Market Research Helps Business Plans
April 9, 2012 Leave a comment
Over the weekend I met someone whose son is opening up a new franchise in Florida. In our discussion he had mentioned that although his son had a business plan, he felt his son needed a little additional research in his plan. I told him that, unfortunately, this is a common situation.
In a slightly dated, but still relevant, 2009 press release, from Michigan CFO Associates, it stated that 90% of small business owners do not do anything to jump start their stagnant businesses. Other findings from the research were:
- 99% of businesses have no written plan for growth.
- 98% of businesses fail by the 10th year.
- 80% of businesses fail because of under-capitalization.
- 23% of businesses price their goods or services correctly.
When developing or revising your business plans, there are several areas where market research can be used to improve your business plan. The two main ares where research can best help your business plan is for competitive analysis and developing your target market.
- Competitive Analysis: I have written a number of times about understanding your competition. By doing a comprehensive, independent look at your competition, you can develop a SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) for each of your competitors and yourself. With this analysis, you can identify areas where your business model is better than theirs and areas where you may not want to compete against because their company has a competitive advantage.
- Target Market Development: The only thing that is more important about knowing your competition is knowing your target market. You can do this in a number of ways. Talking with your current and past customers are a great way to get to know them better. This can be done by interviews or surveys. During your discussions with your customers, be sure to identify why your customers buy you over your competition. Also, get to know them from a segmentation aspect. For example, if you are a B2C business, know who your best and typical customers are from a demographic perspective (martial status, age range, kids, household income). On the other hand, if you are a B2B business, knowing the industries, employee count, revenue range and growth are the metrics you should be grouping your customers in.
How have you used market research to improve your business plan?
–J. Nolfo helps companies understand their market and customers though a variety of market research strategies. He has over ten years of experience of market research for strategic planning purposes. He is the Director of Research at Rhino Market Research. He shares his thoughts about market research and business concepts with his blog “Pensare…Understanding Market Research in Business“. If you would like to discuss this blog or how J. can help you understand your market and customer needs, email him at firstname.lastname@example.org.