What market research should I do when starting a business?

Answer

First thing, I hope it’s obvious, we aren’t experts in a lot of different specific businesses. We can help you with general techniques on finding information, not in the specifics for your type of business. However, we do have some resources, including several free resources, that can help you.

We’ve posted two web books, free if you read them online, that include chapters on how to find this kind of information. They both have links that can help you find statistics, industry associations, and other leads. Both of those are at www.bplans.com, and you can read them there free. Look for the Hurdle book on business planning, and the On Target book on marketing plans. They are on the front page at www.bplans.com. They sell for about $20 at www.paloalto.com and are included with planning software that costs about $100, but as long as you read them online they are also completely free.

There is also some market information built into Business Plan Pro, including several thousand industry profiles that include standard ratios, 5-year sales growth, etc. organized by type of industry. You can get more information on that at www.businessplanpro.com.

Additional market research information is available at www.bplans.com/r/.

In general, though, the problem of information is not where to find it but how to wade through all that’s available and find the right stuff. You must, simply must, be able to search the Internet. If you are reading this, then presumably you can already do that, so you are ahead of the game. If you are on the net but don’t know the search engines, learn to use Yahoo! and Google at least.
There’s no substitute for what’s now available through the web.

There is an amazing wealth of information available about publicly traded companies. Such companies have to publish detailed financials every quarter, every six months, every year. If you are looking for information about any publicly traded companies, or if there are publicly traded companies in the general area you are exploring, then you can get huge detailed reports just by looking through what’s available at stock market oriented sites. If you are not familiar with any of these, I’d suggest you go first to Yahoo! Finance. There are dozens of sites that specialize in the financial information related to stock market companies.

For more formal research, look for a trade association that focuses in your business area. There are lots of them. Yahoo! has a listing of trade associations at:

http://dir.yahoo.com/Business_and_Economy/Organizations/Trade_Associations/

A good reference library can get you a reference book that lists trade associations. Once you find an association, then contact them to see whether they publish a directory or (better yet) a statistical review.

Next, look for magazines. In most businesses, there are magazines that focus on your type of business, so they can sell ads to the businesses that want to sell to your type of business. Subscribe or buy the magazine, get some back issues, and look for industry reviews. If you don’t already have more than you can handle, then get back to a reference library and look for indexes of published articles, and find some articles related to your business.

Most important, as far as I am concerned, is what I call “shoe leather” research. Find some similar businesses and find out as much as you can about them. Whatever kind of business you’re planning, look at your yellow pages and see how many are listed. Call them, find out about prices and things. If they have a location, park by it. Count their customers. Then, get a phone book for a town a few hundred miles away, call some of this same type of business, and find an owner who will talk to you about it. After all, you’re not a competitor, and people like to talk to people about their business. Ask them as much as you can, until they can’t stand answering questions anymore.

If you can find somebody selling this kind of business, contact them. Consider buying theirs. At the very least, you’ll get access to their past financial data, which will give you an idea of how the industry works.

Tags: business plan, market research, research, start-up, Starting a business

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