Doing Market Research for Your Business Plan Need not be Expensive

Every business needs to do market research. Whether your company is a Fortune 500 corporation or the neighborhood bar, understanding the market or markets in which you operate is critical to your company’s success. Would you invest money in an oil company that didn’t research the fields where it wanted to drill? Would you buy a house in a neighborhood without checking out the schools, crime rate, or housing market? Would you open a restaurant if you knew nothing about the location, the traffic around it, or the prospective customers? You can be sure that if you wanted to open a business, no banker will loan you money without you having done proper, thorough market research.

When one hears the phrase “market research,” most often he/she thinks about surveys and focus groups. These are the most common, yet often most expensive types of market research. Surveys and focus groups are primary research methods, since they are conducted from scratch. Most market research that small businesses need is secondary, that is, research that has already been conducted, published, and available to the public. Often, secondary research can be found in libraries, online, or through other published sources. Secondary research is also much less expensive – sometimes even free – to obtain; however, sifting through it for information relevant to your business’ needs and analyzing it properly can be very time-consuming. In this post, we will discuss how someone starting a business can do market research without breaking the budget.

First Step: Decide on the Information You Need

Tom Johnson has decided to fulfill his dream of starting a comedy club. He’s purchased a book on writing a business plan, and finds that one section of a typical business plan is “Market Analysis.” Tom realizes he must get this section down pat in order to determine the viability of his business and make projections of his first few years of revenues, and convince a banker to lend him money. Tom needs to ask himself several questions: What type of customers am I catering to? What locations are most convenient for attracting those customers? What are the traffic patterns in those locations? What other comedy clubs and entertainment venues are in the area? What do they charge? How do they promote their businesses? What types of promotions do my target customers respond to? Tom writes down all the questions he can think of that will help him analyze his market.

Census Bureau

The first place Tom turns to is the U.S. Bureau of the Census. The bureau’s Web site, www.census.gov, provides a wealth of info for him. He looks at the Web site for demographics, and plugs in the ZIP codes for the locations he is considering, along with their adjacent ZIP codes. The Web site provides great insights into the number of households in the ZIP code, the age ranges, income levels, racial composition, and other demographic factors. Also from the bureau’s Web site, Tom obtains the latest “Consumer Expenditure Survey,” and finds out what the average family spends on entertainment each year.

Tom then notices that the bureau also does an Economic Census of businesses every five years. He finds the Web page for County Business Patterns and looks to see how many entertainment establishments are within the ZIP codes he is considering. He gets good insights about the number of establishments, their employee size, revenues, and payrolls. Tom also finds other interesting facts from the Economic Census – particularly what percentage of revenues entertainment establishments typically spend on various categories: advertising, salaries, maintenance, etc.

Local Library

Tom realizes the Census Bureau has provided him with data that is summarized and aggregated. He needs more information about specific competitors and business patterns in the areas he is considering. So he visits his local library, which has access to several different databases of small businesses, like Dun & Bradstreet’s Hoover’s, and Million Dollar Database. These databases provide information on several individual establishments, including revenues, owner/officer information, employees, and location. Tom does a search of all entertainment establishments in his locations of interest.

Tom also searches through local newspapers of the past few weeks to see which entertainment venues were advertising, how often they were advertising, what they were offering in their ads, etc. He then goes to the Yellow Pages to see if those prospective competitors advertise there as well.

Chambers of Commerce

Tom then contacts different chambers of commerce around his locations of interest. He finds out when their functions are and attends some of them. The local chambers of commerce are great sources for identifying the similar businesses in his area, meeting their owners directly, and finding other businesses that can be help to Tom in opening his business. For example, Tom could meet the general manager of a local movie theater, and might learn from him that the area seems to be pressed for customers, or is impacted by some local ordinance; Tom might also meet a banker or an attorney who specializes in helping new businesses start. Still, he might meet people from a local corporation who are seeking to do events for employees, of which a comedy club can be a great option. Tom might also find information on the cost of labor in the area, as well as commercial real estate rents in various areas. Chambers of commerce are ideal for networking, news, assistance, prospective customers, and other information.

Getting Out There

Tom has now done a lot of secondary research, an exhaustive amount if you ask me! But there is also some primary research he can – and must – do. Tom should drive the areas near the proposed locations for his comedy club. He should check out the other entertainment places nearby: restaurants, jazz/dance clubs, movie theaters, other comedy clubs, karaoke bars, etc. That is, he should mystery shop. Tom should go into some of these competitors and get a feel for the type of clientele to which they cater, the prices they charge, the quality of service they deliver, and how busy they are. He can also see the décor of these venues, their peak times, the outdoor signage, and the traffic around them. All of these can yield valuable clues about the venue’s degree of competitive threat to Tom’s comedy club, and the viability of the location.

Putting it all Together

While there are countless many more sources Tom can turn to for market research, we see he’s done quite an impressive amount already. While most of his sources were free, or of minimal cost, Tom’s real expense was the time and legwork he put into it; he must now synthesize all this information and analyze it to see which locations provide the best mix of traffic, revenue potential, rental costs, and demographics, and then use that information to create forecasts. Once he’s done that, Tom can write the Market Analysis section.

PlanPro Makes the Market Analysis Section of Your Business Plan a Snap!

Chances are you don’t have the time Tom did to do all of that research. Finding all that secondary information and making heads or tails of it is probably something you’d rather delegate to a professional. With PlanPro, Analysights conducts all the secondary research you need for your business, and provides you with templates for the primary research you need to do. Once all the research is compiled, we will analyze it and provide you with the findings, so that you could write the Market Analysis section of your business plan with ease. All for a flat $495! For an extra $125, we will also write the Market Analysis section for you. This way, you can spend more time on the elements of your business plan that make the best use of your time. To learn more about PlanPro, visit: http://analysights.com/PlanPro.aspx or call Analysights at (847) 895-2565.

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