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How to Conduct Market Research for a Startup

• 17 Mar 2022

With every innovative product idea comes the pressing question: “Will people want to buy it?”

As an entrepreneur with a big idea, what’s the best way to determine how potential customers will react to your product? Conducting market research can provide the data needed to decide whether your product fits your target market.

Before launching a new venture, you should understand market research. Here’s how to conduct market research for a startup and why it’s important.

Access your free e-book today.

What Is Market Research?

Market research is the process of gathering information about customers and the market as a whole to determine a product or service’s viability. Market research includes interviews, surveys, focus groups, and industry data analyses.

The goal of market research is to better understand potential customers, how well your product or service fits their needs, and how it compares to competitors’ offerings.

There are two types of research you can conduct: primary and secondary.

• Primary research requires collecting data to learn about your specific customers or target market segment. It’s useful for creating buyer personas, segmenting your market, and improving your product to cater to customers’ needs .
• Secondary research is conducted using data you didn’t collect yourself. Industry reports, public databases, and other companies’ proprietary data can be used to gain insights into your target market segment and industry.

Why Is Market Research Important for Entrepreneurs?

Before launching your venture, it’s wise to conduct market research to ensure your product or service will be well received. Feedback from people who fall into your target demographics can be invaluable as you iterate on and improve your product.

Performing market research can also help you determine a pricing strategy by gauging customers’ willingness to pay for your product. Additionally, it can improve the user experience by revealing what features matter most to potential customers.

When assessing which startups to fund, investors place heavy importance on thorough market research that indicates promising potential. Providing tangible proof that your product fulfills a market need and demonstrating you’ve taken the time to iterate on and improve it signal that your startup could be a worthwhile investment.

Related: How to Talk to Potential Investors: 5 Tips

How to Do Market Research for a Startup

1. form hypotheses.

What questions do you aim to answer through market research? Using those questions, you can make predictions called hypotheses . Defining your hypotheses upfront can help guide your approach to selecting subjects, researching questions, and testing designs.

An example question you may ask is: “How much are people in my target demographic willing to pay for the current version of my product?” Your hypothesis could be: “If my product contains all its current features, customers will be willing to pay $500 for it.”

Another example question you may ask is: “What’s the user’s biggest pain point, and is my product meeting their needs?” Your hypothesis could be: “I believe the user’s biggest pain point is needing an easy, unintimidating way to learn basic car maintenance, and I predict that my product meets that need.”

You can and should test multiple hypotheses, but try to select no more than a few per test, so the research stays focused.

Related: A Beginner’s Guide to Hypothesis Testing in Business

2. Select the Type of Research Needed to Test Hypotheses

Once you’ve formed your hypotheses, determine which type of research to conduct.

If your hypotheses focus on determining your startup’s place in the broader market, start with secondary research. This can include using existing data to determine market size, how much of that market your startup could reasonably own, who your biggest competitors are, and how your brand and product compare to theirs.

If your hypotheses require primary research, decide which data collection method best fits your needs. These can include one-on-one interviews, surveys, focus groups, and polls. Primary research allows you to gather insights into customer satisfaction and loyalty, brand awareness and perception, and real-time product usability.

3. Identify Target Demographics and Recruit Subjects

To gather meaningful insights, you need to understand your target demographic. Do you aim to cater to working parents, young athletes, or pet owners? Determine the type of person who can benefit from your product.

If you conduct primary research, you need to recruit subjects. This can be done in several ways, including:

• Word of mouth: The simplest but least reliable way to recruit participants is by word of mouth. Ask people you know to refer others to be research subjects, then screen them to confirm they fit your target demographic.
• Promoting the study on social media: Many social media platforms enable you to show an ad to people who fall into specific demographic categories or have certain interests. This allows you to get the word out to a large number of people who qualify.
• Hiring a third-party market research company: Some companies provide full market research services and recruit participants and conduct research on your behalf.

However you recruit subjects, ensure they take a screener survey beforehand, which allows you to determine whether they fit the specific demographic you want to study or have a trait that eliminates them from the research pool. It also provides demographic data—such as age and race—that enables you to select a diverse subset of your target demographic.

In addition, you can offer compensation to boost participation, such as money, meal vouchers, gift cards, or early access to your product. Make it clear that compensation is in appreciation for subjects’ time and honest feedback.

4. Conduct the Research

Once you’ve determined the type of research and target demographic necessary to test your hypotheses, conduct your research. To reduce bias, enlist someone unfamiliar with your hypotheses to perform interviews or lead focus groups.

Ask questions based on your audience and hypotheses. For instance, if you’re aiming to test existing customers’ purchase motivations, you may ask: “What challenge were you trying to solve when you first bought the product?”

If examining brand perception, your audience should consist of potential customers who don’t yet know your brand. Present them with a list of competitor logos—with yours in the mix—and ask them to rank the brands by perceived reliability.

While the questions you ask are vehicles to prove or disprove hypotheses, ensure they don’t lead subjects in one direction. To craft unbiased research questions , use neutral language and vary the order of options in multiple-choice questions. This can keep subjects from selecting the same option each time if they sense the third option is always mapped to a certain outcome. It also helps account for primacy bias (the tendency to select the first option in a list) and recency bias (the tendency to select the final option in a list).

Once you’ve collected data, ensure it’s organized efficiently and securely so you can protect subjects’ identities .

Related: 3 Examples of Bad Survey Questions and How to Fix Them

5. Gather Insights and Determine Action Items

After you’ve organized your data, analyze it to extract actionable insights. While some of the data will be qualitative rather than quantitative, you can detect patterns in responses to make it quantifiable. For instance, noting that 15 of 20 subjects mentioned feeling overwhelmed when attempting to assemble your product.

Once you’ve analyzed the data and communicated emerging trends using data visualizations , outline action items.

If the majority of users in your target demographic reported feeling overwhelmed while assembling your product, action items might include:

• Creating different versions of assembly instructions to test with other groups, varying diagrams and instructional language
• Researching instruction manual best practices

Each round of market research can offer more information about how your product is perceived and experienced by potential users.

Market Research as an Ongoing Endeavor

While it’s useful to conduct market research before launching your product, you should revisit your hypotheses and form new ones over the course of building your venture.

By conducting market research with each version of your product, you can gradually improve it and ensure it continues to fit target customers’ needs.

Are you interested in bolstering your entrepreneurship skills? Explore our four-week online course Entrepreneurship Essentials and our other entrepreneurship and innovation courses to learn to speak the language of the startup world.

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How to Do Market Research Before Starting a Business

Market Research Before Starting a Business

So you have a great idea for a product or service. It’s so good, that you think you can start a new business and eventually thrive because of this idea. That’s great and all, but the last thing you should do is rush into this without doing a bit of market research. And by doing a “bit” of research, we actually mean doing “extensive” research. Not doing your market research is a sure way to doom your business before you even get it off the ground. You need to know the nature of the business as well as figure out who your target demographic is. And don’t rely on basic public data – this simply isn’t enough. The following are four ways that you can do market research in order to prepare yourself to properly start a business:

LEARN ABOUT:  Market Evaluation

• Do the research on your own – Before you begin wasting resources on advertising, you’ll want to analyze your market and your target audience . One of the easiest ways to begin doing this is by taking a look at other companies that are offering similar products and services – companies that will most likely be your competitors. By studying what they are doing, you can see what works and what doesn’t without going through the process of trial and error yourself. There are also all kinds of resources available for you to do your research – Survey Templates , Survey Questions and Survey Design themes to get you kick-started right away!
• Obtain customer data – Find out what customers would think about your products and services by conducting online surveys or focus group sessions – whatever works best for you. How do you find consumers to obtain data from? Simply placing an ad online, such as on Craigslist, and offer small compensation and you’ll get plenty of willing subjects. Just make sure that they belong to the demographic you are targeting. You could even find qualified graduate students that might be willing to conduct this research for your at a local college or university if you offer them a rate that is reasonable.
• Buy expert market research data – Sometimes it takes too many resources to try to obtain all the data you need on your own. In this case, there are a lot of firms out there that specialize in market research, such as the Kantar Group and IDC. They have the means and ability to perform detailed studies on particular segments of the market. They can provide you with incredibly valuable data that would have cost you a huge amount of money to gather on your own. The only drawback is that you may not receive the particular data you wanted for a certain geographic region or specific market. Make sure that you find a firm that focuses on your particular industry as well.
• Hire a research firm – A research firm can provide you with expert market research data as well as information directly from your target consumer base. They will not only provide you with a sophisticated market analysis, they will also interview consumers at select destinations in order to help figure out what your target demographic’s shopping behaviors and purchase decisions are.

LEARN ABOUT:  Market research industry

These are four excellent ways that you can obtain valuable market research in order to get your business off on the right foot – and if you’ve read over these four tips, then odds are you probably realize that market research is an absolute must if you didn’t realize that already.

We recently published a blog that talks about Market Research Tools ; why don’t you check it out for more ideas?

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How to Conduct Market Research for Startups

With 50% of new businesses failing within the first five years of operation, startups need to develop a deep understanding of their customer base quickly in order to thrive. Successful new business ventures strategically begin by gathering accurate and thorough information about their industry to identify the best path ahead. Conducting market research for startups is a key step toward meeting customer needs and strengthening marketing messaging.

Market research brings together important details about a business's customers, competition, and industry. The results serve as a tool in a startup’s business planning process as it evolves. Analyzing the findings can help determine the viability of a business concept and identify areas for adjustment to improve performance, profitability, and attract investors.

“Without market research, a startup is just making guesses. Listening to your prospective customers will help you align your product/service and marketing messaging to address their needs.” Dr. Elaine Young, Champlain College Online

As noted by Dr. Elaine Young , professor and program director of marketing communication at Champlain College Online, “Startups need market research so that they can gain insight into the behaviors and values of their target customers. Just because you think your startup idea is amazing, doesn't mean that consumers will. Without market research, a startup is just making guesses. Listening to your prospective customers will help you align your product/service and marketing messaging to address their needs.”

Table of Contents

What is market research?

Why is it valuable for startups, types of market research, methods of market research, how to do market research for startups, sample questions to ask customers.

Market research is defined as the process of collecting, analyzing, and interpreting a broad set of information about a specific market or industry. The research might focus on:

• A potential product or service for that market
• Existing and/or potential customers for the product or service
• The needs, purchase habits, characteristics, and location of your target market
• Competitors in your industry
• Trends within your market or industry as a whole

As a business strategy, market research enables companies to make actionable decisions according to data-based findings. These measurable statistics can be gathered through a variety of methods, which we will explore below.

Startups benefit from market research in multiple ways. With so much time, energy, and funds invested in a startup, taking steps to strengthen the concept and connection to your target audience is critical to survival and the bottom line. 

The market research process delivers value to startups by:

• Allowing you to test the ideas and concepts behind your product or service
• Enticing investors with data showing the projected profitability of your venture 
• Providing statistical evidence to potentially support your business concept or encourage you to adapt it to better meet the needs of your target market
• Helping to clarify exactly who your customers are
• Serving as evidence to investors of an entrepreneur’s commitment to improving a business based on current market conditions
• Increasing the odds of   success of your startup

“Market research can help founders focus their energy, enthusiasm, and resources toward a specific segment and the real target audience.”

Adrienne Wallace, Grand Valley State University

The American Marketing Association confirms that market research can directly increase your bottom line. And trusted market research findings can also speed up the process of getting investors on board with your startup venture.

“Startups can't begin with just a hope and a prayer,” notes Adrienne Wallace , associate professor at Grand Valley State University. “Market research can help founders focus their energy, enthusiasm, and resources toward a specific segment and the real target audience instead of making the age-old error of ‘everyone is the target’ because it simply can't be that for efforts to be fruitful.”

There are two types of market research used most in the business world today: primary and secondary. They can be used individually but are often combined to create a broader understanding of your target market.

Primary research

Primary research involves collecting data directly from your target market. This is often achieved through the use of surveys, interviews, and focus groups. The findings can provide a comprehensive understanding of your customer base’s needs and preferences.

Secondary research

Secondary research requires examining existing data collected by third parties. Examples of potential data sources include news media, industry reports, proprietary data from other companies, academic journals, or public databases. Although targeted data is not always available for your particular industry, secondary research enables you to gain insight and understanding about an industry overall.

Choosing a specific method of market research — either quantitative or qualitative — will determine the type of data collected in your research.

Quantitative research

Quantitative market research gathers large numerical datasets that can be used in statistical analysis. These results offer more accurate snapshots of industry trends and market challenges. Common methods of collecting quantitative research data are through surveys, questionnaires, and polls.

