It Doesn’t Have to Take Big Bucks to do Research

Crucial to a business’ success is the research that is done to validate an idea for a business. Many an idea that seemed really great did not fly when it was introduced to the marketplace.

This brings up the question: how does an entrepreneur, particularly one with a tight budget, find out about their market and competition? This posting provides a simple but powerful plan for conducting market research at little or no cost by using tools that are readily available via the internet and other sources.

Before we get into the plan, here is the story of a friend of mine that is typical of how many approach the idea of starting a business. He lived in an area having problems with water quality. My friend decided it would be very easy to sell water filters to concerned residents. His research amounted to locating a source of water filters and purchasing a “criss-cross” directory (essentially a telephone book listed by address rather than name).

He then began making telephone calls. This was before caller id, but the end result came about in less than 24 hours. My friend told me how awful all of the people were and that he was not going any further. He actually made fewer than 20 phone calls. My friend missed the boat by not finding out whether or not the population of the area he chose would be interested in buying water filters, in particular from a stranger at the other end of the phone.

In essence, my friend did not research at all. Now, I am sure that we all have friends that have thought about starting a business and their research amounted to talking to several friends. Friends being friends, they mostly assured the budding entrepreneur that his or her idea was destined for great success. If you really want the truth from a friend, ask them to invest; that will give you a more solid idea of what they really think.

Recently I was working with an entrepreneur in the tourist industry. Gayle had an idea of what market niche that she wanted to pursue (luxury travel), but was unclear on how to get information on the characteristics of the industry, in particular financial information such as sales volume.

Yet, finding the right information was not as hard as you would imagine. Gayle had a head start, as she had worked in the industry for 8 years. Together we mapped out a game plan.

First, Gayle visited industry websites in order to learn more about the companies that were already serving that niche. Leveraging this information, I guided Gayle to the research tool Lexis Nexis for free at her local library. Gayle was able to establish a comprehensive list of companies in the geographical area she wished to draw from, as well as compile information about company revenues.

Gayle needed to know more about the size of the industry, and in particular what revenue levels could be predicted for her niche. To find this information, Gayle turned to a low-cost, online research company called BizMiner (www.bizminer.com). It is one of many research tools on the web, including Hoovers, The Star and Online Business research. Using the same codes that she had researched competitors in Lexis Nexis, Gayle was able to construct a report of the geographic market that she wanted to serve.

The report, which cost under $300, contained a treasure trove of data about the market. Gayle was able to determine the size of the market by starting with the annual average sales of the companies included in the research. The report contained historic information from three years, so Gayle was able to determine trends in the industry. The report contained complete information from 2008, so Gayle was able to see how the current economy was affecting the industry.

The report also contained complete financial information for her industry market, including income and expense reports, balance sheets and ratio analysis. Gayle was able to use the information to create a business plan with realistic numbers about sales, cost of sales and other crucial information in her pro forma income and expense report, balance sheet, cash flow and budget determinations.

In the final analysis Gayle used these simple steps to create a business plan that was based on more than guesswork, friends’ opinions and other unreliable information; she used free and low cost tools that were available to her. In particular, do not underestimate the availability of high quality research tools that you may have at your service via institutions such as public libraries.

7 thoughts on “It Doesn’t Have to Take Big Bucks to do Research

  1. Dear Kevin,

    Thank you for pointing this out, I never realised that public library’s have these data. Could you tell me if you know a way to find market data and targetgroup data on internet users? Could this be available too in public library’s? I will certainly go and check it, but was wondering if you knew any other ways.

    Thank you,

    M.

  2. Hi Kevin,

    I will be interested to see how well this approach works in the UK. I have launched two electronics sector start-ups over the last 20 years or so, one very succesfully (now sold) the other not (long dead) but in neither case can I claim to have done serious market research. The main reasons were the high cost of engaging a market research professional and also because such reports as I have seen seemed very general and lacking in targetted specifics.

    Thanks for your insights – keep ’em coming

    John

  3. Hi Kevin,
    This was very helpful. I’m in the process of expanding the company and researching which lines of products I should be concentrating on. We are an export company so we do not have just one line we sell. We have access to millions of products which is making it a bit difficult to try to narrow it down into something I can focus on and sell.
    Take care,
    Lucy

  4. Lucy,

    I am glad you found it helpful. I would also suggest a book by Michael Hugos: The Essentials of Supply Chain Management that you can find on Amazon.com.

    Good luck with your expansion!

    Kevin

  5. Kevin,

    I’ll check it out.

    Thank you,

    Lucy Lietsch

  6. Kevin R Callahan

    Related to Maximka’s question above: about 10 days ago Google launched a site for Internet Statistics. Although the site is on Google UK, it appears to have statistics covering all of the internet. Here is the URL: http://www.google.co.uk/intl/en/landing/internetstats/

  7. Hi Kevin,
    bless you!! I can’t tell you the dreary results obtained from the US Census Bureau resources in the library, tons of dusty, obscure figures. We used the Dept of Transport for general vehicle info, and Industry Employment and SIC codes for target establishment numbers, and also did some extensive vehicle counts here in southern CA – which is a prime local for that. I have canvassed the trucking, distribution, and fleet leasing industry and only gotten bits and pieces of info.
    Anyway, our quest is the population of Stake-bed trucks that typically use the side gates for transport. Our product is for those gates.
    Needless to say, we did not have the thousands for paid research.
    So I thank you for a new direction, though I’m not sure wether I’ll find anything. We have NO competition to look at!! The only place I haven’t gone is to : Gate manufactures!

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