How to Research Demand for a Business
Researching the market for your start-up business is one of the most important tasks entrepreneurs face. Market research involves analyzing the size of the market (how much money is being spent on a product or service), competitors in the market (who is producing or serving) and the market demand (how many consumers are buying a product or service). Each of these factors are interrelated and influenced by variables such as location and the health of the economy, all of which should be taken into account when conducting your research.
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Instructions
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Meet with a business counselor to refine your business concept. If you do not have a formal relationship with a business mentor, consult with a SCORE business counselor in your area. SCORE is national organization of business professionals that provides free counseling and advice to business owners. A well articulated business concept allows you to conduct your research effectively.
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Analyze local and national competitors for your product or service. If you are researching demand for a local business, visit market competitors and make assumptions based on your observations. For example, if a coffee shop competitor is often crowded and busy, it is an indication that there is good demand in that location for coffee. Also interview local business owners to get a sense of how your competitor meets the needs of the community.
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Gather demographic data for your business category. There are a variety of sources that provide economic data such as buyer age range, income levels and spending habits of potential customers. The Census Bureau gathers and compiles this kind of information, as well as Chambers of Commerce, area universities and economic development councils.
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Query potential customers with paper surveys, digital surveys and focus groups. Talking directly with people helps confirm or refute business assumptions. Is the market saturated? Will this market support the services or products that you envision? Be sure to talk with potential customers.
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Gather information from trade associations in your industry or profession. For example, if you are opening a movie theater, the National Association of Theater Owners provides movie goer demographics based on location, which gives you insight into who your potential customers are and how often they go to the movies.
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Visit the business library in your area. Reference librarians are able to direct you to the best resources and databases available for business owners free or low cost. For example, business libraries provide resources such as Reference USA and the D&B Million Dollar Database, proprietary business and consumer research that analyze all sectors of business.
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Tips & Warnings
Compile your research. Note dates, sources, times.
Your research will be part of your business plan, which you can build with a free template from SCORE.
Your research will help you decide whether to go to the next step as a start-up or buying a business.
Research is critical for your lenders, business partners, vendors and even key customers.
References
Resources
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