence are necessary to research every angle of a potential product. Without sound research, a faulty product can cause a nightmare that could literally devour your business in the process. Let us help you minimize your financial risks by determining if your product or service will succeed or fail in the marketplace. Contact us today!