Qualitative research

Qualitative market research strives to identify the reasons behind customers’ buying habits, as well as their needs, wants, and overall customer satisfaction . These results can help clarify the “why” behind your target market’s behaviors and feelings. Focus groups, in-depth interviews, and online bulletin boards are typical methods for conducting qualitative market research.

Generally, quantitative market research is more commonly utilized than qualitative market research because it is more scientific, unbiased, and more easily plicated in future studies. In 2019, 61% of the money spent on market research in the United States went toward quantitative research, with only 12% spent on qualitative research.

Conducting market research is not a quick process, so it requires thoughtful planning. You may handle this research on your own or hire a third-party market research company to manage the process on your behalf. The steps below will guide you through developing a market research strategy that benefits your startup.

Step 1. Define your research purpose

The first step in market research for startups is to determine what questions you hope to answer through this research. From those questions, you can develop projected results that will help reveal the overall purpose of your research. Understanding the purpose from the beginning will be an asset in identifying the best approach to selecting subjects, composing questions, and testing product designs.

Examples of market research purpose include:

• Confirming consumers’ biggest pain point and whether your product meets their needs
• Tracking and predicting relevant industry trends
• Determining consumer spending capacity for a product/service
• Gauging the market infiltration of your competitors

Step 2. Study your target market and competitors closely

It’s important to take time to study existing information about your target market, your competitors, and your target demographic. Growing your knowledge base about all of these factors in advance will strengthen the relevancy of your research.

When working on demographics, a buyer persona template can be a useful tool to help segment the consumer audience into smaller groups for better targeting. Understanding each group’s behaviors and motivation can lead to research findings that resonate deeply with your customer base.

Step 3. Choose the right type and method for your needs

The best type of market research for your business will depend on the purpose you aim to achieve. If your goal is a broad-scope industry view, secondary research examining existing data may provide you with all the information you need. But if your strategy is to clarify specific details about your customer base, you will need to collect new data through primary research. 

The ideal method for data collection also depends on the end goal. Quantitative research methods such as surveys create data useful in making market predictions. Qualitative research methods like focus groups and in-depth interviews offer more personal and subjective responses from participants. Such responses are valuable when seeking direct consumer insight on your product or service and on brand awareness.

Step 4. Recruit appropriate research subjects

If you are pursuing primary research, the subjects involved in your study should be capable of providing insights that are directly relevant and valuable to your market research goals. Recruitment methods can vary from social media posts to hiring third-party market research firms and incentivizing participation.

Seek out existing customers, former customers, and potential customers to create a full spectrum view of your market and product. Other potential sources for research participants include:

• Recent customers
• Customers who did not complete their purchase
• Word of mouth among both personal and professional networks 

Step 5. Conduct your research

Execute your market research plan based on the method you identified in Step 3. Appoint someone not deeply connected with the project planning as the point person for interviews or focus groups in an effort to reduce potential bias. When creating surveys, strive to incorporate neutral (non-leading) language as a way to craft unbiased research questions.

Christina Inge , an instructor and curriculum designer at Northeastern University, suggests an effective research technique called customer discovery. “It requires asking customers what their needs are,” she says, “rather than showing them your product or service and asking for their reactions. This can help you get to the heart of what your customers need, leading to better product market fit, faster.”

Step 6. Analyze your results

Once you’ve collected and organized all of your data, analyze it for relevant trends and patterns. Any qualitative data, such as feedback from focus groups or interviews, can be interpreted quantitatively by noting response ratios amongst the participants. Examine your findings for insights that offer actionable next steps.

One famous example of a startup that pivoted toward success as a result of closely analyzing the market research on their target market is Tune In Hook Up. As an online video dating site that wasn’t seeing much traffic, their research revealed that users struggled to share videos easily with one another. Based on their findings, they decided to shift away from romance and focus on the videos, renaming themselves YouTube.

Step 7. Create an actionable report from your findings

Gather your findings into a report that outlines the recommended actions necessary to address the market research results. Whether the data provides positive or negative insights, you should always come away with actionable steps and suggestions for the next stage of your startup.

Find additional tips and a free report template in HubSpot’s’ How To Do Market Research: A Guide and Template .

Drafting market research questions for startups is not an exact science because cookie-cutter surveys and interview questions will not work. Every product, service, and industry has unique features that require tailored language in each research question. 

Below is a sampling of the type of questions you may want to consider: 

• What do you like most about our new product or service?
• What do you wish our product or service did that it does not currently do?
• What do you lose sleep over at night?
• What price would you consider so low that you’d question this product’s overall quality?
• Which of these companies have you purchased this product from in the past six months? (list of competitors)

Market research is a booming industry around the globe, but nowhere more so than in the United States. The U.S. is the leading country for market research services , with the industry bringing in $18.75 billion in 2020, more than six times the industry-related revenue of any other country in the world. It’s no surprise, considering how quality market research can directly impact a company’s bottom line and growth. Free kits for growth marketing can help you get moving on the road to success through market research for startups.

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How to Research Your Market Do your homework before opening your doors to avoid business-busting mistakes.

By Brad Sugars • Mar 2, 2007

Opinions expressed by Entrepreneur contributors are their own.

Starting a business is a little like buying a car: You need to do some research before taking the plunge. First, figure out if there's demand for your product or service. Do a competitive analysis. Find a place to set up shop. And create a plan to differentiate your offering.

Doing your due diligence can mean the difference between success and failure, and it doesn't have to cost a penny. Networking, online research, informal focus groups and other do-it-yourself methods can often do the trick.

Consider the case of an event facility in the South. It started as a place to hold weddings. Located in a beautiful old house, it attracted wedding business, but wasn't turning a profit because it usually sat empty on weekdays.

So the owners contacted members of a nationwide wedding planners' association with similar estate-type settings in other geographic markets. They discovered that others in their situation filled the gap with corporate meetings and by offering bed-and-breakfast arrangements. Today, 40 percent of the facility's business is corporate events, and the owners are building a lodging facility on the grounds to expand their offerings.

Before you get the research ball rolling, you need to come up with a solid business concept. Once you have a concept, you need to determine if it's viable. To figure out if you should go ahead with your business idea, you need to ask questions like these:

• Is the market saturated? Does your city really need another hardware store or flower shop? How much money is spent in your industry each year in your area? Is there room in the market for one more business?
• Does the market want what you're offering? If you're thinking of providing day care for dogs or a facility where people can cook a week's worth of meals in a group setting, will anyone care? Or if you're developing a new online service for day traders, is it something they can't live without?
• What's the competition doing? What do they do well? What do they do poorly? What's unique about them? Can you offer something different that'll encourage customers to patronize you instead of more established businesses?
• Can you reach your target audience? If you're selling inline skates, are you opening in an area with a population of the right age and disposable income?

Once you're sure of your business idea, dig in deeper. You need information that'll help you develop a unique business proposition that'll give you a competitive advantage. The best sources of information will vary depending on the type of business and circumstances, but options include the following:

• Trade information. In the wedding site example cited earlier, the trade association for wedding planners provided a direct pipeline to the information the event facility was seeking. Other trade information can also be found in print or online trade publications, or by walking the aisles of a trade show.
• Demographic and economic data. Try the U.S. Census Bureau's American FactFinder , State Data Centers or most recent Economic Census to find things like age range, income, number of businesses by type in a geographic area and total sales in your category. For even more information, a reference librarian can point you to other specialized databases.
• Business groups. Your local chamber of commerce may be able to help you find the information you need. Also try government-sponsored Small Business Development Centers , which assist entrepreneurs and small-business owners.
• Local universities. Sometimes professors at business schools are interested in having their graduate students do a market feasibility study for course credit.
• Local competitors. If you're starting a local business, shop the competition and check their websites. Or find a similar business in a similar city and ask to talk to the owner. Also look for similar businesses for sale and contact the brokers for information like why they're selling and what their financials are like. You may be interested in buying that business yourself.
• National competitors. Do an online search of businesses in your industry and evaluate what they offer to help fine-tune your idea.
• Potential customers. Run your idea up the flagpole with informal focus groups. Talk with friends of friends--but not your own friends or family, since they may not tell you the truth--and old customers or existing customers if you're already in business. This is the acid test to see if your plan is ready for prime time or needs tweaking.

All this detective work will pay off, either by helping you validate your business plan, sending you back to the drawing board, or convincing you to shelve it altogether. And don't worry if that happens--inspiration will strike again.

Brad Sugars is the founder and chairman of ActionCOACH. As an entrepreneur, author and business coach, he has owned and operated more than two dozen companies including his main company, ActionCOACH, which has more than 1,000 offices in 34 countries.

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How to do Market Research for Your Business Idea

Perhaps you have an idea for the next top-selling gadget, an app to help make people’s busy lives better or a method to sell professional services in an innovative way.

Once you’ve come up with a business concept and decide you want to bring it to market, it’s time for planning and preparation. Performing market research before launching a new business idea is an important step to help ensure your new endeavor will be successful.

What is market research?

Market research is the process of learning why consumers will want to purchase your service or product. The details you gather will show you what your target market’s needs and preferences are. You can learn what consumers’ spending habits are like and the types of purchasing decisions these people make. Having this information and analyzing it thoroughly can help you figure out the best way to make your offerings known and price them in a way to attract the most customers.

The following steps can help you get started.

How to do market research

1. read about the market..

There are market reports for most industries. Even if your idea seems unique, such as a new type of toy, you can find information about different aspects of the toy market, including pricing and what toys are selling well. Reading these reports and those in trade journals can show you current and predicted trends, which gives you a better idea of how your product or service might perform.

2. Perform customer research.

You’ll want to know a lot about the type of people who may be your future customers. This includes information about who they are, such as their age, education level, location and occupation. You’ll need to review their current buying habits and whether they’re willing to pay more for quality or they’re adhering to a budget and using coupons while focusing on cost.

Much of this demographic information is available on the U.S. Small Business Administration’s website . You can use this data to determine which groups are more likely to purchase from you than others — and if there are other groups you want to target and sell to.

You’ll also need to analyze information to determine why your target group would buy your product instead of something from another company. Start by finding out who the customers are for similar products or services, based on market reports.

3. Interview potential customers.

Once you find these potential customers, you’ll want to ask about their needs and what they want in a product or service. You can do this with an online poll or survey on social media . Sending out a survey link to online groups where these potential customers spend time is a good option.

For example, if your target customers are mothers of young children, put the link on a social media platform where these women share tips, or ask a few specific women to share the link with others who meet that description.

Reaching out to potential customers is essential for understanding if or how your product will be relevant in market. Some key answers you can gain from this include:

• What products or services already exist?
• How much are customers willing to pay?
• How can products or services be better?

4. Understand the competition.

Learn about other companies in the same or a similar industry. By comparing companies that have similar products, you can better understand the business landscape and learn how they’ve succeeded. This can also help you determine your chances of success. Company size doesn’t necessarily matter here. You can research established firms of a similar size or start-ups, be they private or publicly traded. Speaking with potential customers can also clarify what they currently like about the competition and areas where they feel their needs aren’t being met. Reading online reviews, talking with customers in person or online, and conducting surveys are all useful ways to obtain this information.

5. Testing the business idea

The last step is testing your business idea. You could offer a business service to a few customers to get their opinion and see how it works in real life. If you’re making a product, create a prototype and let others use it to get their feedback on whether it’s useful, if it fits a need and how much they would pay for it. You can modify your business idea based on what you learn.

Launching a small business can be challenging, even with a great idea. Find more tips on how to successfully start your business , and consider how you plan to protect your company from potential damages. With small business insurance , you can have the peace of mind that you’re covered if the unexpected happens.

• business idea
• market research
• starting a business

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How to do market research

Your business idea is clearly inspired. But it helps to check you’re not the only one who thinks so.

Types of market research for new businesses

As a startup, you need to figure out who’s going to buy from you (customer research), and who you have to beat to get that sale (competitor analysis).

Why do customer research

By understanding your customer, you can:

• build better products and services
• learn how people make purchase decisions

Why do competitor analysis

By understanding your competitors, you can:

• copy what they do well
• work out what you can do better

It’s a good idea to figure out your customers first. That is the most important relationship for your business.

• Create a customer profile: Describe the person or business that will buy from you. For consumers, think of things like their age, location and interests. For business customers, think of things like their industry, size and location. Stuck? Start by checking out who buys from known competitors.
• Hit the internet: Search for information on the group you’ve just described. There may be existing studies into those types of people or businesses which you can use as a starting point.
• Start asking questions: Find real-life people who fit your customer description and ask them questions like: what do they need from a business like yours? where do they get that product or service now? what’s good about that current solution? and what could be better?

