Market Research for a Business Plan

      Thoughts and advice on how to investigate the market for the products of a proposed new cabinet business. October 14, 2009

Question
I am currently working on my business plan for a one, maybe two man custom cab shop. I am a bit intimidated by the market research bit. I have worked in the industry in the town I want to operate in for several years so I have a practical knowledge of how it works in my town and neighboring counties, but I don't know much about the bigger picture such as larger market, market share, industry trends, etc. I am a bit overwhelmed by this part and I wonder, is it really necessary to get out there and survey people? I want to find my own niche, but I am unsure as to how. I know my questions don't seem to flow very well. It just shows how lost I am on this part.

Forum Responses
(Business and Management Forum)
From contributor G:
You're going to have to sell your cabinets to somebody. How will you know who is going to buy them if you don't ask? Start by making lists of potential customers: builders, renovators, other cabinet shops, etc. Browse through the Yellow Pages as well. I'm sure others will kick in more ideas, but think about it - if you can't find anybody who is interested, there's not much point in getting started, is there?



From contributor W:
It sounds like you are reading about this from a book and wondering how to go about a professional market evaluation. That would be nice, but somewhat impractical. Starting out, if your market is big enough, you will have a miniscule market share to begin with. This is important. If your market is small, and you have to have 30% of it to survive, 60% to prosper, you are going to have a tough time getting started.

Questions I would ask:

How far am I willing to drive for sales and installs? How many people live in that geographic area? You will have a much easier time getting started if there are several million people within your area than if there are only 30,000. Guess at how many people are employed making custom cabinets serving your area. A rough guess is good. Hundreds is much better than 3. Is this area normally economically healthy, or are you trying to start a business in Detroit? You get the idea? Take a practical view of the situation.

Make the lists that contributor G mentioned. Then get out and casually discuss what you are trying to do with some prospective customers. People love to talk about their businesses, and most will take a few minutes to do so with you.

The first cabinet shop I approached said they would buy doors from me because they had to drive 40 miles to pick up their doors. Everything else was a fit (population, historical growth, etc) so that did it for me. I was in business 15 years ago.



From the original questioner:
Yes I am learning from a book and some of the recommendations regarding the different types of research don't seem very applicable or practical at the least. I am not trying to ask for spoon feeding, but I just don't know how to break the ice. What do I say to these folks? "I am planning a cabinet shop", "I want to start a custom cab shop", "and I already own a shop"? Also, Yellow Pages brought up about 250 builders, remodelers, and disaster renovators in a 50 mile radius. How should I narrow it down - random sample?


From contributor J:
You should look at the business articles in the Knowledge Base section of WOODWEB (and use the search feature). There is a ton of business related info on the site. You might also want to consider starting with installs. You can run this type of business with very low overhead and most installers are making just as much money (if not more) than small shop owners. Iíve been lucky to be able to fill in with installs to supplement shop projects. Itís not sexy, but neither is being poor. Itís a tough market and it is good that you are trying to do your homework.


From contributor G:
Here's an approach. Market research analysts tell us that potential customers need to see your name six times before it sinks in that you are a real business. You might as well get them started right away. Get a map and geographically locate your Yellow Pages leads. Group them in batches the size of the area you think you can cover in a day. Discover Ė one way or another the fax numbers for those businesses. Google them to see who the contact person is. Send faxes to those in your first target batch. Donít get long-winded, just tell them your name, the fact you are planning a cabinet shop and will be in their neighborhood next week and could you please have five minutes of their time?

The day before you plan to go, phone them and mention youíll be in their area tomorrow. Donít forget to say your name. That makes twice. Drop by with samples of your work. If they are too busy right now, make an appointment for later. Now theyíve heard your name three times and seen you as well. Ask if they can refer you to somebody they might know. A referral is valuable. Youíll refine your research technique as you go and find other potential customers when you start thinking creatively about it. You may even find it fun.



From contributor S:
I am glad to see that you are in the process of writing a business plan. A well prepared business plan will help guide you down the road of owning a successful business.

Here is some useful advice: "I am a bit overwhelmed by this part and I wonder, is it really necessary to get out there and survey people? I want to find my own niche, but I am unsure as to how."

Identify what product/service you want to offer and who you want to offer it to. Be as specific as you can (i.e. a custom cabinet shop that will manufacture and install the following products: entertainment centers, bathroom vanities and built-in wall units). Our products will be manufactured entirely in-house with the exception of moldings which will be outsourced to a local millwork shop. Initially our products will be sold directly to the end user. During our second year in business we will begin marketing our products to real estate developers/remodelers, interior designers/decorators, architects and audio visual companies.)

The more specific you get the easier your market research will be. Once you have identified what you are going to sell and who you are going to sell it to you can then start your market research. While doing your market research you may find that you need to modify your product/service to meet the needs of your market.

