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Checking Out the Competition

Before starting your own business, look at the needs and wants of the community. Price, quality, service and variety are all part of market research.

October 14, 1998

One of the first things a would-be entrepreneur must do is assess the competition.

A child-care provider or an accountant might want to find out who provides similar services in the neighborhood and offer something unique. Computer consultants, software designers or other high-technology workers might want to assess the competition in Southern California and beyond.

Price, quality, service and variety of products offered by direct competitors should be checked, but don't forget indirect competitors. Look at substitute products or services, related products or new items offered by companies expanding their product lines.

A fledgling pastry shop owner would check out direct competitors such as neighboring bakeries. Indirect competitors might include bakery counters in supermarkets, coffee bars that offer pastries, or a corner newsstand equipped with a pastry and coffee cart.

In business terms, this gathering of information is called market research. For the small-business owner, market research can be as simple as a walk down the street, a trip to the library or a phone call.

The idea behind market research is to learn how your small-business idea fits into entire industries and economies, from the local to the national scene. Seeing this larger picture is necessary even for a one-person, home-based business.

"You have to be able to see and recognize trends because those are going to influence your business," said Esparza. "Even though an event can happen halfway across the world, it can affect how you get your raw materials or how you export your product."

You should also find out detailed information about each industry and the rules that govern your line of business. And you should be soliciting opinions about your business ideas outside your circle of friends and family members.

"Chances are, the knowledge and background you need for a successful small business won't be around one dinner table," Esparza said.

If you plunge ahead in business without preparation, you put yourself at greater risk of failing. You may be unprepared for circumstances that could sweep your company out of business or, conversely, sweep you into prosperity.

Billionaire H. Wayne Huizenga stated out with a single, $5,000 garbage truck and a half-day pickup route in South Florida. But he took advantage of the region's 1962 real estate boom by making afternoon door-to-door calls through Pompano Beach's new residential and commercial developments. Soon he had expanded to 20 trucks and went on to create a $1-billion company, Waste Management.

Huizenga grew his business by acting on larger business trends. This gathering of information is vital even before venturing into business.

"The first investment that I recommend for an entrepreneur is a spiral notebook," Esparza said. "It's old-fashioned, but it will help you keep all your thoughts in one place."

The Bottom Line

"Entrepreneurship 101" is a tutorial on how to choose, start, finance, plan and grow a business. The program, written by Times small-business columnist Vicki Torres, was developed by Debra Esparza, a faculty member at the Entrepreneur Program of USC's Marshall School of Business. Esparza is a former head of USC's Business Expansion Network and currently is a program advisor at the Women's Enterprise Development Corp. in Long Beach. With Esparza's help, WED Corp. is launching a series of courses targeting small businesses that want to grow. Entrepreneurship 101, the tutorial, also can be found on The Times' Small-Business Web site at

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