Read our guide to understand more about market research .

Market research methods

So how do you get information about people and their preferences? There are a few proven market research methods to try.

• Search the internet (desk research): Search for public studies into your customer group. And follow what those people say on social media and community groups.
• Have one-to-one conversations: Ask open-ended questions and let respondents do the talking.
• Host workshops or focus groups: Ask questions to a whole group of customers at once. You’ll get deeper answers because people will spark off each other.
• Run surveys: Ask tons of people the exact same questions to generate really solid insights and statistics.
• Start a community: If your customers are enthusiasts, bring them on your startup journey. Share updates, ask questions, and invite them to be beta testers.

Give something to get something

Free catering or swag will get people to your focus group. A random prize draw will encourage people to fill out your survey. A little sweetener goes a long way when doing market research.

How to do competitor analysis

Customers can tell you a lot about your competitors. So you’ll use many of the same market research methods to find out who you’re up against.

• Identify your competitors: Some competitors will be obvious from the get go. But you will find more by asking customers who they buy from now. Spare a thought for indirect competitors, which sell different things but go after the same dollar (they might sell cupcakes versus your donuts).
• Compare them to each other: Competing businesses often go after different parts of the market. One will be the premium option, while another will compete on price. Or perhaps they will target different age groups or locations. Map how they relate to each other.
• Find where you fit: Where on the map will you go? Measure your strengths and weaknesses against your competitors and figure out where you can give them a run for their money.

Read our guide to understand more about competitor analysis .

That’s how to do market research

You don’t need a big budget or a stats degree to go do some market research. Asking a few key questions of a few target customers and doing some competitor analysis can give you the smarts to build a winning business.

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

How to start a business

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Your prices can influence the number of sales you make and the profit you earn on each transaction.

Your business structure can affect how much tax you pay, and how you're treated by the law.

If you’re starting a business, then you’ll need to get familiar with some accounting basics.

After all the excitement of deciding to start a business, you’ll have some paperwork to do.

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Small Business Trends

Guide to how to do marketing research.

Have you ever kicked off an advertising campaign with high hopes, only to be disappointed by the results? Or what about introducing a new product with great fanfare, just to discover the market wasn’t interested? These situations happen in business. And this is where doing marketing research makes a difference.

If you have big goals, market research can help your business make the right moves and avoid wasting time and money on the wrong ones.

Not only that, but marketing research can help you get happier customers. For example, 94% of diners choose a restaurant based on online reviews, one study suggests. Another study found that 82% of customers expect an immediate response on sales or marketing questions. Knowing these kinds of facts can help you put into place the processes and tools to delight the customer and attract new ones.

In this article we define what is marketing research in plain language, including the different types of market research. You will learn fast and easy techniques for how to do marketing research, which techniques work best, and how to take advantage of third-party information that already exists.  The end goal is to find success.

What is Market Research?

Market research is the process of collecting information about target prospects, clients, market size, competitors and more. Businesses use this information to develop products and services, set prices, increase lead flow, boost sales, improve customer satisfaction, and develop marketing and advertising campaigns.

If you take nothing else away from this market research definition, remember one thing: data is the foundation of a company’s marketing strategy. Research is the starting point that guides your marketing in the right direction.

Marketing research prevents you from acting on incorrect assumptions or one-size-fits-all advice, and making costly mistakes. In a world of trial and error, market research achieves more trial with less error.

The Evolution of Marketing Research in the Digital Age

Integrating Digital Data Sources : In today’s digital-driven market, traditional marketing research methods are being complemented with new data sources. Online behavior tracking, social media analytics, and digital footprint analysis provide a wealth of information about consumer preferences and trends.

Understanding how to integrate these digital data sources into traditional research frameworks can offer a more holistic view of the market landscape.

Leveraging Big Data and AI : The advent of big data and artificial intelligence (AI) has transformed marketing research. AI algorithms can process large datasets to uncover patterns and insights that might be invisible to human researchers. Businesses can leverage these tools to predict consumer behavior, personalize marketing strategies, and enhance decision-making processes.

Types of Market Research

Marketers leverage two different types of research:  primary and secondary research. Whether you know the terms or not, you probably are familiar with both.

First, let’s look at primary research. Primary research refers to the process of gathering data that hasn’t been collected yet by another party. In other words, primary information is simply information you uncover and collect yourself.

When people tell you their experience with your business or their level of satisfaction with your product or service — that’s primary information. Primary research includes the following:

Surveys involve asking people questions that they can quickly answer to reveal their opinions, perceptions, attitudes and behaviors.  Companies conduct surveys by mail, on the phone or increasingly today, online. Surveys are one of the most common research methods for a small business.

In Person Research

In-person research involves talking directly with a consumer, potential customers or existing customers — and includes:

• Interviews – These are one-on-one interactions to dive deeply into reasons driving the interviewee’s beliefs. Interviews are relatively inexpensive and can involve simply phoning a customer.
• Focus groups – A focus group gathers together between 5 to 10 people in a group setting to give feedback. Focus groups are expensive and really require an experienced facilitator to get unbiased information.
• Ethnography – Ethnography simply means interactions with others in their natural environment. A common method is “fly on the wall” where a researcher quietly observes someone in a store or using a product. A digital method involves heat maps to test where a visitor’s attention lingers on a web page.

Other Marketing Research

• Diaries – People track their behavior for observation about how they interact with your products or services.
• User testing – Users test and give feedback about how they experience your product or service in real-time. We’ve all seen examples of this on TV commercials: the blind taste testing.

Primary methods like the above have many uses, but small businesses find them invaluable in two situations. First, small businesses use them when trying to uncover the true user experience with their product or service. Second, they use primary methods when they need to understand how their clientele feels about their company.

Next let’s look at secondary research. Secondary research involves using information that has already been collected by another party. Much secondary information is online research and is free or low cost. Examples include:

Government Research

• U.S. Census data (a good place to start is Census Data Gems ).
• Information from government agencies like the Bureau of Labor Statistics, FEMA or the SBA.

Third Party Research

• Research reports (not your own), or information gathered by other companies. Example: a research chart from eMarketer .
• Secondary data from trade associations such as the National Retail Federation. It publishes industry statistics and studies.
• Information provided by specialized digital tools. An example is Google Trends data, showing public search trends.

Combining Qualitative and Quantitative Research

Balancing Depth and Breadth : Effective marketing research often involves a combination of qualitative and quantitative methods. Qualitative research, such as interviews and focus groups, provides depth and context to understand the ‘why’ behind consumer behaviors.

Quantitative research, like surveys and statistical analysis, offers breadth and generalizability to measure trends and patterns across larger populations.

Hybrid Research Models : Embrace hybrid models that blend qualitative and quantitative approaches for a more comprehensive analysis.

For example, a study might begin with qualitative interviews to explore consumer attitudes, followed by a large-scale quantitative survey to validate and quantify these attitudes across a broader audience.

Market Research Examples

Exactly what do you use marketing research for?  There are hundreds of uses. Below are just 15 examples:

• Identify revenue opportunities – Research may reveal customer segments you never considered, or the opportunity to cross sell or up-sell. You can also identify new verticals ripe for expansion.
• Set pricing – Research can reveal whether your prices are high or low compared to the market. Research may show that price increases are justifiable.
• Capitalize on competitor weaknesses – Learn what the market hates about your competition, so you can compare your brand and persuade prospects.
• Identify competitor strengths – Learn what the market likes better about your competitors, so you can meet or beat them.
• Spot trends – Trends may suggest new technologies to adopt.
• improve reputation – Your business may discover a reputation problem from bad online reviews that your team needs to overcome.
• Compose winning marketing messages – Research may reveal which advertising messages appeal to your target market.
• Identify a new offering – Changing habits, tastes and needs may trigger ideas for products or services.
• Delight customers – Customer expectations may be different from what you assume, and research reveals what matters most.
• Demonstrate industry authority – Find out what content your target buyer values and how they want it delivered to them.
• Test concepts – Poll the public as to whether a brand name appeals to them, and test concepts before launch.
• Determine key influencers – Ascertain who holds sway over buyer decisions, so you can connect and leverage influence.
• Elevate digital presence – Assess your visibility in search engines and on social media. Identify opportunities to gain a bigger footprint.
• Identify product features – Research helps guide your development efforts by suggesting the qualitative value proposition at every stage of the product life cycle.
• Improve your website – Collect data about what draws prospects to your website. Identify elements they love, and discover what makes them convert.

How to Do Market Research

Now that we understand the market research meaning, the steps to conduct research are straight forward. Here are seven market research steps to follow:

1. Identify Your Goals

Start with your goals. Write down what market research information you want to gather and how you will use it.  Be specific about the challenges in your business.  A few sample goals include the following:

• Compare competitor prices to see if your business has room to raise prices.
• Increase word of mouth referrals by improving customer service levels.
• Identify your ideal potential customers so you can tailor products and services to meet their needs. Include age, gender, location, income and specific problems your customer wants solved. Create customer personas to guide your sales outreach.
• Isolate the messaging that resonates best for an ad campaign.
• Size the market before developing a new product or starting a new business.

2. Choose a Type of Research 

Choose the type of marketing information needed to meet your goals. Start with these simple steps:

• Primary or secondary? Decide which type will give you the information needed for your goal(s).
• If primary, determine the format. For instance, you could invite current clients to participate in interviews. Ask your social media followers to participate in an online survey. Or try a service like Google Surveys to get responses from consumers and the general public.
• If secondary, determine what sources to investigate. Always check first to see if government research has what you need. Google searches will point you to other secondary information, including industry organizations.

For more, see these 21 market research tools .

3. Conduct the Research

Now it’s time to actually do the research. The best way to know what people are thinking is to ask them directly. In this section we will focus on the main three ways to get customer research: interviews, focus groups and surveys.

Interviewing Customers

Interviewing customers can be done over the phone, in-person or using one of many web-based tools.

Speak to 10 to 15 individuals to make sure that you are getting feedback representative of your target audience. Request 20 to 30 minutes to talk at a mutually convenient time. Be prepared ahead of time with your questions.

Ask respondents if they give you permission to record the interviews so you can refer back later. Alternatively, have someone with you to take notes.

Remember not to coach people or guide them to answers that you want to hear. You want their honest feedback. Do not react to what they say. Your job is to get their thoughts, not correct any assumptions or perceptions you may disagree with.

Holding Focus Groups

A good focus group size is 8 to 10 participants.

Conduct focus groups in-person or online using apps that lend themselves to the purpose. Many local libraries and community centers have rooms that you can use at little or no cost. Trade shows and conferences also offer an opportunity to conduct interviews and focus groups. You can also use online conferencing tools to facilitate this group interaction.

Start off the group with self introductions. Let everyone know that all opinions are valid and there are no incorrect answers. Then guide them through a discussion that you prepare ahead of time.

Limit the session to no more than two hours, or even 90 minutes. This should be plenty of time to get insights, while giving everyone a chance to voice opinions.

Conducting Surveys

Surveys are terrific for gathering customer feedback. Today most customer surveys are done online using a professional survey tool. Simply set up a survey and email a link.

Include questions to gather demographic or firmographic data such as zip code, age, title, gender, industry, purchase frequency, etc. (but skip anything you already know). This helps you analyze the data with specificity.

Then ask your substantive questions.

After collecting the information, take the time to isolate trends and segments. Most survey software today generates beautiful charts and graphs. But you will need to study them and perhaps do deeper analysis than the standard charts provide.

You can also survey non-customers. This option is great if you need industry data or general consumer input. Many survey software packages also provide access to a survey panel of non-customer respondents. You will have to pay for non-customer responses. Survey pricing varies for responses:

• Consumer samples are usually relatively inexpensive, perhaps $1 per response, although the cost will increase the more specific your needs are. Asking consumers over the age of 25 will be one price, for example, while asking men between the ages of 35-44 who have children, will be another price.
• For comparison: Google Surveys start at 10 cents per response for just one question, but that number can go up to $10 per each completed survey if you want 2 to 10 questions. If you want respondents screened for specific audience characteristics it costs more.
• Business-to-business responses are more expensive than consumer responses. It might cost as much as $100 per completed survey from a senior executive.
• If budget is a challenge, see if you can barter with another organization that has a large membership. You can increase the power behind this ‘ask’ if you partner with other businesses such as your vendors to see if they will join you in making this request.

