A business can only succeed if conducting thorough market research for its products or services concerning the target audience. It improves and confirms business ideas by blending the economic landscape with consumer behavior and should happen early in the startup process.
Market research tells you what your intended customer base wants and how to provide it effectively. It’s the most brilliant way for an entrepreneur to keep up with current trends and the latest usage in the marketplace, depending on the industry.
But what’s the importance of market research in writing your business plan, whether seeking a small business loan or defining your business roadmap for achieving goals and objectives?
Benefits of Market Research
- Market research allows you to model your business according to your target customer’s demographics, buying habits and preferences
- You’ll discover who your competitors are, their market share and your venture’s unique advantage within your industry’s segment
- You can perform primary or secondary market research by either doing it yourself or adapting someone else’s analysis to suit your objectives
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What Is Market Research for Small Businesses and Startups?
Information about the marketplace and your intended customers is crucial for small businesses and startups. It helps discover your target audience, define buyer personas, and understand the viability of your enterprise’s offerings.
Market research gathers information to provide further insight into your customer’s location, psyche, and buying patterns. It also helps you as an entrepreneur to monitor market trends or changes in the marketplace and your competitor’s operations.
Besides including market research as a significant component of your business plan, you’ll conduct regular marketplace analysis so that;
- You can identify potential leads and new customers
- Discover your existing customer’s demographics, buying habits, and expectations
- Make informed decisions regarding new or existing services or products
- Test new marketplaces
- Identify pricing, promotion, and performance opportunities
The advantages of market research for startups and existing small businesses include reducing risk factors and increasing sales or revenue. You’ll also be able to improve customer relations, boost business growth and measure your brand’s reputation.
What’s the Purpose of Your Business Plan’s Market Research Section?
Market research in writing your business plan shapes all other aspects of your corporate proposal and informs critical decision areas. Also called market analysis contributes to your marketing strategy by defining your customer’s buying habits and presenting marketplace competitors.
Your business plan aims to answer questions about the market you’re planning to enter or are engaged in if your enterprise already exists and its consumers. You can critically decide on aspects of your product or service offerings, such as design, business location, and marketing methods.
Comprehensive and accurate market research in a business plan shows you’ve analyzed the marketplace as part of the planning process. It showcases that you’ve grasped all the information to help you achieve your goals of floating the market better and that you’ll stay ahead and succeed.
Market research forms a foundation for your sales and marketing plan which, to lenders, shows that your business’s products or services will fulfill your target audience’s needs. Your business plan’s purpose as a roadmap is only complete with the processes of your market research details of how your business can exploit the niche in the marketplace.
How Do You Conduct Comprehensive, Accurate Market Research?
Even if your business ideas are still in your head, performing market research will allow you to reduce the risk of entering a marketplace unprepared. You can gather customer gaining information by studying demographics to understand limitations and identify opportunities.
When you’re performing market research that complements your business plan, you’ll either embark on primary or secondary methods of analysis. In primary research, you’ll either conduct the exercise or hire someone for you, actively reaching out to your target audience, asking questions, and collecting and analyzing data.
Secondary research involves using primary research data collected by someone else and formatting it to fit your business’s purpose. During either of these methods of market analysis, you’ll cover aspects such as;
Objective Definition
You’ll define the objective of performing your business’s market research, whether it’s for an internal or external purpose. Internal purpose market research is what you do when looking to venture into a new marketplace, launch a product or service or adjust tactics and strategies of marketing.
External purpose market research is what you’ll include in your business plan intended to attract investment or funding, such as from lenders. Your objective will determine how comprehensive your market analysis is or whether your focus is heavily on market size, product pricing, or your business’s competitors.
Industry Outlook Provision
Conducting market research will offer a preliminary view of the general direction your business’s niche or industry is headed or if it’s a growing or declining industry. That’s particularly essential for lenders as they’re interested in your enterprise’s growth potential. Significant sections to include here are;
- Market Size: Whether you’re targeting niche or big-size markets and if there are enough customers to support your business for the former.
- Product Life Cycle: What’s the life cycle of the product or service you want to develop, and will these come to fruition once launched? Lenders look for discussions on research and development, growth, launch, and decline in this section.
- Projected Growth: How is the projection for your business’s growth and performance over time, and will your enterprise fare well in future projected market conditions? Here you’ll calculate your existing business year-over-year growth to assist lenders with an overview of your growth rate up to that point.
Target Market Determination
The primary objective of your market research is to discover customer potential and how your offered product or service specifically caters to them. Since you’re selling to only specific customers, demographics, consumer location, personas, and nuances will inform your marketing strategy.
This information must be accompanied by realistic, decipherable data that adds credibility to your market research. You can use surveys, targets, focus groups, feedback, and reviews to analyze your target market and resources from the SBA, the Department of Commerce, and the US Census Bureau.
Market Value Calculation
An estimation of your target market’s value is possible with a top-down, which calculates the entire market and estimates the share your business can expect. Otherwise, use bottom-up analysis, which considers individual factors in evaluating how high up you can scale to arrive at your projected market share.
Competitor Discovery
Your industry’s competition level will determine how you’ll position yourself and stand out within a niche or general market. You’ll research direct and indirect competitors selling similar products or slightly different offerings targeting the same customer base.
Barrier Identification
Glaring barriers to your business launch or expansion are outlined within your market research, especially if it’s part of a business plan targeting lenders. Barrier identification will help avoid costly business or legal errors, including technology, branding, location, and cost of entry.
Conclusion
Your business plan is the document within which you’ll lay out your ideas for investors and lenders to obtain funding. As such, they’ll require comprehensive and accurate market research that addresses critical customer base, marketplace, and competitor questions.
Essential data, nuances, and information your business will rely on for success and achieving goals or objectives are provided by market research. It’s an initial undertaking when starting up, launching products or services, expanding, or venturing into a new marketplace.