“Do your market research” is standard (and smart) advice when you’re thinking about starting a business. But what does market research tell you and how long does it take?
The most important thing market research tells you is whether there are enough potential customers to support your business, locally and/or online. The next key piece of information is who your direct competitors will be. With these two pieces of information, you can see whether your business idea could be profitable and how to make it competitive.
As for how long it takes to do market research, experts in the field usually say to allow 6 weeks or more for a full-scale market research project, one that goes beyond answering those two basic questions to include multiple interviews and focus groups. That may seem like a long time, but it’s important to make sure your idea is on track before you go all in.
In this post, we’ll go over the basics of market research, helpful resources, and DIY tools to help you gather the business intel you need to vet your business idea and plan a successful launch.
Market research is the homework you do before you start your business to learn as much as you can about your prospective customers, the geographic market where you’ll operate, your competitors, and trends in your industry.
The great thing about market research is that, thanks to massive amounts of consumer data collected by government agencies and research firms, you can get as detailed a picture of your customers, market, and industry as your time and budget allow.
1. Are there enough potential customers near you to make your business work?
Let’s say you want to sell hand-tied flies to fly-fishing enthusiasts and you’d like to sell locally in addition to online. Are there enough fly fishers near you to make operating a storefront worthwhile?
You can start quickly by Googling your business idea or product plus “demographics” to find trade association reports and other marketing research that can show you a snapshot of your intended customer base. In this case, two trade groups put together a report that shows where the greatest number of fly fishers live. If you’re in the Carolinas or Florida, a brick-and-mortar shop might be worth having. If you’re in New England, the low level of participation means a storefront may not make sense.
2. Who will be your direct competitors?
Let’s say you want to sell your flies online and in a shop in Jackson County, North Carolina, a popular trout fishing destination. You’ll need to search online to find out who sells hand-tied flies online and who retails them in Jackson County.
The SizeUp tool from the Small Business Administration is really useful for finding local competitors. In this case, it lists and maps all 36 fly fishing tour and equipment businesses in the Jackson County area so you can quickly size up the competition.
Beyond those two big questions, there are more you’ll need to answer for better planning.
3. Who is the target market for your product?
It’s important to make sure your assumptions are on track and adjust if they’re not. For example, if your plan is to disrupt the hand-tied fly market to appeal to older teens and young adults, you might want to take a closer look at the market demographics for fly fishing: most fly fishers are 45 or older.
4. Do these consumers need and/or want what you’re planning to offer?
If you’re making fishing flies, the answer is a clear-cut yes.
But if you’re planning another type of business, perhaps a birthday party planning service for kids, you’ll need to look more closely at your local market. Is it full of busy working parents who don’t have time to plan their kids’ events and have money to spend on help, or is your area full of stay-at-home parents who plan their own kids’ parties and have smaller household budgets?
We’ll look below at a US Census tool that can help you find this sort of data.
5. Do they have money to spend with you?
Back to our hand-tied flies example. You can find this type of information by searching Google for your location, product or service, and “economic impact” or “consumer spending.”
Searching for “Jackson County fly fishing economic impact” returns a state-funded report showing that in 2008, more than 76,000 resident trout anglers spent more than $36 million on fly fishing equipment. The search also returned a 2016 press release showing that fly fishing contributed $174 million to the area’s economy.
This is general data but it shows that our local fly artisan may be on to something.
6. Is the market growing, shrinking, or holding steady?
Growing your business is easier if your customer base is growing, too. The report on fly fishing demographics shows that while the overall number of fly fishers is small, it’s trending upward. Find your data by searching for your product, business or niche plus “participation trends” or “growth.”
To get more detailed answers to these questions, you’ll need to go beyond internet searches to conduct more specific primary and secondary market research.
- Primary market research is research you conduct.
- Secondary market research is all the demographic and industry data that’s out there for businesses to use—the type we used to get quick general answers to the questions above, but also more detailed reports.
The terms don’t mean that you should do primary market research first and secondary market research second. To be efficient at planning your business, you need a good understanding of the industry, geographic market, general customer characteristics, and projected trends before you spend time and money conducting surveys and focus groups with primary sources.
How Do You Do Primary Market Research?
You’ll need to identify people who fit the profile of your ideal customers – people who are interested in what you want to sell, have the money to buy it, and will continue to have money to spend with you over time.
The way to do this, usually, is with online and maybe phone surveys, based on demographic data you’ve gathered from secondary sources, in-person connections you’ve made with your target market, trade and professional groups, and more.
The Small Business Administration has a handy 7-page Market Research Worksheet that not only guides you through the basics of setting up a primary research questionnaire but also helps you avoid some newbie mistakes as you go.
For online surveys, SurveyMonkey is the most popular option. Not only does the service offer free tools you can use to collect data, there’s also a resource library where you can learn how to design your survey, how to finesse tricky topics, how to structure numerical rating scales, and tips on market research.
If you’ve already started building your business email list, you can share your surveys with your subscribers to start collecting info. You can also embed SurveyMonkey surveys on your Facebook pages. You can use both SurveyMonkey Audience and Facebook Ads to share your surveys with audiences that match your target customers.
How Do You Do Secondary Market Research?
There’s a lot of good data online, but for some of the most valuable secondary market data, you’ll need to either buy access or find a library with access to those databases.
Free online resources to get you started include:
- SizeUp from the Small Business Administration, which lets you research local competitors, benchmark your business against them, and find advertising outlets.
- American FactFinder from the US Census Bureau can help you determine the size of your target audience, get general demographic data, and gather industry information by state, county, or city.
- In the birthday party planning example we used earlier, we needed to know whether there were enough two-income, relatively high-income households to support that type of business. By entering the city (let’s say Mountain View, CA), we can look up local 2010 census data for households to see that there were more than 17,000 households with kids, and 2013-2017 survey data indicating a median household income of about $120,000. Delving into the details of the “Income in the Past 12 Months” table shows that more than 34% of local family households had a household income of $200,000 or more, and for married couples, the percentage was more than 41%.
- The Bureau of Economic Analysis has a trove of national and regional data, including personal spending, income, and savings data displayed by quarter. Want to know if your area is economically healthy? What about your industry? You’ll need to do some searching but there’s lots of data to work with here.
At the library, look for these resources:
- The State and Metropolitan Area Data Book – The more recent, the better. This covers general demographic data like population, employment, education, and more for your state and its cities.
- The Statistical Abstract of the United States – Again, the most up to date edition you can find. This includes data on everything from sexual orientation, healthcare usage, veterans, and lots more to help you refine your research.
- Databases – Each library system has access to a variety of databases that cost too much for individuals to tap into on their own. Cardholders may be able to use some of these databases online at home, but others may require you to make a trip to a branch.
These are just a few secondary sources, and there will be a learning curve as you explore, but that’s true for just about every aspect of starting a business. Stick with it, ask your library’s information specialists for help, and remember that learning to do identify worthwhile market research sources is a skill that will help you as your business grows.
How Long Do You Have to Do Market Research?
After you launch, you always should keep tabs on market trends that affect your industry, your competitors, your geographic market, and your target customers. This can help you when you want to introduce new products or expand into new areas, and it can help you serve your customers better as their needs and income levels change.
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