If you are going to sell directly to homeowners you need to identify which homeowners are most likely going to buy your product. These people are your market. Your market area is simply the geographic region you will serve (150 mile radius). Within your market area you will need to know how many homeowners there are and out of those homeowners how many are potential customers (your market).

Your potential customers are the people within your market area that have the means to purchase your product. Once you have identified who your market is you then need to identify who you are competing with (other custom cabinet shops) for your share of the market. Now figure out how much of the market you will need to get business from in order to be successful.



From contributor P:
It is all about what is needed and wanted period. This function requires some work. Find out what shops are doing well, what do they make, where are they located, what is their labor pool, how long have they been in business, what training do the owners have, what investment did they have to make, what are the demographics of the customer and the shops that service them, what attributes do they have that makes them different. Join some organizations so that you can really pick the brains of the owners of cabinet shops.
Do not shortcut this step it is the most important thing that you will do in your business.


From contributor W:
Cold calls. I'm going to suggest that the '6-times' rule is most relevant for retail sales. Get your logo in front of as many eyes as you can. Cold calls is for selling to businesses. If this is your market, then the basics are:

Make yourself presentable, professional in attitude and appearance. Introduce yourself, with a smile. Ask to speak with the owner. Adapt to the situation. Ask a question that will save a lot of time. If you are not sure they buy custom cabinets: "Do you ever buy custom cabinets?" If they obviously do buy custom cabinets, state your intent: "I am starting a custom cabinet business right now, and I wanted to introduce myself."

Next is the give and take, you telling them a little about yourself, but mainly asking probing questions to see if there is any kind of 'fit' between you and this prospective customer. If the customer asks questions, this (listening) is the most important phase of your meeting. It is normally referred to as 'answering objections'. Before you ever see your first customer, write down all the potential questions a customer might ask you that you can think of. Take some time to think about your replies. 'How do you normally charge? By the foot?' 'What kind of volume are you set up to handle?' 'Are you insured?' 'Do you do frameless and faceframe construction?' etc.

They will ask you questions you have not thought of before. If you don't have a good answer, make sure you do the next time someone asks that same question. Some meetings will go incredibly well. Some seem to kind of hang. In both of these situations, you will need follow up visits. Having a new sample to show or some new information is a great excuse for that next visit.

If the meeting dead-ends, learn from it and then don't give it a second thought. Move as quickly to the next customer as you can. The more people you meet, the easier it gets. After a while you will start to like it, and may think 'I could do sales for a living if I had too!'. Cold sales is like stepping into cold water. Makes you tense up at first, but you get used to it, and can have fun with it.

As far as closing the sale - tell them you would like to make their cabinets. Ask them what it is you could do for them to close this sale. There are lots of ways to close the sale.



From the original questioner:
First off, some of you folks are incredibly helpful. Thank you. Now, I of course want to service other businesses, such as contractors, builders, etc, but I would like to talk to the end user as well. How might I approach, say a homeowner in a neighborhood that I would like to get into. Would mail-in fliers work for them?


From contributor S:
Slow down. Before you start asking about advertising, you need to identify who you are going to market to. After you identify who you are going to market to, you identify how you are going to advertise to that particular segment of the market. Blind mailings get less than a 1% response. This means that for every 100 "flyers" you mail out you will be lucky to get 1 phone call, which is an inquiry call and not a sale. We can go into further detail on marketing and advertising once you have identified who you are marketing to. You need to know more about the types of people who live in the houses in the neighborhoods you want to do business in before you can create a successful marketing campaign. Don't take this the wrong way, but you need to do some research to find out who you are going to market to. Take your time and identify your market. The more time and effort you invest now in gathering accurate information about your market the better off you will be. The stronger your business plan is the stronger your company will be. Do not start cutting corners this early on.


From the original questioner:
I guess I came off wrong. I am still talking about market research. The ideas I have heard so far about approaching small business people are good ones and relatively easy. I will approach them the same way vendors come to me when they have a new product. I also want to find out if the end user has anything to say about the products or services they may want. I know the size of my market, roughly, and I also know the demographics of the end users that I would "like" to cater to. But I don't know how to get to them and talk you know? The books I have read regarding market research and the end users recommend such things as surveys and focus groups, but I don't know if that would really apply to me. Even if it does, how do I contact them? Am I making this too complicated?


From contributor W:
Focus groups are for corporations mostly. "But I also want to find out if the end user has anything to say about the products or services they may want." Pick one or the other to start, business or retail. When you talk to prospects, listen. That is your market research. You should know the various styles and options you can offer. You do, right?


From the original questioner:
"You should know the various styles and options you can offer. You do, right?" Sure, and I have several door samples made with different finishes and panel styles. And as per earlier recommendation, I am going to make a couple of different 16" base cabs with different door styles, side panels, and drawer options to take with me as samples. I guess meeting with the end user will have to wait until they come to me.