Best Practices

As you begin exploratory research, follow these best practices:

• Pre-test. Do a dry run of a customer interview with someone on your team in role play. For a survey, ask a few colleagues take it as a test. This goes a long way to ensure questions are understandable and that information will be useful.
• Respect respondents’ time. Keep interactions short. For instance, it’s better to do a branched survey where respondents only see relevant questions based on prior responses, rather than forcing them to wade through a dozen irrelevant questions. People lose interest fast when they feel you take too much of their time.
• Use plain language. Use vocabulary respondents recognize. At the same time, tailor your questions to get specific answers. See these 75 market research questions to ask.
• Step into the customer’s shoes. Ask questions that make sense from your customer’s point of view. For instance, instead of asking a technical question about your software configuration process, ask the customer how long it took between opening an account and beginning to use your software.

Time and Skill

Before you begin, map out the research process so you’re clear on the effort, time and money needed. Small businesses tend to greatly underestimate the amount of time required and how much it will distract from other priorities.

Consider also whether you have the skills internally for the research process. For example, do you have the skill to develop a survey, get respondents, and analyze the data in-depth? What about time? A professional researcher may be able to complete the project in a fraction of the time of an unskilled staff member. In the end that may be faster and cost less.

Primary research can take anywhere from 1 to 3 months to complete.

Secondary research goes faster, but do set a time / hours budget.  Remember, it takes time for someone to locate the secondary data, analyze it and compile insights. Establish a certain number of hours per week for secondary sources, and then stick to that schedule. Don’t fall into “rabbit holes,” since there are so many sources.

Embracing Technology in Research Methods

Online Focus Groups and Virtual Interviews : The digital era has enabled virtual research methods. Online focus groups and video conferencing tools allow for remote interviews, making it easier to gather diverse perspectives without geographical constraints. These methods can be particularly valuable when targeting niche markets or global audiences.

Mobile Surveys and Real-Time Feedback : Utilize mobile technology to conduct surveys and collect real-time feedback. Mobile surveys offer convenience to respondents and can increase response rates. Real-time feedback mechanisms, such as in-app surveys or interactive polls on social media, can provide immediate insights into customer experiences and perceptions.

4. Analyze and Summarize

You’ve completed the market research – now what?

This is where good businesses often stumble.  They spend a lot of time doing a survey, for example, but then the survey sits. They do nothing other than look at some charts.

The best data is useless if not analyzed properly. Analyze the data, draw conclusions, and take evidence-based actions. Your research may identify new opportunities, or it may indicate that you should not take actions you were planning to take. Come up with a list of action items based upon the data.

Summarize the results into a report.  A report makes data usable internally. You and your team will forget the details a month later, so you need to be able to refer back to something.

5. Incorporate into Your Marketing Plan

Incorporate the research information into your marketing plan. Here are two examples.

Example 1: Company A used research to successfully adjust its marketing approach for a product launch. Social media research revealed that consumers responded to certain messages and not others. The company tweaked its marketing messaging to better convey the benefits consumers wanted to hear about, not the benefits the company thought were important.

Example 2: Company B conducted focus groups and found that instead of a single target market for the product, the market actually consisted of a few segments, all with different needs. The client was able to change its content marketing plan to address each segment with more meaning, rather than a one-size-fits-all plan.

For more, see these small business marketing ideas and strategies.

6. Adapt Internal Processes

Share the marketing research with your team and seek their ideas. Identify and implement a few actionable steps.

Market research may suggest that your processes and procedures need an overhaul. For instance, you may need to re-imagine your method of handling customer complaints. You may need to turn around reputation problems such as years worth of bad reviews. Or you may need to redesign your products to meet competitor offerings if your current value-add is low. Let’s look at two examples.

Example A: Company Y discovered after a focus group that while some of the services it offered were highly valued, others were not. The company was able to shift efforts and resources to the services customers wanted most.

Example B: Company Z observed a few business customers using its product in their offices, and discovered that customers in certain verticals were using the product in unexpected ways. Company Z was able to get testimonials that specifically mentioned these use cases and saw sales conversions in those verticals grow.

Staying Agile with Ongoing Research

Continuous Market Monitoring : The market is dynamic, and consumer preferences can change rapidly. Implement systems for ongoing market monitoring to stay ahead of trends. This might involve regular social media sentiment analysis, keeping an eye on competitor activities, and tracking industry news.

Feedback Loops and Iterative Learning : Establish feedback loops within your organization where insights from market research continually inform business strategies. Encourage a culture of iterative learning, where marketing initiatives are regularly reviewed and adjusted based on the latest research findings.

We hope this Guide has helped you understand what is market research in business. Most small businesses and startups could achieve greater success if they did simple exploratory research before launching a product or starting a business. Whatever your budget or staff size, research will make your business more proactive and results-oriented, with decisions based on fact, to power your growth.

Image: Depositphotos.com

Statistical surveying (or advertising research) is any arrangement of methods used to accumulate data and better comprehend an organization’s objective market

No it isn’t!

I appreciate you helping me learn the basics of how to do marketing research and I think it’s great that you elaborated on using layman’s language when interacting with your respondents to get specific answers. I agree with what you said about respecting the respondents’ personal time as I feel like this may be something that is easy to overlook. If I was in need of market research myself, I don’t think I would prefer to do it on my own due to its tedious nature. Instead, I would probably look for a quick but reliable service that has a great portfolio and can promise me accurate results.

Hi Angela! Many organizations share your perspective that they prefer to outsource this type of work rather than do it themselves. If you find yourself needing a consultant to do this for you, make sure that in addition to being capable of providing accurate results, they clearly communicate the methodology they would use, why it would be appropriate to go in that direction, and what they would do to not only provide accuracy, but also data that are actionable.

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What to research when starting a business

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Get your financial admin right from the start with Countingup

You need to know a lot when starting a new business to help you write a solid business plan to act as a roadmap to guide you towards success. This process takes a lot of time and research, but it’s an important step to cover before you open your doors. 

This guide will explain what to research when starting a business to get you off to the best start. At the very least, you should look into:

• Your competitors
• Your target customers
• Licenses and legal documents
• Promoting your business
• Business insurance
• Registering a business name

We’ve listed six key areas you need to familiarise yourself with before you start your business.

Conducting a competitor analysis is necessary to help you understand what other businesses offer the same products or services you plan to. You need to research your competition to know what you’re up against and how you can set yourself apart from similar brands.

Studying your competition allows you to learn from others’ mistakes and take inspiration from what they do right. You also get an idea of how much people are willing to pay for that kind of product or service.

Competitor research also allows you to find a gap in the market you can fill to help you attract customers. Think about what other brands are missing in their products or services. How can you provide a better service and grab a share of their space in the industry?

You can learn more about how to research competition for a business plan here .

If you try to appeal to everyone, you’ll likely appeal to no one. You need to focus your efforts on a target market , a group of customers that are likely to need what you’re offering. 

Defining your target customers will help you develop an offering that appeals to them and tailor marketing and sales campaigns to reel them in. Conduct market research to make sure you target the right customers. You could hold focus groups, send out surveys, or ask around on social media. 

Figure out what people want to see from a brand like yours to help you develop something they want to buy. 

Starting a new business comes with some legal documentation that you need to be aware of. You need to register your new business with the government, and the process is different depending on the legal structure you choose. You can either set up as a sole trader , a limited company or a partnership. It’s important to research the difference between these legal structures to pick the best one for you. 

While sole trader businesses are simpler to set up, limited companies look more professional. Setting up as a limited company also gives you limited liability for any debt associated with running the business. On the other hand, there are more accounting and tax responsibilities involved with running a limited company.

Depending on the type of business you want to start, you might also need a special licence to trade. The rules vary in different areas to check with your local council to get accurate information for your area. You can run your business without all the necessary legal documents and licenses, so research this thoroughly before starting.

There is no point in having an amazing business idea if no one knows about it, so you need a plan for how to get the word out about your new company. 

Most startups don’t have a big marketing budget, so do some research to find the most effective and affordable methods. Even if you have a lot of money for marketing, the most expensive method isn’t always the most effective. 

Look around to find out where your target customers are active on social media, find networking opportunities to start building a reputation, and join groups to connect with local journalists, suppliers, and business organisations. 

Start laying the groundwork early to create hype around your business and get it to the best start once you begin trading.

A lot of things can go wrong in business, so it’s good to protect yourself with insurance no matter what field you want to break into. There are plenty of insurance covers out there, but most businesses will benefit from the following insurance policies:

• Professional indemnity insurance: this will pay for any claims made against you if you make a mistake or are accused of professional negligence or breaching confidentiality.
• Public liability insurance : in case someone hurts themselves or their property suffers damage when dealing with your business. 
• Personal accident and sickness insurance: this covers your income if you can’t work for a while due to injury or illness or if you’re unable to go back to work at all.

You need a name for your business so people can recognise you. Choosing a name can be the most fun part of starting a business, but it’s trickier than you might think. First of all, you need to make sure no one else already uses that name. You can use the Companies House name availability checker to make sure the one you want is available.

Once you have a name, you can register it online, but it does involve following some rules. You should register your company name with Companies House via either the online portal or postal application . Online applications are faster and cheaper to complete, which increases your chances of getting the name you want before someone else has a chance to snatch it.

The final step in the research process should be to find an accounting system that’s efficient and easy to manage. You need a solid system to keep track of your financial admin and run your business more efficiently.

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Find out more here .

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Conducting Market Research

Crafting a business plan, reviewing funding options, understanding legal requirements, implementing marketing strategies, how much does it cost to start a business, what should i do before starting a business, what types of funding are available to start a business, do you need to write a business plan, the bottom line.

Building an effective business launch plan

Starting a business in the United States involves a number of different steps, spanning legal considerations, market research, creating a business plan, securing funding, and developing a marketing strategy. It also entails decisions around a business’s location, structure, name, taxation, and registration.

This article covers the key steps involved in starting a business, as well as important aspects of the process for entrepreneurs to consider.

Key Takeaways

• Entrepreneurs seeking to develop their own business should start by conducting market research to understand their industry space and competition, and to target customers.
• The next step is to write a comprehensive business plan, outlining the company’s structure, vision, and strategy. Potential funders and partners may want to review the business plan in advance of signing any agreements.
• Securing funding is crucial in launching a business. Funding can come in the form of grants, loans, venture capital, or crowdfunded money; entrepreneurs may also opt to self-fund instead of or in combination with any of these avenues.
• Choosing a location and business structure can have many implications for legal aspects of business ownership, such as taxation, registration, and permitting, so it’s important to fully understand the regulations and requirements for the jurisdiction in which the business will operate. 
• Another key aspect of launching a new business is having a strategic marketing plan that addresses the specifics of the business, industry, and target market.

Before starting a business, entrepreneurs should conduct market research to determine their target audience, competition, and market trends. 

The U.S. Small Business Administration (SBA) recommends researching demographic data around potential customers to understand a given consumer base and reduce business risk. It also breaks down common market considerations as follows:

• Demand : Do people want or need this product or service?
• Market size : How many people might be interested?
• Economic indicators : These include income, employment rate, and spending habits of potential customers.
• Location : Where are the target market and the business located?
• Market saturation : How competitive is the business space, and how many similar offerings exist?
• Pricing : What might a customer be willing to pay?

Market research should also include an analysis of the competition (including their strengths and weaknesses compared to those of the proposed business), market opportunities and barriers to entry, industry trends, and competitors’ market share .

There are various methods for conducting market research, and the usefulness of different sources and methodologies will depend on the nature of the industry and potential business. Data can come from a variety of sources: statistical agencies, economic and financial institutions, and industry sources, as well as direct consumer research through focus groups, interviews, surveys, or questionnaires.

A comprehensive business plan is like a blueprint for a business. It will help lay the foundation for business development and can assist in decision making, day-to-day operations, and growth. 

Potential investors or business partners may want to review and assess a business plan in advance of agreeing to work together. Financial institutions often request business plans as part of an application for a loan or other forms of capital. 

Business plans will differ according to the needs and nature of the company and only need to include what makes sense for the business in question. As such, they can vary in length and structure depending on their intended purpose. 

Business plans can generally be divided into two formats: traditional business plans and lean startup business plans. The latter is typically more useful for businesses that will need to adjust their planning quickly and frequently, as they are shorter and provide a higher-level overview of the company.

The process of funding a business can be as unique as the business itself—that is, it will depend on the needs and vision of the business and the current financial situation of the business owner. 

