How to Conduct Market Research for a Business Plan
Any successful business starts with a thorough, written business plan. For most small business owners, the prospect of gathering and compiling all the data required for a business plan can often seem intimidating. Fortunately, several helpful tools can make conducting market research faster and easier, especially when conducting target customer interviews.
What Does a Business Plan Include?
When building a business plan, you may include different sections or topics depending on how you intend to use the final product. For instance, business plans for internal use might not need to be quite as detailed or structured as plans that will be presented externally in order to secure financing from investors. Regardless of your purpose, most business plans include the following core sections:
- Industry Background – Include analysis of special business considerations that apply to your particular industries, such as trends, growth rates, or recent litigation.
- Value Proposition – Your value proposition (or Unique Selling Proposition) outlines how your business plans to bring value to its target customers in a way that isn’t currently being fulfilled in the market.
- Product Analysis – Describe in detail the product or service you offer, including features that are better than or differentiate you from current market offerings.
- Market Analysis – Examine your company’s target market, including customer demographics, estimated market capture, personas, and customer needs.
- Competitive Analysis – Here, you’ll compare the intended product or service to other offerings in the market and outline your company’s competitive advantages.
- Financial Analysis – Typically, your financial analysis will include estimated sales for the first 1-3 years of operation, as well as more detailed financial projections depending on who will be reading the plan.
Conducting a Market Analysis
Specific industries have different potential customers. It’s easier to reach your potential customers when you have a clear view of who they are. A market analysis helps clarify your ideal customer personas by researching both qualitative and quantitative aspects of your target market.
To better understand your potential customers, start by researching the demographics and segmentation of individuals who typically buy products and services in your industry. Your market analysis should also include:
- Research on the total size of the market
- How much additional market share is available
- Any currently unmet needs that could be sources of competitive advantage
- Features and qualities potential customers find valuable
Using Market Research to Support Your Business Plan
Market research helps assess a business idea’s strengths and weaknesses. his research will serve as the basis for strategic marketing decisions, price positioning, and financial projections listed in the Financial Analysis section of your business plan. You can also use it to help your management team think through important decisions, ultimately leading to choices that will resonate with your target audience and get customers to buy your product or service.
Conducting market research begins with fact-finding through the internet and other publicly available resources. This secondary research, or research originally conducted and compiled by others, gathers statistics on market size, average market pricing, competitor promotional effectiveness, manufacturing costs, and more.
Secondary research is necessary because it is often expensive and time-consuming for individual business owners to conduct this research firsthand. There are many reliable professional research firms that gather comprehensive industry statistics and make them available at a much more granular level than individuals could gather on their own. Some governmental organizations, such as the U.S. Bureau of Labor Statistics will even provide this information at no charge. Fortunately for business owners, a free resource is still perfectly valid as long as it’s reputable.
Beyond the initial secondary research, you should also conduct thorough primary research to vet your business idea. Primary research is conducted by talking to members of the target audience firsthand through surveys, interviews, and focus groups. These tools can provide valuable insight into how prospects judge your product or service and how they compare it to alternative options.
Primary research efforts will typically generate qualitative data in the form of audio and video recordings. These interviews are not always brief, and therefore can be difficult to process efficiently unless first converted to text. You can quickly and easily incorporate the content of these interviews into your plan once they’ve been transcribed.
With a speech-to-text service like Rev, you can get 99% accurate transcripts of your market research interviews in a matter of hours. Dramatically streamlining your business planning process with Rev gives you faster access to valuable customer feedback and potential insights, letting you skip the busy-work and get down to business.