- Use market research to find customers
- Use competitive analysis to find a market advantage
- Free small business data and trends
Market research and competitive analysis
Market research helps you find customers for your business. Competitive analysis helps you make your business unique. Combine them to find a competitive advantage for your small business.
Use market research to find customers
Market research blends consumer behavior and economic trends to confirm and improve your business idea.
It’s crucial to understand your consumer base from the outset. Market research lets you reduce risks even while your business is still just a gleam in your eye.
Gather demographic information to better understand opportunities and limitations for gaining customers. This could include population data on age, wealth, family, interests, or anything else that’s relevant for your business.
Then answer these questions to get a good sense of your market.
- Demand: Is there a desire for your product or service?
- Market size: How many people would be interested in your offering?
- Economic indicators: What is the income range and employment rate?
- Location: Where do your customers live and where can your business reach?
- Market saturation: How many similar options are already available to consumers?
- Pricing: What do potential customers pay for these alternatives?
You’ll also want to keep up with the latest small business trends. It’s important to gain a sense of the specific market share that will impact your profits.
You can do market research using existing sources, or you can do the research yourself and go direct to consumers.
Existing sources can save you a lot of time and energy, but the information might not be as specific to your audience as you’d like. Use it to answer questions that are both general and quantifiable, like industry trends, demographics, and household incomes. Check online or start with our list of market research resources.
Free small business data and trends
There are many reliable sources that provide customer and market information at no cost. Free statistics are readily available to help prospective small business owners.
Consider these types of business statistics in your market research and competitive analysis:
|General business statistics
Industry Group 653: Real Estate Agents And Managers
|Find statistics on industries, business conditions||NAICS, USA.gov Statistics, Statistical Abstract of the United States, U.S. Census Bureau|
|Consumer statistics||Gain info on potential customers, consumer markets||Consumer Credit Data, Consumer Product Safety|
|Demographics||Segment the population for targeting customers||American FactFinder, Bureau of Labor Statistics|
|Economic indicators||Know unemployment rates, loans granted and more||Consumer Price Index, Bureau of Economic Analysis|
|Employment statistics||Dig deeper into employment trends for your market||Employment and Unemployment Statistics|
|Income statistics||Pay your employees fair rates based on earnings data||Earnings by Occupation and Education, Income Statistics|
|Money and interest rates||Keep money by mastering exchange and interest rates||Daily Interest Rates, Money Statistics via Federal Reserve|
|Production and sales statistics||Understand demand, costs and consumer spending||Consumer Spending, Gross Domestic Product (GDP)|
|Trade statistics||Track indicators of sales and market performance||Balance of Payments, USA Trade Online|
|Statistics of specific industries||Use a wealth of federal agency data on industries||NAICS, Statistics of U.S. Businesses|
Asking consumers yourself can give you a nuanced understanding of your specific target audience. But, direct research can be time consuming and expensive. Use it to answer questions about your specific business or customers, like reactions to your logo, improvements you could make to buying experience, and where customers might go instead of your business.
Here are a few methods you can use to do direct research:
- Focus groups
- In-depth interviews
For guidance on deciding which methods are worthwhile for your small business, the Small Business Administration provides counseling services through our resource partner network.
Use competitive analysis to find a market advantage
Competitive analysis helps you learn from businesses competing for your potential customers. This is key to defining a competitive edge that creates sustainable revenue.
Your competitive analysis should identify your competition by product line or service and market segment. Assess the following characteristics of the competitive landscape:
- Market share
- Strengths and weaknesses
- Your window of opportunity to enter the market
- The importance of your target market to your competitors
- Any barriers that may hinder you as you enter the market
- Indirect or secondary competitors who may impact your success
Several industries might be competing to serve the same market you’re targeting. That’s why you should make sure to differentiate your competitive analysis by industry. There are many methods for doing this, including Porter’s Five Forces analysis. Important industry factors to consider include level of competition, threat of new competitors or services, and the effect of suppliers and customers on price.
THE FIVE FORCES IS A FRAMEWORK FOR UNDERSTANDING THE COMPETITIVE FORCES AT WORK IN AN INDUSTRY, AND WHICH DRIVE THE WAY ECONOMIC VALUE IS DIVIDED AMONG INDUSTRY ACTORS.
Institute for Strategy & Competitiveness
Harvard Business School
First described by Michael Porter in his classic 1979 Harvard Business Review article, Porter’s insights started a revolution in the strategy field and continue to shape business practice and academic thinking today. A Five Forces analysis can help companies assess industry attractiveness, how trends will affect industry competition, which industries a company should compete in—and how companies can position themselves for success.
Pick your business location
Your business location determines the taxes, zoning laws, and regulations your business will be subject to. You’ll need to make a strategic decision about which state, city, and neighborhood you choose to start your business in.
Research the best place to locate your business
Where you locate your business depends in part on the location of your target market, business partners, and your personal preferences. In addition, you should consider the costs, benefits, and restrictions of different government agencies.
Region-specific business expenses
Local zoning ordinances
If you buy, rent, build, or plan to work out of a physical property for your business, make sure it conforms to local zoning requirements.
Neighborhoods are generally zoned for either commercial or residential use. Zoning ordinances can restrict or entirely ban specific kinds of businesses from operating in an area.
You might have fewer zoning restrictions if you base your business out of your home, but zoning ordinances can still apply even to home-based businesses.
Zoning laws are typically controlled at the local level, so check with your department of city planning, or similar office, to find out about the zoning laws in your area.
State and local taxes
Consider the tax landscape for the state, county, and city. Income tax, sales tax, property tax, and corporate taxes can vary significantly from place to place.
In fact, some states are well-known for creating tax environments that are very friendly to certain kinds of companies. That’s part of the reason why tech startups, financial institutions, and manufacturing tend to concentrate in certain areas of the country.
Visit state and local government websites to find out what the tax landscape for your area looks like.
State and local government incentives
Some state and local governments offer special tax credits for small businesses. You might also find state-specific small business loans or other financial incentives.
Incentive programs and benefits are often related to job creation, energy efficiency, urban redevelopment, and technology.