The first step in seeking funding is to calculate how much it will cost to start the business. Estimate startup costs by identifying a list of expenses and putting a number to each of them through research and requesting quotes. The SBA has a startup costs calculator for small businesses that includes common types of business expenses. 

From there, an entrepreneur will need to determine how to secure the required funding. Common funding methods include:

• Self-funding , also known as bootstrapping  
• Seeking funding from investors, also known as venture capital  
• Raising money by crowdfunding
• Securing a business loan
• Winning a business grant

Each method will hold advantages and disadvantages depending on the situation of the business. It’s important to consider the obligations associated with any avenue of funding. For example, investors generally provide funding in exchange for a degree of ownership or control in the company, whereas self-funding may allow business owners to maintain complete control (albeit while taking on all of the risk). 

The availability of funding sources is another potential consideration. Unlike loans, grants do not have to be paid back—however, as a result, they are a highly competitive form of business funding. The federal government also does not provide grants for the purposes of starting or growing a business, although private organizations may. On the other hand, the SBA guarantees several categories of loans to support small business owners in accessing capital that may not be available through traditional lenders.

Whichever funding method (or methods) an entrepreneur decides to pursue, it’s essential to evaluate in detail how the funding will be used and lay out a future financial plan for the business, including sales projections and loan repayments , as applicable.  

Legally, businesses operating in the U.S. are subject to regulations and requirements under many jurisdictions, across local, county, state, and federal levels. Legal business requirements are often tied to the location and structure of the business, which then determine obligations around taxation, business IDs, registration, and permits.

Choosing a Business Location

The location—that is, the neighborhood, city, and state—in which a business operates will have an impact on many different aspects of running the business, such as the applicable taxes, zoning laws (for brick-and-mortar, or physical locations), and regulations.

A business needs to be registered in a certain location; this location then determines the taxes, licenses, and permits required. Other factors to consider when choosing a location might include:

• Human factors : Such as the target audience for your business, and preferences of business owners and partners around convenience, knowledge of the area, and commuting distance
• Regulations and restrictions : Concerning applicable jurisdictions or government agencies, including zoning laws
• Regionally specific expenses : Such as average salaries (including required minimum wages), property or rental prices, insurance rates, utilities, and government fees and licensing
• The tax and financial environment : Including income tax, sales tax, corporate tax, and property tax, or the availability of tax credits, incentives, or loan programs

Picking a Business Structure

The structure of a business should reflect the desired number of owners, liability characteristics, and tax status. Because these have legal and tax compliance implications , it’s important to fully understand and choose a business structure carefully and, if necessary, consult a business counselor, lawyer, and/or accountant.

Common business structures include:

• Sole proprietorship : An unincorporated business that has just one owner, who pays personal income tax on profits
• Partnership : Options include a limited partnership (LP) or a limited liability partnership (LLP)
• Limited liability company (LLC) : A business structure that protects its owners from personal responsibility for its debts or liabilities
• Corporation : Options include a C corp , S corp , B corp , closed corporation , or nonprofit

Getting a Tax ID Number

A tax ID number is like a Social Security number for a business. Whether or not a state and/or federal tax ID number is required for any given business will depend on the nature of the business, as well as the location in which the business is registered.

If a business is required to pay state taxes (such as income taxes and employment taxes), then a state tax ID will be necessary. The process and requirements around state tax IDs vary by state and can be found on individual states’ official websites. In some situations, state tax IDs can also be used for other purposes, such as protecting sole proprietors against identity theft.

A federal tax ID, also known as an employer identification number (EIN) , is required if a business:

• Operates as a corporation or partnership
• Pays federal taxes
• Wants to open a business bank account
• Applies for federal business licenses and permits
• Files employment, excise, alcohol, tobacco, or firearms tax returns

There are further situations in which a business might need a federal tax ID number, specific to income taxation, certain types of pension plans, and working with certain types of organizations. Business owners can check with the Internal Revenue Service (IRS) about whether they need an EIN.

Registering a Business

Registration of a business will depend on its location and business structure, and can look quite different depending on the nature and size of the business. 

For example, small businesses may not require any steps beyond registering their business name with local and state governments, and business owners whose business name is their own legal name might not need to register at all. However, registration can include personal liability protection as well as legal and tax benefits, so it can be beneficial even if it’s not strictly required. 

Most LLCs, corporations, partnerships, and nonprofits are required to register at the state level and will require a registered agent to file on their behalf. Determining which state to register with can depend on factors such as:

• Whether the business has a physical presence in the state
• If the business often conducts in-person client meetings in the state
• If a large portion of business revenue comes from the state
• Whether the business has employees working in the state

If a business operates in more than one state, it may need to file for foreign qualification in other states in which it conducts business. In this case, the business would register in the state in which it was formed (this would be considered the domestic state), and file for foreign qualification in any additional states.

Some businesses may decide to register with the federal government if they are seeking tax-exempt status or trademark protection, but federal registration is not required for many businesses.

Overall registration requirements, costs, and documentation will vary depending on the governing jurisdictions and business structure.

Obtaining Permits

Filing for the applicable government licenses and permits will depend on the industry and nature of the business, and might include submitting an application to a federal agency, state, county, and/or city. The SBA lists federally regulated business activities alongside the corresponding license-issuing agency, while state, county, and city regulations can be found on the official government websites for each region.

Every business should have a marketing plan that outlines an overall strategy and the day-to-day tactics used to execute it. A successful marketing plan will lay out tactics for how to connect with customers and convince them to buy what the company is selling. 

Marketing plans will vary according to the specifics of the industry , target market, and business, but they should aim to include descriptions of and strategies around the following:

• A target customer : Including market size, demographics, traits, and relevant trends
• Unique value propositions or business differentiators : Essentially, an overview of the company’s competitive advantage with regard to employees, certifications, or offerings
• A sales and marketing plan : Including methods, channels, and a customer’s journey through interacting with the business
• Goals : Should cover different aspects of the marketing and sales strategy, such as social media follower growth, public relations opportunities, or sales targets
• An execution plan : Should detail tactics and break down higher-level goals into specific actions
• A budget : Detailing how much different marketing projects and activities will cost

The startup costs for any given business will vary greatly depending on the industry, business activity, and product or service offering. Home-based online businesses will usually cost less than those that require an office setting to meet with customers. The estimated cost can be calculated by first identifying a list of expenses and then researching and requesting quotes for each one. Use the SBA’s startup costs calculator for common types of expenses associated with starting a small business.

Entrepreneurs seeking to start their own business should fully research and understand all the legal and funding considerations involved, conduct market research, and create marketing and business plans. They will also need to secure any necessary permits, licenses, funding, and business bank accounts.

Startup capital can come in the form of loans, grants, crowdfunding, venture capital, or self-funding. Note that the federal government does not provide grant funding for the purposes of starting a business, although private sources do.

Business plans are comprehensive documents that lay out the most important information about a business. They are important references for the growth, development, and decision-making processes of a business, and financial institutions as well as potential investors and partners generally request to review them in advance of agreeing to provide funding or work together.

Starting a business is no easy feat, but research and preparation can help smooth the way. Having a firm understanding of the target market, competition, industry, business goals, business structure, funding requirements, tax and operating regulations, and marketing strategy, and conducting research and consulting experts where necessary, are all things that entrepreneurs can do to set themselves up for success.

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. “ Loans .”

U.S. Small Business Administration. “ Fund Your Business .”

U.S. Small Business Administration. “ Pick Your Business Location .”

U.S. Small Business Administration. “ Choose a Business Structure .”

U.S. Small Business Administration. “ Get Federal and State Tax ID Numbers .”

Internal Revenue Service. “ Do You Need an EIN? ”

U.S. Small Business Administration. “ Register Your Business .”

U.S. Small Business Administration. “ Apply for Licenses and Permits .”

U.S. Small Business Administration. “ Marketing and Sales .”

U.S. Small Business Administration. “ Grants .”

• How to Start a Business: A Comprehensive Guide and Essential Steps 1 of 25
• How to Do Market Research, Types, and Example 2 of 25
• Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
• Marketing in Business: Strategies and Types Explained 4 of 25
• What Is a Marketing Plan? Types and How to Write One 5 of 25
• Business Development: Definition, Strategies, Steps & Skills 6 of 25
• Business Plan: What It Is, What's Included, and How to Write One 7 of 25
• Small Business Development Center (SBDC): Meaning, Types, Impact 8 of 25
• How to Write a Business Plan for a Loan 9 of 25
• Business Startup Costs: It’s in the Details 10 of 25
• Startup Capital Definition, Types, and Risks 11 of 25
• Bootstrapping Definition, Strategies, and Pros/Cons 12 of 25
• Crowdfunding: What It Is, How It Works, and Popular Websites 13 of 25
• Starting a Business with No Money: How to Begin 14 of 25
• A Comprehensive Guide to Establishing Business Credit 15 of 25
• Equity Financing: What It Is, How It Works, Pros and Cons 16 of 25
• Best Startup Business Loans 17 of 25
• Sole Proprietorship: What It Is, Pros and Cons, and Differences From an LLC 18 of 25
• Partnership: Definition, How It Works, Taxation, and Types 19 of 25
• What Is an LLC? Limited Liability Company Structure and Benefits Defined 20 of 25
• Corporation: What It Is and How to Form One 21 of 25
• Starting a Small Business: Your Complete How-to Guide 22 of 25
• Starting an Online Business: A Step-by-Step Guide 23 of 25
• How to Start Your Own Bookkeeping Business: Essential Tips 24 of 25
• How to Start a Successful Dropshipping Business: A Comprehensive Guide 25 of 25

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• Published: January 8, 2021

How to Do Market Research Before Starting a Business

• Last update: March 1, 2022

Market research is all about understanding who your potential buyers are and what influences their behaviour. Chiefly, what impacts their decision to buy or not to buy.

The value of this kind of activity means that successful market research companies make – and often charge – millions of pounds for their services.

But what if you want to do a little market research for your own small business? What market research methods are there? What are the benefits and limitations of market research?

For a basic overview, here’s where to start:

What Is Market Research?

The importance of market research, what are the four types of market research, how to do market research, what is market research in business.

Market research is the process of gathering data about your customers and potential customers in order to better achieve your goals.

The process itself might involve creating buyer personas, target audience research, analysing consumer behaviour via technology, in-person surveys and many other approaches.

The overall goal is always to better understand your audience so you can determine how successful your products and services are. Or how successful they could or are going to be.

The benefits of market research mean that it is pretty much a required part of the opening or operating a successful business. Market research can:

1) Boost Your Sales

Knowing your target audience can help you sell your goods or services to them in the most effective way.

Without proper market research, it’s almost impossible to tell whether you could be achieving much greater profits with only small and simple changes to the way you promote your business and what you have to offer.

2) Minimise Your Risks

The obvious example is starting a new business. At this point, almost any decision that a company makes will have lower risks attached if proper market research is done first.

If you don’t have data, what are you basing that decision on? Especially when you are deciding whether or not to make a big investment, good data is vital.

3) Improve Your Customer Interactions

Want to know how your audience prefers to be spoken to? Need to know how you could better adapt your products or services to meet their needs?

Knowing more about your target audience helps you give your customers what they really want.

4) Know Your Reputation

Are you known as a reliable provider? A cheap and cheerful option? A service which your clients sort-of like, but always have the same complaint about?

Without market research, you can never really be sure. With it, you can compare your standing with that of your competitors and see where there could be avenues for you to improve.

5) Grow Your Business

Gain insight into opportunities for expansion and improvement. With informative market research data on your side, you will be able to identify places where you can expand and grow.

here are, roughly speaking, four types of market research:

• Qualitative
• Quantitative

1) Primary Research

Primary research comes to you first-hand. It might involve measuring customer trends via interviews or small-scale surveys.

Following up, you might explore those trends in more detail. Has an issue been identified? Ask more questions about it specifically.

2) Secondary Research

Secondary research comes to you second-hand. It usually involves looking at publicly available data such as:

• Market statistics
• Industry statistics
• Trend reports
• Your own sales data, including customer retention rates
• Competition analysis

3) Qualitative and Quantitative Research

There is an important – but sometimes easy to overlook – difference between the data you might gather as part of your market research efforts:

• Data which can be quantified  has a number you can put on it. How much is your average revenue per sale, for instance?
• Qualitative data  is different. The results you get from asking your audience questions is usually qualitative. It’s valuable. But you can’t usually put a figure on it.

