Monday, June 24, 2013

Why Market Research is Important in Business Planning

imageThis article was written by John Rau, SCORE Orange County Business Mentor

Generally speaking, the key elements or sections of a business plan are the following: Executive Summary, Company Description, Market Analysis, Organization and Management, Service or Product Line, Marketing and Sales Plan, Funding Requirements, Financial Projections and, as necessary, Appendices.

The Market Analysis section is extremely important, because before launching your business, it is essential that you research your business industry, market and competitors. That’s what market research is all about, namely, the process of gaining information about your market. The results of market research become the basis of your plan to move forward with your business. Without having performed adequate market research to give you some direction as to where you should be going with your business in the marketplace, you’ll be like Alice when she “came to a fork in the road. ‘Which road do I take?’ she asked. ‘Where do you want to go?’ responded the Cheshire Cat. ‘I don’t know, ‘Alice answered. ‘Then,’ said the Cat, ‘it doesn’t matter.”

To get you started, you need to ask yourself some basic questions. The Edward Lowe Foundation, through its Business Builder Program (see suggests that you should get answers to the following questions:

  • Is my market clearly identifiable?
  • What is the size of the market?
  • By what methods am I able to reach it?
  • How fast is the market growing?
  • Can the market be segmented?
  • What types of people buy this product/service?
  • Does the product/service have limited appeal based on geography?
  • What do potential or existing customers like about my competitor’s products/services?
  • What makes my product/service unique relative to others in the marketplace?
  • What are current buyers paying for comparable products/services?
  • What factors are most important to buyers when selecting a product/service: price, quality, delivery time, etc.?
  • What is required to succeed in this market?
  • How many competitors will I be competing against and who are they?
  • If location is important, where are my competitors located relative to my business?
  • Can the market support another player?
  • How do my competitors reach the market?
  • Are my competitors making any changes?
  • Are they successful? If yes, why? If no, why not?
  • How are my competitor’s fees, operations and marketing structured?
  • Is the industry growing?
  • What are the current trends within the industry?
  • Who are the leaders within the industry, and why are they successful?
  • What types of marketing strategies are prevalent within the industry?
  • Is the industry seasonal?
  • Are there regulations that affect the industry?
  • Is there customer loyalty within the industry?
  • Is the industry sensitive to economic fluctuations?
  • Are there technological changes happening or required in the industry?
  • What are the financial characteristics of the industry?

The above list of questions is intended to give you a starting point relative to your market research efforts. You need to get answers to these types of questions in order to give you the basis and direction as to how you want to proceed with your business. Don’t be an “Alice” who had no idea where she was going!