Before moving forward with your business idea, it’s important to complete basic research, to make sure that you have a good understanding of your total market. Many times this preliminary research is needed to obtain funding.
There are four main areas that you should research thoroughly before starting your business. You will also want to incorporate much of this research into your business plan.
Who is Your Customer?
Your customer description should be specific and identify their characteristics such as age, gender, location, income level, occupation, education and general demographics. It may be helpful to include your customers’ likes, dislikes, hobbies, etc. If your customer is a business, you will want to include a breakdown of the types of businesses you are targeting, industry, location, size of firm, etc.
What/Where is Your Target Market?
Next, you will want to determine the geographic area where most of your targeted customers will be coming from. Are your customers mostly local, or will you reach out to customers nationally? Will you target customers within a 100 mile basis, or will you primarily target customers driving by your business on a daily basis? In the market area you defined, how many customers are there?
What is the Industry Like Both Locally and Nationally?
You will also want to take a look at the condition of your industry locally and at a national level. Is the industry booming, or is it a fading fad? What is the demand for your product/service in your defined market area?
Who is Your Competition?
What companies or products/services will be in competition with your business? List your direct competitors and compare them to your company by looking at the products/services offered, location, price, target markets served, reputation and image, customer service, marketing/advertising, and their current market share. It is also important to examine competitors that are not considered direct, but still make up a part of the market share. For example, if you owned a movie theater, a bowling alley would be considered an indirect competitor, as another location customers could spend their recreational time and money.
Below are some additional ideas on what research you’ll need to get started:
- Research market potential using census data and demographic databases (who will pay for your product or service?)
- Research production options using business databases (how will you deliver the product or service?)
- Research patent filings (is your product or idea patented or trademarked?)
Free and Low-Cost Market Research Resources
- Business Concierge- Through IASourceLink, the Business Concierge can answer your questions and provide you with free market research information and personalized data.
- Iowa Small Business Development Centers- The Iowa SBDCs also provide free one-on-one consulting and market research assistance at no charge to Iowa firms.
- Small Business Administration- SBA's online articles can point you to additional resources to help you find market research data.
- SizeUp.com- This tool can help you know how your business stacks up against competitors. It can also map your customers, competitors and suppliers, and locate the best places to advertise.
- Resource Navigator- Use the searchable database on IASourceLink with the keywords "Business Research" to find other Iowa organizations closest to you that can help.