There are several steps involved in effective marketing research. You will almost certainly want to:

1) Define Your Goals

Before you get down to work, you need to set your goals for the research you are going to carry out. You might want to know:

• Does your audience want what you have to offer? Is your business offering services designed for families in an area which is largely single professionals? Are you a high price-bracket company trying to sell to a lower-income audience?
• How much competition is there?  If you are considering opening a new business in a certain area, is the market already saturated?
• What are your competitors offering?  Are there any niches which you could target? Is there anything they do too well to compete with? Or so poorly you have a clear opportunity?

Armed with your goals, you can determine which of the types of market research listed above will be most suitable.

2) Create Marketing Personas

Sometimes called buyer personas, this is an exercise where you imagine a fictional client who embodies all of the key characteristics of your ideal customer.

You might want to consider their age, gender, where they live, what kind of job they might have, do they have any family and what their income level is, as well as what challenges you might be helping them to overcome.

It’s common for some types of business to have multiple marketing personas because of a more diverse audience. If you have multiple personas, you should conduct specific research for each.

3) Look for Other Existing Research

If you have a question about a given market, there’s a chance that someone else may have asked it already.

If your goals can be wholly or partially answered by existing research, your job may be done before you even begin.

4) Conduct Primary Research

This might involve carefully preparing a list of questions for your survey participants, running a questionnaire on social media or any number of first-hand data gathering activities.

Everything should be designed to get you the information you need to answer the questions you posed when you defined your goals.

5) Examine Secondary Sources

Again with a focus on your goals, you can locate and consult government records, publicly available information and your own data.

Businesses conduct market research because it is the only way to learn more about their existing clients, potential new customers and larger audiences if they are planning to open or expand.

The easiest solution, of course, is to have that work done for you:

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21 things to research before starting a business

Home / / 21 things to research before starting a business, we love and live startup businesses..

We know they can be the key to lifelong success and satisfaction. But it is important to recognise that three-quarters of startups fail within the first three years, and a third of those fall by the wayside in the first six months. There are key themes in the reasons that businesses don't ultimately succeed, so we've compiled the top 21 things to research before you take the plunge.

1. Sole trader or limited company?

Which one you choose will impact on the tax you pay and how much legal and financial responsibility is laid at your door. Which you choose will impact on the tax you pay and how much legal and financial responsibility is laid at your door. For instance, sole traders and partnerships are subject to different tax regulations compared to corporations, such as Limited Liability Companies (LLCs). While an LLC isn't recognized as a distinct legal entity in the UK, it is possible to establish a US-based LLC with the assistance of the best LLC service company and operate your startup business from the UK.

Check out our guide to UK company formats and business structures , and consider the question: should I register as a sole trader or limited company?

Thinking of setting up as a sole trader?

Registering as a sole trader is the simplest form of business structure. HMRC estimates almost 60% of businesses in the UK use this format.

2. Size up the competition

Competitor analysis  will help you understand who else is doing what you're planning to do. And work out how you can do it better!

By studying the competition you can learn from others' mistakes - or even what their customers appreciate. Learn how much people are willing to pay for your product or service and how you could enhance the current offerings.

If one big player dominates the market space, focus on what they don't do well or who they don't cater for, provide superior service and you could grab a share of their space.

Alternatively, if the market is fragmented, there could be an opportunity to launch a brand that becomes the de facto choice for consumers.

3. Define your target audience

Appealing to everyone appeals to no one.

You need to focus on your target audience and style everything, from your website to your marketing campaigns, around them.

Make sure you are targeting the right people by conducting market research . Send out online surveys , speak to your customers through social media and hold focus groups .

The only way to provide a product or service people really want is to get inside their heads. Involve your target customer in the development of your business and continue to test, test, test.

Creating a customer persona or two can really help.

Once you're up and running, consulting your customers will also make them feel like they have a voice, inspire loyalty and, if you're lucky, increase the likelihood of them recommending you to others.

4. Paying yourself

How will you pay for yourself? You need to think about this upfront.

With the best intentions of ploughing profits straight back into the business, you're going to have to eat, drink and put a roof over your head.

Cut back on the luxuries, but figure out what you do need to live on and include it in your outgoings. This is called your personal survival budget.

The bank or any investors would much rather see this than you going back cap-in-hand six months after you told them your business plan made sense.

5. Your business name

Think long and hard about your name: you're going to be stuck with it as rebrands are expensive and painful. 

It'll need to work with an available web domain and will also often be the first thing prospective customers see. Make sure there aren't lots of other businesses with the same name.

Consider what your name needs to say about your business. It is an important part of your business branding .

Should it simply be a case of 'says what it does on the tin' or communicate aspects of your brand identity, such as Innocent Drinks ?

Or perhaps geography is important if you're focused on serving or representing a local area - Manchester Landscaping Ltd or Premium Lincolnshire Sausages Ltd, for instance?

6. How you'll get your name out there

No point having an amazing business idea if nobody knows about it - so how will you get your name out there? You need a marketing plan !

Without a big marketing budget, start small and focus on building relationships. Use social media and networking opportunities to start building a reputation with not just potential customers, but also local journalists, suppliers, fellow retailers, local business organisations.

Start a blog, be active on Facebook and Twitter, offer to write articles or talk for free on your expert subject, get people trying and reviewing your product or service, think about having a launch party.

There’s so much to think about when you’re launching a new business. But bringing your baby into the world is a big deal, and it deserves to happen with a bang not a fizzle.

Check out our handy checklist to help you tell the world you’ve arrived, and get those sales flowing in.

7. Your web presence

Did you know that 50% of small business don't have a website?

Most want one, but they either think they can't afford one or don't have the skills to put it together themselves. The latter may have been true a few years ago, but web building tools such as Wix and Squarespace mean absolute beginners can now get a fully e-commerce website up and running in no time.

You might not need to sell online though, perhaps a simple brochure site showcasing what you do would be enough - but, then again, wouldn't it be nice to take bookings?

Start thinking about how much more business you could be doing by embracing an online market - then explore the available options to make it happen.

8. Your USP

Customers will only stop buying from other businesses in favour of yours if you offer something better or different.

Your USP (unique sales proposition) defines what is special about your offering; what customers can't get elsewhere. This is key to your business brand .

Carefully sculpt your USP: perhaps it's your product if it is genuinely unique, or maybe it's about customer experience, after-sales support, the way you price or offer payment, or perhaps everything you do is organic.

Maybe - like Tom's Shoes , which donates footwear to Africa for every sale made - you appeal to consumers' growing demand for ethical trading. Find your angle then make sure everything you do is true to it.

In an ideal world, you would have enough money to self-fund the launch of your new business.

But, for the majority, that's not an option. Instead, you can ask friends or family if they may be willing to help or you can look into getting a bank loan or seek out an investor.

Guide to funding a new business

One of the big questions for anyone thinking of starting a business is how they’ll finance it. Is it sensible to borrow from family or friends? Can you get a startup loan? Where do you find an angel investor? This guide will help you understand:

Different ways to fund a new business

The pros and cons of different business finance options

Where to find small business finance

Read this guide and you'll be ready to find business finance and get started...

You should also look into what business grants are available: they're hard to come by but brilliant if you manage to get one. If you can't secure the funding you need to launch your master plan, start small and prove the business works - then go back to the bank or investors with more evidence. There's information about bootstrapping your startup here.

10. Find an accountant

An accountant is much more than just a bean-counter. They should be a valuable and trusted source of financial and business advice.

Usually armed with many years' experience they can help you steer the company away from danger and advise you when and where to save your money.

Find a local accountant  with experience in your sector. Choose someone who'll see you as a big enough client not to just pass you onto a junior.

Ensure you can afford to pay for help like this by not frittering away money getting them to sort out your shoebox of bills and invoices. Use  accounting software  to get your finances organised and save time when your taxes need calculating!

11. Write a business plan

Business plans rock - really! Don't view them as a chore that you have to do for the bank or an investor . Use this as a chance to prove to yourself that every aspect of your business plan and model works and makes sense. If it doesn't, do you really want to go ahead? Check out our ultimate step-by-step guide to writing a business plan . And if you need a little extra help, Team Transmit have a recommended business plan template to help you get started.

12. Route to market

This one's really simple - how will you sell to your customers? What's your route to market?

Consider all your options (spoiler alert: there are loads!)

market stalls

an online shop

a retail unit or concession

picking up businesses at networking events

advertising on social media or search results

telesales or face-to-face sales

You can't write a business plan until you've worked out your platforms and route to market, and how much each will cost you.

13. Potential partners

Who could you benefit from working with? Forming a relationship with a business in another sector could help you tap into a whole new customer base.

For example, if you're a florist you could find a wedding planner and supply flowers for them at a discounted price. You'll get access to their customers and you can recommend people to them. It's beneficial for both parties. Find someone to share half the workload and you'll move twice as fast.

14. Licensing and legal issues

When launching a business you should speak to the local authority to find out whether you need any special licenses to sell in your area. For example, if you are selling food or alcohol you need a license. If you fail to produce one, you'll be fined and could ultimately be closed down.

There are a host of other legal obligations to consider and it's best to get at least one session of legal advice. You should also ensure processes - from sales to supplier agreements and terms and conditions - are legal binding and contracted up.

15. Find the best business bank account

You'll need a business bank account, but don't just go straight to the bank you've used as a consumer. Find one that understands your business and who you feel comfortable with. Most banks also offer incentives for new sign-ups.

16. Staffing requirements

Will you need employees from day one? If not, how about day 100? You need a plan for this so you're organised, prepared and resourced for whenever - if ever - that day is.

Employing someone is a big commitment to the individual, but also to your bottom line. Don't jump into it and be clear before making any appointment exactly what that person will do and what added revenue they will bring to the business: it's usually an equation that results in a quick rethink!

If you can, utilise freelancers and look at what you can outsource. Check out our essential guide to HR for startups.

17. Insurance

You are required by law to have employers' liability insurance if you have any staff and public liability insurance if you expect to welcome customers or suppliers onto your premises.

You must also insure any vehicle you use.

If you sell products explore if you need product liability insurance. It can be expensive, but think if your business could survive should the unthinkable happen and your premises, equipment or stock was stolen or damaged.

Shop around for the best deal and ask your bank for any deals that may come as part of your account. We recommend Superscript , who offer flexible cover that you can amend as your business grows.

18. Skill gaps, experience and training

Just because you've eaten in a lot of restaurants it doesn't mean you'd know how to run one - a fairly obvious statement numerous wannabe restaurateurs have ignored to their peril.

So even though you may have a killer business idea you need to work out if you have the experience and skills to execute it. If you haven't, look into training, evening classes and even think about getting a job in the industry first to pick up that valuable insider knowledge.

19. Technology

Audit your business plan to figure out what technology will enable you to do five things: save time, save money, stay in control, make more sales and deliver a better service to your customers. For example, a CRM system can help you market more effectively to your customers, whilst accounting software can help you save time and effort on your invoicing and expenses.

20. Mentors

There's nothing better than having an experienced business mentor to turn to for guidance, or simply to bounce ideas off. Someone who has been there and done it, and knows what you're going through will be invaluable.

Is there a business guru in your circle of friends? If not target people you admire, seek recommendations from people within your industry or consider government-backed mentoring schemes.

The Prince's Trust can put you in touch with a business mentor if you are aged 14-30.

21. When to start (and give up your day job)

You're ready to launch your business , but don't rush to quit the day job - the salary could be useful in the short-term. It could pay to start piecing together your business out-of-office hours, and then make the leap once your business can sustain you, and is truly ready for your full-time attention.

If you're thinking of starting a business, our sister company Smarta can support you with flexible learning for entrepreneurs.

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The importance of research before setting up a business

Depending on the area of business you’re going into, some people may require more research into one area than the others. Some prior knowledge can help, and for Tania and her co-founders, Marsha Starcevic and Kristina Hutchins, that was definitely the case.

“As the three founders, we had some prior knowledge of the industry, both from the perspective of a client and from working in the industry. We were always passionate about the industry itself and were keen to create a beauty clinic with a difference” Tania explained.

Take your time to look for information

To improve their industry knowledge, Tania and her co-founders spent two years researching and setting up the business before they opened the doors to the public. “Knowing the industry inside out is paramount in order to set up the business and get everything right,” Tania said. “The beauty industry is saturated with equipment and products and knowing the technology, active ingredients, and how these all work with skin and body to produce results is paramount.”

The beauty industry is an excellent example of an industry which is very competitive and the importance of knowing exactly what services you’re going to offer before starting your business.

