Once you have decided that there are enough people to support your business, you must then look at what competition already exists that might dilute your market.
Let’s use a golf instructor as an example. What if you’re planning to start a golf instruction business and there are already other golf instructors in your area? If so, you must share the pool of potential students with your competitors. If there are three competing instructors in your area, you have a problem. Unless your competitors are totally inept, your business, fourth in line for the pool of golfers, will have a tough time breaking even.
You may think there’s still room for you to prosper, and for all four instructors to average enough students to make a good living. However, this is very unlikely. There’s one elusive element that upsets the entire equation: the establishment factor. Your top two competitors may have been in business for more than five years, and may have established deep roots in the community.
Consider the following scenario. You have carefully researched the area. Of your three competitors:
Instructor #1 has an excellent location, good name recognition, and is very busy. He drives a new Corvette and just bought a big house on the fashionable side of town. He takes out full-page ads in the local newspaper every week and throws a major charity tournament and clambake every year (from which he receives tons of free press and TV/radio coverage). He appears to be smiling every time you see him.
Instructor #2 is making a fair living, but nothing to rave about; he’s a die-hard who will grin and bear the financial ups and downs and never release his grip on his business or his students. His wife makes a decent salary as a local government officer; they live a simple, comfortable life.
Where does this leave Instructor #3? It leaves him, unfortunately, in pretty bad shape. #1 and #2 control the territory, leaving Instructor #3 with the scraps. He is open long hours and is frequently idle…not from choice. He seldom smiles! It goes without saying that his business won’t survive and he’ll eventually have to close down or move into his backyard. Unless the two top instructors start doing something incredibly wrong, your chances of running a successful operation in your selected target area are slim to none.
Numbers can be misleading. Sometimes you have to probe a little deeper to get the true picture. For instance, if you research your market and find that you share the territory with three competing instructors in a population base of 30,000, should you look for another area? Is there a reason to be discouraged?
Not necessarily. Let’s say:
#1 is a no-nonsense, tough-as-nails instructor who enjoys teaching only pros and low-handicap players and doesn’t give group lessons.
#2 is located on the local Air Force Base at a ‘Military Personnel Only’ club.
#3 is a retired deputy sheriff operating at a rundown range who made a lifelong career out of issuing parking tickets to everyone within a 60-mile radius!
To your amazement you discover that their combined active student base doesn’t exceed 180 students a year. There is room for you to do business. The three instructors do not appeal to the general population base. It is possible for you to capture enough of the total target market to become the leading golf instructor in the area and a solid business success.
The key is to really do your homework. A few extra hours or days now can be critical effect to your future success.
Probe to find out as much as you can about your existing competition before deciding on a specific location.
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