Choosing to start your own business is exciting, filled with endless possibilities and opportunities.
Turning those dreams into success takes drive, vision, and discipline.
It also requires a very clear understanding of the market forces that will influence and shape your business. Understanding these forces and their impact on your business, both at the onset and once your venture is up and running, puts you in the best position for long-term success.
Why conduct market research? No matter what business you are in, you will need sound market research in order to minimize risk. In addition, market research lets you better understand current problems and challenges facing your industry as well as the opportunities for sales, marketing, and customer acquisition.
Market research gives you a full view of the market itself, the pool of potential customers, and the competition. Market research allows you to make better decisions, based on data, not intuition alone. Here is a closer look at how and why smart market research leads to small business success.
Role in Creating Business Plan
When writing your business plan, market research is a critical component. The components of market research coincide directly with the standard elements of your business plan. They include:
- The Industry. What are the trends, threats, growth rates, and sales data?
- The Competition. Who are the major players in your industry? Which are direct competitors, and which are indirect competitors? What does each competitor do well and where are they exposed and vulnerable?
- The Product (or Service). What are you selling? How is it created, developed, and produced? What are your distribution channels and delivery methods?
- The Operations. How are you staffed? What should your leadership structure look like?
- The Ideal Customer. What is the profile of your typical customers? Where are they located? What are their demographic characteristics? What needs of others does your product or service meet?
Primary Market Research
Knowing the questions that need to be answered is one important element. Knowing how to answer them and where to get the answers is just as critical.
Market research includes both primary and secondary components. Together they give you the best insights and most comprehensive understanding of the market and your company’s place in it.
Primary research consists of information that cannot simply be found via a Google search (more on that later). This research is specific and directly pertains to your business. Its goal is to address specific questions about your venture.
The types of questions vary from business to business but are designed to gain feedback and insight so you can make market-informed fundamental decisions. Here are a few examples:
- What price will customers pay for your product or service?
- What feelings or responses does the name of your company and product or service evoke?
- How do people expect to receive your product or service?
- Where should your business be located?
- What support will customers expect?
Primary research is specific and personal. It requires seeking out true potential customers, not just neighbors and family members. It means having an open mind about the responses you receive, which may very well differ from your preconceived ideas and opinions.
Primary research may be done in a number of ways. The key is to get quantifiable (and in some cases qualitative) information upon which you can base decisions.
Among the most common techniques for primary market research are:
- Online Surveys. There is a plethora of online survey tools that will allow you to ask the right questions electronically, aggregate, and analyze the results. The key is to survey those who are in your potential customer pool.
- Phone or Face-to-Face Interviews. Standard interviews provide you with the opportunity to ask follow-up questions and gain additional insights on the fly that are not available in online surveys.
- Focus Groups. Usually conducted by a professional facilitator, focus groups allow you to test names, concepts or specific products with individual that fit your ideal customer profile.
Secondary research consists of a review of existing data and analysis that is already published. The sources of secondary research are extensive, including the internet, academic journals, and media reports.
The federal government, and in some cases, state, and local governments, are excellent sources for information. Among the best sources for this information are:
- U.S. Census Bureau, with information on demographics and market size
- U.S. Small Business Administration, with resources, guidelines, and funding information
- USA.gov, which offers various statistical information
Competitors themselves, particularly if they are public companies, are often a treasure trove of information. Public companies are required to provide quarterly and annual information about their markets, revenue, executives, employees, and other information.
Trade journals, PR sites and general news publications are also useful, though it is important to remember that much of this information is generated directly by the company and can be full of hype and scant on facts.
Putting It All Together
With a comprehensive approach to market research, you can gain deep insights into your market, your industry, your competitors, and your company itself. With more data and more information comes better decisions and a higher likelihood for long-term success.
At Benetrends, we help small businesses fulfill their dreams by helping them secure the funding they need to get started. To learn more about how Benetrends can help with your business aspirations, download Innovative Funding Strategies For Entrepreneurs today.