From contributor C:
Just get after that business plan. Get a rough draft done, set a due date to submit it (to someone). Just put anything down at first, your vision will get clear as you put more time and effort into it. Start with a very general Executive Summary (ES). Then go back and forth, building the outline while tweaking the ES. Itís going to take a few attempts to get close. As you work on it, your target sector will get clear. Don't worry about puny numbers, making sense is what matters.

The Yellow Pages will aid your surveys, you'll understand why later. Pull numbers out nowhere if you have to; later, when you have some business owner experience (that business) adjust the graphs and financials. Work on that business plan for awhile, itís more important than your goods and services. It will fix your thinker when it gets broken, it will put you in a position to take advantage of opportunities that would otherwise be impossible. There is a huge difference between a person who wrote a BP and uses it and someone whoís just out there doing whatever and whenever. What you are doing is very good.



From contributor L:
It seems to me that you need to identify a market that is not already well served. There are lots of small cabinet shops that make essentially the same product. If you enter that market it will be "price-price-price." Not what I'd want to do! What part of the market is underserved?

Long ago and far away I got started by providing remodeler with oddities. I made short runs of moldings to match old houses, a new panel door with true divided lights, a curved molding or cabinet. What most local cabinet shops considered a PIA. I really wanted to make custom furniture when I first started but couldn't survive on it. The nice thing about that first run of success was that I didn't have to keep finding new customers. Contractors that specialized in burn refurbs and old house restorations need the stuff I learned to make.

I occasionally did a kitchen or the like but they were never as profitable as the other stuff. With little competition I could charge enough to do ok. In many ways my business still does similar work. Lots of moldings including curves, curved reception/sales counters, and will do architectural work that many other shops still view as a PIA. We just regard it as another fun challenge. Try not to butt heads with established shops, they have an advantage!



From contributor S:
I too dislike unsolicited faxes and e-mails. I also dislike the cryptic voicemail messages that some solicitors leave that sounds like a possible serious inquiry about a job. I also agree that you have to learn to sell yourself and know how to carry on an intelligent conversation about things other than cabinets.

To the original questioner: sorry I misunderstood what you wrote. There is a lot of good information in this thread and on this website. Search the knowledge base in the upper right hand corner of this website. It contains a tremendous amount of information. You will learn much more from doing the research yourself than you ever will from someone telling you the information you seek. This is your business plan and your future at stake. Form your own conclusions based on the accurate information you gather. Do not rely on someone else to give you accurate information or form a conclusion for you.

Take your time preparing your business plan. Set a "due date." You have taken the first few steps down the path of success, keep going and you will soon find yourself running side by side with the successful.



From contributor U:
I am reading about a lot of very good ideas. However, you might also try seeing if there is a local S.C.O.R.E. (Service Corps of Retired Executives) organization in your area. This is a group dedicated to helping people start and grow their businesses and they are familiar with the local landscape. Also, if there is a local college or university around teaching courses in marketing and market research, you might be able to find a student in search of a semester project.



Would you like to add information to this article?
Interested in writing or submitting an article?
Have a question about this article?


Have you reviewed the related Knowledge Base areas below?
  • KnowledgeBase: Knowledge Base

  • KnowledgeBase: Business

  • KnowledgeBase: Business: Marketing


    Would you like to add information to this article? ... Click Here

    If you have a question regarding a Knowledge Base article, your best chance at uncovering an answer is to search the entire Knowledge Base for related articles or to post your question at the appropriate WOODWEB Forum. Before posting your message, be sure to
    review our Forum Guidelines.

    Questions entered in the Knowledge Base Article comment form will not generate responses! A list of WOODWEB Forums can be found at WOODWEB's Site Map.

    When you post your question at the Forum, be sure to include references to the Knowledge Base article that inspired your question. The more information you provide with your question, the better your chances are of receiving responses.

    Return to beginning of article.



    Refer a Friend || Read This Important Information || Site Map || Privacy Policy || Site User Agreement

    Letters, questions or comments? E-Mail us and let us know what you think. Be sure to review our Frequently Asked Questions page.

    Contact us to discuss advertising or to report problems with this site.

    To report a problem, send an e-mail to our Webmaster

    Copyright © 1996-2017 - WOODWEB ® Inc.
    All rights reserved. No part of this publication may be reproduced in any manner without permission of the Editor.
    Review WOODWEB's Copyright Policy.

    The editors, writers, and staff at WOODWEB try to promote safe practices. What is safe for one woodworker under certain conditions may not be safe for others in different circumstances. Readers should undertake the use of materials and methods discussed at WOODWEB after considerate evaluation, and at their own risk.

    WOODWEB, Inc.
    335 Bedell Road
    Montrose, PA 18801

    Contact WOODWEB











  • WOODWEB - the leading resource for professional woodworkers


      Home » Knowledge Base » Knowledge Base Article