Market research and mystery shopping both have their benefits and can really help when setting up your own business. As Tania pointed out, “as long as you do it ethically, there is nothing wrong in doing this research. You do get to see what works and what doesn’t for other players in the industry and learn from it.”

Research according to the Business Sector

Along with the industry-specific knowledge you need to acquire, there are several other key elements you will need to research before setting up a business. These include where your business is going to be based along with the legal and financial requirements you will need to fulfill. There are also the elements of B2B working, which you may need to explore, such as marketing and if you are making a product the manufacturing and marketing aspects.

Another area which requires dedicated research is finding staff for your business. Successful business owners and managers continually say that their success is based on the people they hire. It is, therefore, crucial to hire the best possible people for jobs within your business.

This is not an easy process and it can take time. Also remember it is complicated if you’re operating in a competitive industry. Tania explained that in her industry, hiring great staff can be challenging, “due to the fact other beauty clinics want to keep the experienced staff, and they seldom have to look for a job.”

Hopefully, the points raised above have highlighted the importance of spending time researching before setting up a business. If the business you proposed is in an area that isn’t saturated with other businesses, some of the research you will need to do will vary to that of someone setting up in a competitive sector.

However, if you are starting a business in a competitive industry such as beauty, don’t get discouraged. As Tania told us, “the fact that market is competitive only means that there is a demand for what is on offer and that there is an opportunity to improve what is on offer, set higher standards, and do well.”

Interesting Related Article: “ Tips to Funding a Startup “

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16 things to research before starting a business

Gnaneshwar G

February 15, 2023

Starting a business can be a daunting task for any entrepreneur. But if you take the time to conduct proper business research, you can significantly increase your chances of success. Research before starting a business is an essential step that should not be overlooked. Doing research helps you to identify potential risks and opportunities and gives you the information you need to make informed decisions. This blog post will outline the 16 most important things to research before launching a business. With this information, you’ll be well on your way to a successful business venture.

1) Your target market

Before you start a business, it is essential to do your research and gain a clear understanding of who your target market is. Knowing your target market will help you to identify their needs and develop products or services that appeal to them. Research should include gathering information about their demographics, psychographics, and behavior. This will help you to understand their motivations and create marketing strategies that are more likely to be successful. Additionally, researching the trends in your industry can help you stay ahead of the competition.

2) Your competition

When you research before starting a business, it is important to consider your competition. Researching the market and understanding your competition’s strengths and weaknesses can help you make better decisions about pricing, marketing, and product development. Understanding how your competitors position themselves in the marketplace and how they promote their products or services is crucial. Understanding how your competitors differ from you can also help you create a unique value proposition that will differentiate you in the market. By researching your competition and understanding what makes them successful, you can develop a strategy to stand out from the competition.

3) How to reach your target market

Before starting a business, it is important to research the best ways to reach your target market. Identify who your target audience is and how they prefer to be reached. This may involve researching different marketing channels such as social media, email campaigns, and more traditional methods such as print advertising. Consider where your customers are located and how you can reach them in a cost-effective manner. Developing a marketing plan based on research will help you stay focused and allocate better resources to reach your desired customers.

4) The cost of goods or services

When researching before starting a business, it is essential to understand the cost of the goods or services you will be providing. This includes not only the cost of manufacturing or sourcing the items but also any additional costs associated with shipping, storage, and delivery. Knowing the total cost of your goods or services can help you determine a realistic pricing strategy that enables you to cover all of your costs and make a profit. It is essential to research business trends and marketplace changes to ensure that you stay competitive and up-to-date.

5) The price of your goods or services

When it comes to researching before starting a business, the price of your goods or services is an important factor. Knowing what you can charge and how much people are willing to pay for your product or service is crucial. Researching the current market prices and trends is essential in order to set realistic and competitive prices. Additionally, consider the costs of producing the products or services, labor costs, taxes, shipping fees, and other related expenses. The more you research before setting your prices, the better prepared you will be to make decisions that are beneficial for your business.

6) How will you make your goods or services

When researching before starting a business, it is important to consider how you will make your goods or services. This includes understanding the production process, the resources and materials you need, the technology required, and any other costs associated with producing your products. You should also research how long it will take to complete each step of the production process. Knowing all of this information will help you accurately price your goods and services, as well as determine the cost-effectiveness of your production methods. Additionally, research about business can help you decide if outsourcing any part of the production process is necessary for efficient production.

7) Your unique selling proposition

Before you can begin to research before starting a business, it’s essential to identify what sets your business apart from competitors. This is often referred to as your unique selling proposition (USP). Your USP should take into account the needs of your target market and how your goods or services meet these needs better than anyone else. It is important to consider how you will differentiate yourself from the competition, what makes you stand out, and why people should choose you instead of other providers. Research about business trends and developments in your industry, and use this knowledge to create a unique and compelling USP that resonates with potential customers.

8) Your business model

Researching your business model is an important step when starting a business. Your business model is the framework that guides how your business will make money. It outlines how you will deliver value to your customers and generate revenue. It should include factors such as pricing, production costs, distribution channels, customer acquisition and retention strategies, and marketing tactics. Taking the time to research your business model can help you understand how to make your business successful.

9) Your branding

Research is an essential part of starting a business, and creating your branding is no exception. Before you begin, you should research the market to understand what your potential customers are looking for and how they perceive the industry. Additionally, research should be done on what your competitors are doing with their branding. This will help you create a unique identity that stands out and resonates with your target audience. Additionally, researching what kind of language and visuals can best communicate your message is also important. Understanding these elements of branding before you start your business can give you an advantage when it comes to marketing and building a strong customer base.

10) Your company culture

Researching your company culture before starting a business is essential. A successful business is built on strong values and culture, so it’s important to research and define the culture that you want your business to reflect. Consider the types of people you want to hire, what type of team environment you want to create, and how you want to communicate with customers. These are all questions you should consider when researching your company culture. Make sure to communicate these values clearly when looking for potential employees and partners.

11) Your team

When researching before starting a business, it is important to consider who will make up your team. You need to consider the skills and experience you will need in order to be successful. Depending on the type of business you are starting, you may need to hire employees with specific qualifications or expertise. Additionally, it would be best if you considered how many people you need to bring on board and what roles you will need them to fill. You should also research the salary and benefits for each role so that you can budget accordingly. Finally, consider how the team will fit together to ensure that everyone works well together and supports the success of your business.

12) Your partners

One of the most important things to research before starting a business is your partners. When looking for potential partners, it’s important to consider their experience, track record, and industry connections. Consider what your partners bring to the table and how they can help you reach your goals. Research their past projects and look at their customer reviews to get a better idea of what kind of relationship you would have with them. Make sure that the partnerships align with your values and objectives and that you are comfortable with the terms of the agreement. By doing your due diligence, you can ensure that any partnerships you enter into will be successful.

13) Your suppliers

Before you start a business, it is important to research potential suppliers and determine if they are reliable and can provide quality products or services in the quantities that you need. Researching your suppliers before starting a business will help you avoid problems later on. Ask for references from past customers and read online reviews to get a better sense of their reliability. You should also investigate their financial stability and ask for samples of their products to make sure that they meet your standards. Make sure to factor in delivery times and any additional costs associated with shipping. Taking the time to do the proper research into suppliers before starting a business will help ensure that you have reliable partners who can help you successfully launch and grow your business.

14) Your customers

Researching your customers should be an integral part of your research before starting a business. Understanding the needs and wants of your target market is key to launching a successful business. Having an idea of who your customers are will also help you make important decisions when it comes to pricing, product design, and marketing. To get a better understanding of your customers, you should do market research. Market research can be done in many ways, such as surveys, focus groups, interviews, and observation. All of these methods can provide valuable insights into the habits and desires of your target customers. You should also look into who your competitors are targeting. Knowing who their customers are can give you an indication of what strategies have worked for them and which ones have failed. It’s also a good idea to conduct competitor analysis, which involves researching the products, services, pricing, and marketing strategies of your competitors. Finally, understanding customer buying habits is essential for any business. This includes researching customer buying behaviors, preferences, and trends. Knowing this information will help you determine how to market your products or services in order to reach the right people. By taking the time to research your customers before starting a business, you’ll be able to make informed decisions that will put you on the path toward success.

15) The regulatory environment

Before starting a business, research about the local, state, and federal regulations that may apply to your venture. Different types of businesses may require different licenses or permits to be legally compliant. It is essential to understand the laws and rules to prevent any costly legal or regulatory action against your business in the future. Be sure to check with the appropriate agencies to determine what type of license or permit you may need to operate legally.

16) Financing

Researching financing is an important step before starting a business. This research should include researching different types of financing, such as debt and equity, and understanding the pros and cons of each type. Additionally, researching grants, loans, and other funding options that may be available to you can help you create a more solid financial plan for your business. Research about business tax incentives, deductions, and credits that you may be eligible for is also essential.

Starting a business without doing any research is like jumping off a cliff without a parachute. You could be lucky, but you’re much more likely to end up in a heap at the bottom. Research about the business before you start can save you time and money, and potentially even your sanity! So don’t be like the lemmings and take the plunge without any research – make sure you do your homework first, and ensure your business is set up for success.

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• Starting a business

How to do market research before starting a business

Before diving into the swimming pool of business ownership, you need to do more than a bit of research. Think of it like doing the research necessary before buying a car. You wouldn’t buy a car just because it looks pretty on the outside. (At least, you shouldn’t.) You wouldn’t plop down a wad of cash without knowing what went into that car’s manufacture.

You should be doing primary and secondary research

What kinds of market research are there, the importance of market research.

In the same way, you shouldn’t start a business without knowing if people even want the product or service you plan to offer. A great many companies have failed because the owners didn’t do the due diligence they should have.

Market research doesn’t have to cost an arm and a leg. In fact, in many cases, it doesn’t have to cost a thing. In the article below, we’re going to pull back the curtains on how to do market research before starting a business. If you’re ready, let’s get to it.

Now, before you jump headfirst into the shallow end of the pool, you should know that there’s both primary and secondary market research that you need to conduct. Both will provide you with the actionable intelligence necessary to launch your business with the highest possible chances for success.

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Primary research

Primary research is all about obtaining information on the market firsthand. That means you go out and do the research personally. You talk to people and start to acquire information before you ever do any specific research. For example, you go out, and you conduct open-ended surveys or interviews with small groups.

Following these interviews and surveys, you might take the general information you’ve obtained, analyze it, and then decide to dig into a specific issue, problem, or fact you’ve uncovered in a more comprehensive fashion. It’s all about narrowing things down and getting specific here.

Secondary research

At the same time you’re conducting primary research, you can also be doing secondary research. That is, collecting information from sources like public records and other data that are available to you (especially online) from which you can draw conclusions. For instance, you can obtain such things as:

• Market statistics
• Industry content
• Trend reports

You can use all of this data to help you gain competitive intelligence, which is particularly useful when considering what you’ll be going up against. Here are some places you should explore when conducting the secondary research.

Public sources

Examples of excellent information reservoirs are government websites. Many have databases that are free to use. You can find government statistics and a host of other information that can be incredibly helpful to the would-be entrepreneur.

Two websites in particular you should explore are the following:

U.S. Census Bureau Bureau of Labor Statistics

These websites can provide helpful information on many different industries and are well worth the time and effort spent examining them.

 Commercial sources

A lot of commercial info here comes from sources like the following:

• Pew Research Center

Each of these companies provides industry insights, which take the form of market reports. However, most of these reports are not free. You’ll have to invest a bit in taking advantage of the time and effort these companies put into compiling their data.

Internal sources

Essentially, this is information that’s already in your possession. This isn’t likely to help much before you have a business, but later on this is market data you’ll need. For example, if you’re thinking about launching a new product or service, you may want historical data on how similar products or services in your lineup performed.

Types of internal data you’ll have here are things like customer-retention rates, the previously mentioned information on how various products and services performed historically, and what your average revenue per sale happens to be.

The following list gives a quick picture of the types of market research you could choose to perform. It isn’t exhaustive by any means, but these are common types with which you should be familiar:

• Focus groups
• Buyer persona research
• Pricing research
• Product/service use research
• Market segmentation research
• Customer satisfaction and loyalty research
• Brand-awareness research
• Campaign research
• Competitive analysis research

Doing market research before you decide to open up a business is so important. We can’t overemphasize that. You don’t want to waste time, money, or other resources pursuing an idea that’s doomed from the beginning. On the other hand, in the course of doing your research, you may find incredible opportunities to exploit.

Remember to dig into things like who your main competitors might be. Find out what kind of marketing strategies they employ. Look to discover how successful they are. You should also find out exactly who the people are that are most likely to purchase from you. What are their demographics?

