By Dave Pelland

Although many small business owners operate successfully by relying on experience and instinct, most companies would benefit from taking advantage of even basic levels of market research. Conducting market research can provide valuable insights into your customers, prospects, markets, industry trends and other factors influencing the success of your small business.

And while large companies have long relied on market research, a variety of free or low-cost tools make research easy to conduct, and are placing valuable market data within the reach of companies of all sizes.

Where to Start

Although market research can be a specialty unto itself, there are some basic pointers that nearly any small business owner can take advantage of. Market research can be helpful in understanding the following:

  • Your target market. Research can help you identify and segment customers according to industry and economic and demographic characteristics, as well as buying habits and needs.
  • Competition. You can understand how many companies are offering similar services or products, as well as how they price and promote their offerings. A crowded market can be difficult to crack, but a market with no competition may also indicate a lack of demand.
  • Pricing strategies. It’s important to understand competitive prices, typical profit margins, or other metrics that can help you determine the most appropriate pricing for your products or services.
  • Similar products. You can determine important details such as function, prices, warrantees, and other factors that may influence buying decisions.
  • Benchmark data. You can compare your small business against local, regional and national industry peers using a variety of criteria, including revenue, salaries, health insurance expenses, and other data.

Leveraging Insights

For a new business, market research data can be critical in understanding potential customers, where they are located, and whether there is enough demand to sustain a viable small business.

For an existing company, market research can provide valuable insights about customers and prospects, as well as an early warning signal about changing market preferences, or market or industry trends that can influence your company’s success.

Sharing market research data can also be critical if you are preparing a business plan or applying for financing. Potential lenders or investors will want to understand the opportunities and viability your company represents, and presenting comprehensive research data that backs up your plan can make an important difference in the success of your financing efforts.

Sources of Data

A variety of federal, state and, in some markets, local governments and economic development agencies can provide a variety of data for no or little cost.

The Small Business Administration has released a comprehensive data visualization tool called SizeUp that helps small-business owners compare their business success to local and regional competitors. The tool provides a variety of benchmarking data, and can also help you identify competitors, potential suppliers, and advertising opportunities in your market.

The U.S. Census Bureau’s American FactFinder tool allows small-business owners to generate social, economic, household and other data for any city or state. The bureau also offers a variety of seminars to help business owners understand and interpret census data effectively.

The Bureau of Economic Analysis site (economicindicators.gov) provides information about retail sales, manufacturing, construction, and other economic data that can help you understand a potential market.

By leveraging these and other sources of data, you can better understand your market, customers, and prospects, which in turn can help promote the success of your small business.

 

Dave Pelland has extensive experience covering the business use of technology, networking and communications tools by companies of all sizes. Dave’s editorial and corporate experience includes more than 10 years editing an electronic technology and communications industry newsletter for a global professional services firm.

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.  Any views expressed in this article may not necessarily be those of Nevada State Bank.