10-Step Guide on How to Do Market Research & Business Planning

Tools & Resources

Get the Worksheet

Download the worksheet that goes along with the lesson.

Create your free business center account to get access to the complete Small Business Startup Course and all the worksheets.

Download Now

Resources

• Census Bureau Quick Facts
• Bureau of Economic Analysis
• Small Business Administration
• US Economy & Trade

10-Step Guide to Market Research and Business Planning

This section provides a 10-step guide to conducting effective market research and creating a robust business plan. We'll walk you through each step – from defining your target audience to analyzing the competition – and how you can incorporate these insights into your business planning process.

10-Step Guide on How to Do Market Research & Business Planning – Transcript

Wouldn't it be awesome if you could know how much revenue a business would bring in before you started it? Well, while you can't nail down your future revenue to the exact dollar, you can get a pretty good understanding of whether or not your small business idea will be feasible. You just need to plan out your actions and conduct some market research. 

Hey everybody, Will Scheren here from Small Business Startup Guide by TRUiC. This video is part of a larger course helping small business owners cut through the noise and get to the essentials of starting and operating their business. If that sounds like it would be really useful to you, be sure to like and subscribe. 

The task of doing market research is one that a lot of entrepreneurs skip over when starting their business. Because most entrepreneurs are big dreamers who focus on large tasks and they're not as interested in the minutia of how they will accomplish their goals. But businesses that operate off of financial projections will grow 30% faster on average, and according to Harvard Business Review, entrepreneurs who write business plans are 60% more likely to achieve viability than non-business-plan-writing entrepreneurs. 

You also need to be able to professionally explain why your business will be successful if you're in search of outside funding. But with so many variables to consider, where do you even start? Well, we've consolidated the process of planning and researching a small business into ten steps, and we've provided a downloadable link below this video that lists out all the steps for you. This document provides some deeper questions that you can ask yourself when planning your own business idea.

Step 1: Allocate time and a budget to planning and conducting market research. 

Just like in every step of your business, you ought to be strategic about planning your business and researching your market. Planning and researching can be an endless process that will never yield a completely sure result. It just can't account for every variable that could affect your business's success in the future. 

However, the more time that you're able to allocate planning your business activities and researching your industry, the less likely it will be that an unforeseen variable causes a bump in the road on the way to your business's success. For this reason, it's important to start the planning and researching process by putting yourself on the clock. Estimate how much time you feel would yield worthy results in your planning process. 

It's also important to budget how much you'd like to spend while planning. Budgets can be used to purchase and assess competitors' products, pay for studies and surveys to be conducted, and more. So after watching this video and getting your arms around all that you should do to plan and research your business, be sure to start by allocating a budget. 

Step 2: calculate your capacity. 

After figuring out how you will go about planning and researching your business, The first step you should take is figuring out your business's capacity for producing your product or service over a certain period of time. Depending on the business type, capacity can be limited by our production process, human resource allocations, technical thresholds, or several other factors that would limit a business's ability to meet demand. 

For example, if all 8 billion people in the world wanted to purchase a bicycle from you, you probably wouldn't be able to find the raw materials to be able to meet that demand. Or if you have a consulting business that requires you to meet with the customer for an hour, your capacity would be limited to the number of hours you're willing to work. 

Alternatively, if you sold a digital product like access to software-as-a-service, a PDF, or membership to a course, you'll have a relatively unlimited capacity to sell that product over and over again. 

To calculate your capacity, put together a list of all of the materials and tools that you'll need to produce your product or service and calculate the amount of time that it takes you to produce one unit of your product or service. Be sure to calculate the cost and time of production for your product or service at various quantities and consider if your business would have everything that it needed to produce that product or service at each of those quantities. 

Find the most efficient output level after considering each of the activities your business could undertake, and then assume this is your company's capacity. But forecasting how much money your business idea could bring in is not solely limited to your ability to create that product or service. 

Step 3: Conduct a competitive analysis in search of space in the market where you can distance your business from competitors or eliminate them.

To find competitive products, Just Google what you assume people would search for when they're looking for a solution that your product or services will solve for people and see what pops up that you can purchase or get for free and spend time or even money assessing each of these products. Figure out their strengths and weaknesses in solving your potential customers' problems, and pay attention to how they're branded and marketed. 

While it's likely not possible to know how many of your competitors' products have been sold. Do your best to research how much of the market they've been able to occupy. Consumers make decisions to purchase products or services in a competitive landscape based off of two considerations: the perceived value of the product or service and the amount of money the product or service costs. 

The best way to do a competitive analysis when entering into a marketplace is by placing your competitors' products or services against your products or services on a price-quality matrix. As you can see here, a price-quality matrix places competitors' products in a line graph along two axes: the price of the product or service versus the value of the offering. 

When using a price-quality matrix to assess your competitive landscape, place your competitors' products on the graph wherever you see fit, and increase their dot based on how large you believe their customer share to be amongst what you've identified as your potential customer population. The dot size doesn't need to be scaled against the other dots; the dot sizes are simply a measure to help you assess your ability to distance your products from your competitors. 

With most industries, you'll find that as you place dots on the chart, you'll see a positive correlation between the cost of a product and the perceived value. If this is the case for the industry you're considering entering, know that when you go to place your product or service when we create financial projections later in the course, you want your products or services to land above the direct correlation line and as far away from your competitors as possible. Businesses that place themselves away from their competition above this line will have an unfair advantage, and they'll increase their ability to penetrate the market. 

We've provided a link below this video for you to be able to download a price-quality matrix template so that you can do your own competitive analysis. 

Step 4: Google and research competitive market information.

After assessing competitive products, it may be beneficial for you to do some general research to see what data is available to you in terms of general market conditions. 

Spend time Googling the industry to find as much market and financial information as you can while staying within the allotted time that you've allocated to find out about your market, and be sure to take notes on what you learn. While this information won't necessarily affect how you should move your business as a new entrant in the market that you're entering, it will help you benchmark yourself against your competition, and it may help you identify some challenges that may affect your business if they were otherwise unseen. 

Next, research the total population of the area that your business could reach geographically. This step is relatively straightforward, and it should be relatively easy for you to access using a website like Census Bureau Quick Facts, which we've provided a link to below this video. Simply consider all of the regions in the world that would be interested in purchasing your product or service and find out the total population of the people who live in those regions. 

Step 6: Use available demographic information to eliminate portions of the geographical population that would not be interested in your product or service and highlight demographics in that population that you believe would be highly interested in your product or service. 

After gaining an understanding of the portion of the population that could be interested in purchasing your products, you need to begin to take a very honest look at how many of those people actually would purchase those products or services. 

Be as aggressive as possible given the time and budget allocated for your business planning that would help you figure out how many of your ideal customers live in the area that your business idea would service. Highly detailed information about this topic will likely not be available, but we've provided links to several websites below this video that could help get you started in the right direction. 

Also, know that a frequent mistake that entrepreneurs make is they believe that their market will share their enthusiasm for their product or service. However, it's better to be aggressive in cutting off portions of the population who you believe would not purchase your products rather than try to justify why they should want to purchase from you. 

Step 7: Conduct primary research to test the strength of your plan to sure up your strategy. 

After taking time to consider your ideal customer and researching how many of those customers would be available for you to market your products and services to, reach out to them. You should not simply rely on secondary data when starting a business. 

Begin to make contact with your ideal customer as early as possible and ask them if they purchased your product from you. This can be done in the form of in-person conversations, phone calls, surveys — you can even run paid social media placements to encourage your ideal audience to contact you and tell you how you can better serve them. 

No matter how you decide would be best to contact your ideal customers, provide space for them to tell you about what it is that your product or service could do to solve a problem for them. Ask them how much they'd be willing to spend to receive your product or service and find out about any apprehensions they would have in purchasing your product or service from you. 

Next, assess your ability to effectively market your product or services to this population. 

After speaking to a few of your ideal customers, you need to consider how effective you'll be in growing an audience of these potential customers and how well you'll be able to convert a portion of that audience into an actual customer. You can probably think of ten different ways to market your business off the top of your head right now — and if you watch all of our content in this course, we'll likely address how you can become proficient at using them as channels to market your business idea. 

But each of those methods require different amounts of time, money, and proficiencies to be able to be effective at growing an audience and selling your product or services to them. Before moving forward with your business, come up with a marketing plan that takes a few steps beyond just posting to social media and assess how effective you'll be at letting potential customers know that you're here to help them and how effective you'll be at getting them to buy from you. And research how much time and money it will cost you to reach them. 

Next, consider what current and forecasted economic events could have on your business plan. 

As you begin to conclude your pre-planning research for your business, you'll want to take a step back and look for curveballs that could interrupt everything that you're planning. What micro and macroeconomic events could derail your plan? 

No matter what kind of business you're running, forces outside of your business's control could change your business's direction. Take time to consider these events and carry out a risk assessment of your business. This will help you identify possible threats, their effects, and what protocols to take to minimize any dangers in the future. Place any threats that you can think of on a risk assessment matrix to prioritize them based on their likeliness of occurrence and their severity should they occur. 

You can also prepare your business to be less susceptible to outside happenings by planning to diversify your revenue streams. You can establish an emergency fund and continue to plan your business's future. Make sure you remain agile to adapt to current clients and establish good lines of business credits should you unexpectedly need financing in the future. 

Next, lay your planning and research in front of you and prepare to make financial projections. 

After taking time to consider and write some notes on each of the previous nine steps, take a second to step back and ponder how what you've learned might cause you to rethink your business strategy. 

Doing this in a professional manner will require you to take what you've learned and plan out a financial projection, and if that's something that intimidates you, don't worry — soon in the course, we'll be showing you a website called LivePlan.com, which practically gamified the entire business planning process. 

In the next video in the course, though, we'll take what we learned in this video and apply it to our imaginary barbershop. So that you can see how this process plays out before applying it to your own business idea. 

This video is part of a step-by-step course that provides business owners all of the essential information to start and operate their business. We provided a link for you to get access to all of the free and discounted business tools we mentioned in this course below this video. 

Be sure to like and subscribe to get more of this content. We'll see you in the next video, and if you have any questions, let me know.