At the end of the day, analyze everything and summarize your data. Everything you discover is going to help you do one of three things. You’ll either validate your idea, start over from scratch, or give up that idea entirely and fundamentally change the direction you’d planned for your business.

Should that occur, remember that there are millions of paths you could take. Inspiration will come again.

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It's no secret the roofing industry is a necessary and in-demand type of industry. Companies and residents will have regular roofing needs for their homes and business. For this reason, many in the industry strive to go into business for themselves. A roofing business plan should be an integral part of your business model if you want to see your roofing business thrive. 

Developing a well-laid business plan will also help you secure financing and potential investors and set your business up for greater long-term success. Think about this like this; if a building cannot stand alone without its foundation, then your business cannot stand without a well-calculated business plan. In this regard, here are some essential steps on how to write a roofing business plan that can set your business up for better success.

Market research is an essential best practice to help a business succeed. In a digital, data-focused world, online market research tools help companies quickly assess the market and gather real-time information about competitors, target customers and their preferences, product performance, similar products, and business trends. It's also a way to monitor distribution channels, pricing, successful regions, and overseas expansion of similar products. Here is why online market research will help a business succeed and some examples of tools that can be used for it.

Target market metrics Before going to the expense of developing products and marketing any services your company provides, it's essential to understand the likes, needs, and behaviors of your target customer. Online tools, both free and paid, can help you collect data about their behaviors, past purchases, demographics, average household income, purchase of similar products, and so forth. Online data is collected based on anonymous information about customer purchases and is presented in aggregate. This higher-level view gives businesses a broader understanding of activity across a category of consumers. The goal is to use this data to customize product and service development and better tailor marketing messages and platforms for reaching those customers.

You've purchased your various cleaning supplies and posted a job listing to hire your first crew of workers. You have a business name and have secured your business license. But do you know how to market a cleaning business? Now that you're ready to get started with cleaning your first residential or commercial space, what are the best steps you can take to market and grow your new cleaning startup?

How to grow a cleaning business Get online A website is the first tool you should use to set up your cleaning business's online presence. It's a launchpad for all your other marketing communications on social media, by email, and in search engines. By creating a website, you will be searchable and come up when people are looking for cleaning services in your area.

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11 Things to Do Before Starting a Business

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Starting a business can be stressful. It often feels like there are 1,000 things to work on all at the same time. There’s no avoiding this reality for new small business owners. Still, with a little planning, it’s possible to manage expectations and take actions with a sense of purpose toward building your business.

Launch your business: Starting a business is a lot of work, but we’re here to help! Check out our useful resources for everything you need to successfully build your business from the ground up.

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Beyond giving it your all, it’s important to direct your energy to the right tasks – especially at first. Some good first steps in starting a business are researching competitors, assessing the legal aspects of your industry, considering your personal and business finances, getting realistic about the risk involved, understanding timing, and hiring help.

11 tasks to complete before starting a business

To make sure you’re prepared before launching your business, make sure you’ve completed these 11 important tasks. Doing so will better position you and your new company for success.

1. Do your research.

You want to make sure you understand the industry you’ll be involved in so you can dominate it. Even if you think your business idea is unique, you should be aware of competitors, said Ian Wright, founder of British Business Energy.

“Just because you have a brilliant idea does not mean other people haven’t also had the same idea,” said Wright. “If you can’t offer something better and/or cheaper than your competitors, you might want to rethink starting a business in that area.”

2. Determine your audience.

Spend time considering who your target demographic is. This audience will be the driving force in each decision you make. Understanding who needs your product or service can help fine-tune your offerings and ensure your marketing and sales strategies are reaching the right people. Part of this decision is understanding if you are a business-to-consumer (B2C) or business-to-business (B2B) enterprise. Within those parameters are multiple categories, including, but certainly not limited to, age, gender, income and profession. You can’t earn a profit without your customers, so understand who they are and make them your priority.

“It is crucial to make sure you are delivering what your customer wants, not what you want,” said Sonia Lakhany, attorney at Lakhany Law. “This will give you insight into your customer’s buying decision and save you lots of experimenting down the road.”

Know whom you’re talking to. A defined target market will help you better acquire new and repeat customers.

3. Have a strong mission.

Standing out is no easy feat, and no one magic formula guarantees results. However, knowing your business’s purpose is central to guiding these decisions. By recognizing your business’s strengths, differences and purpose, you can make informed choices to expand your services and markets down the line in a way that is harmonious.

4. Choose a structure.

A key initial step to take when starting your business is choosing its legal structure, said business attorney Mason Cole of Cole Sadkin LLC. “It will dictate the taxes, paperwork, liability of the owner(s) [and] other legal aspects, as well as whether or not the company can have employees,” he said. 

Additionally, you must acquire the proper local and state registration required to open your business.

“This means the entrepreneur will need to create the articles of incorporation, obtain an employer identification number and apply for necessary licenses, which will vary by state and industry,” Cole said.

5. Map your finances.

Starting a business requires money that you likely won’t have right away. This is why you need to seek out ways to acquire capital.

“Most entrepreneurs start a business with a very limited amount of capital, which is a large hurdle to many,” said Cole. “However, plenty of options are available to a budding business owner. The first and most common place to seek capital is with friends and family. If that is not enough, expand the search to angel investors and venture capitalists . Should these options not provide the amount needed, then apply for business loans through banks and small business associations.”

Make a plan for how you will fund startup costs, whether that’s using your own funds, asking friends and family for money, or borrowing from a financial institution.

6. Understand your tax burden.

Travis Sickle, a certified financial planner at Sickle Hunter Financial Advisors, advises entrepreneurs to be organized with taxes and fees. There are multiple payments to make, and filing any of them late could result in severe consequences.

“You have to figure out how much your payroll will be to make your tax payments timely,” said Sickle. “The timing can vary depending on your payroll. You must also figure out other business taxes, such as city, county and state.”

7. Understand the risk.

Of course, launching a new business venture will always involve a level of risk. Calculating, understanding and planning for risk is an important step to take before you start working on your business. This means assessing your industry’s risks before developing a business plan.

“ Entrepreneurs should know their industry’s risks before purchasing business insurance,” said Jeff Somers, COO of HouseCanary. “For example, accountants will want to consider professional liability insurance if a client files a lawsuit, claiming a costly error on their tax return. Restaurant owners are more likely to need general liability for slip-and-fall accidents and liquor liability insurance, which can pay for lawsuits.”

8. Put together a business plan.

A business plan outlines the steps you need to take for a successful launch and continued growth. This document is important for establishing a focus for your business, attracting C-level professionals to work for you and seeking and retaining capital. A business plan ensures you put your best foot forward with other professionals who are evaluating your company, so be sure to have this document on the back burner and ready when requested. [Looking for help putting together a business plan? Check out our tips on how to write a business plan .]

Take the time to put together the main components, including:

• Your mission statement
• A description of your business
• A list of your products or services
• An analysis of the current market and opportunity
• A list of decision-makers in the company, along with their bios
• Your financial plan so those who review can understand the opportunity

9. Time it right.

Timing is an important element of building a business. Sure, you want to start your business at a time when the economy is healthy and your prospective industry is expanding, but there’s also a flow to decision-making that’s important to be aware of. Kevin MacCauley, founder and CEO of Upper Hand, said it’s important to be decisive when building a business.

“I wish I understood how detrimental the role of time [can be] in building a business,” he said. “You only have so much time to find out if you’ve made the right business decisions . As I once read, if you’re 70 percent of the way to making a decision, make the decision. If you try to get to 90 percent, you’ve waited too long. If I could have had that mindset from day one, I would probably have had fewer sleepless nights when I was going through tough times.”

10. Look for a mentor or advisor.

Starting a business should not be an independent journey, no matter how tempting that sounds. Finding those who have made this journey before can help set you up for success. Network with other professionals in your industry, attend industry-specific workshops and events, and reach out to thought leaders in your industry to learn their approach. Alternatively, you may want to consider hiring a coach who can give you pointed advice.

11. Bring in the professionals.

Entrepreneurs can’t know everything about running their new venture. Tapping into seasoned professionals’ experience can ensure you’re starting on the right foot.

It’s especially important to have legal assistance to ensure you are protected and going about the process correctly.

“We often assume that legal counsel is for when we get ourselves into trouble, but preventative and proactive legal preparation can be the best way to set your business on the path to long-term success,” said Katy Blevins, CEO of Season of Katy. “When you call on legal counsel after you’ve run into a problem, it’s often too late or could critically impact your business in both the short and long term. Investing in their insight at the start of your business can pay a huge return later on by keeping you out of trouble before you even get into it.”

Another smart hire is an accountant. It’s nearly impossible for one person to handle every aspect of a company, and above all, your finances should not be put at risk.

“I had a full-time job as I considered starting my own business in 2009, but I did a lot of groundwork before I started, and bringing on an accountant was an important step,” said Sarah Burningham, president and founder of Little Bird Publicity. “It helped me understand what I needed to do to make this work from a profit standpoint, [as well as] the ins and outs of state, federal and local taxes.”

Starting a business right can lead to success

Starting a business is a lot of work, but if you do it the right way, you can set yourself up for a successful entrepreneurial journey. By following the tips in this guide and taking advantage of the resources we’ve included, you can build a strong foundation upon which to grow your business. Remember, becoming a small business owner is a journey filled with ups and downs, but if you develop a flexible plan and adapt to changing conditions, you can meet any challenge that comes your way!

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• Aug 13, 2020
• 12 min read

Learn How To Do Market Research Before Starting A Business

Updated: Apr 4

Starting a new business is an exciting time but stressful as there is a whole array of things to think about such as finance, the actual product or service, distribution and advertising. However, during this busy time one important aspect that will help your venture become a success often gets overlooked is market research . Otherwise, this may have not been neglected but if you don’t know how to do market research before starting a business then you have come to the right place to help you get started and guide you through the research process.

Table of contents:

What is market research?

Two types of market research to use, why is market research important for entrepreneurs and start-ups, 10 steps in how to do market research for a start-up, 3 common market research mistakes to avoid, 5 real life examples of market research for start-ups.

[Disclosure: This post contains affiliate links, meaning we get a commission if you decide to make a purchase through these links at no additional cost to you.]

Market research is a structured approach to collecting, analysing, and interpreting data related to a specific market. This includes information about the product or service being offered, the target customers, and the competition.

By conducting market research, businesses gain valuable insights into the preferences, behaviours, and needs of their target audience. This information can then be used to make informed decisions and guide the business towards success.

There are quite a few market research methods  available from using census data to doing an online survey. This could be telephone interviews, face to face interviews or self-completion (online or paper) and information found in internal or external sources like Google. Whilst in other cases a mix of methodologies can be applied. All this comes down to is basically two types of market research: primary and secondary research .

1. Secondary market research methods

Secondary market research also known as desk research, are sources of information that have been previously completed separately by other parties for another purpose and is made available through paid or free sources. This could be reports carried out by a researcher or financial data made available by companies. Examples of this are through online search (Google trends), government databases (census data), paid research reports, corporate databases ( www.sec.gov  and Hoovers), trade and business press.

Another example is using social listening tools like Awario , you can identify topics of interest and analyse the related posts such as examining the number of brand mentions and what people are saying about the product  online .   Social media analytics  can also track the number of likes, shares, impressions and link clicks.

If you want to learn how to get started with social listening download this free E-book .

2. Primary market research methods

As secondary research is likely to cover only part of the information you want, primary research will be required. Primary research focuses on key objectives that you have set for your business.

This could be through development of research material such as questionnaires , interviewing or observations of your target audience, data analysis and interpretation of results for conclusions and recommendations to be made.

Although, you can use bought or old market research through secondary research, this won’t entirely be relevant to the issue at hand and most likely be out of date. Whereas, primary research will have a key set focus on the objectives for those moments in time. Primary research is split into two forms of research - quantitative and qualitative research .

Quantitative research

Quantitative research is where results can be measured by numbers, which is straight forward to understand and pick up in making decisions. These quantified results are collected by interviewing a large group of people (from 50 running into the 1000s) that is a reflection of the whole population. Therefore, with a larger sample size, statistical analysis can be applied to provide better insights  such as key drivers of buyers’ decisions, predicted behaviour and optimal price levels .

These surveys can be flexible because of the wide range of question formats and can be a mix of mainly closed questions with a couple of open-ended questions (in their own words reasons why). Closed ended questions can be multiple choice, yes or no answers, checkbox, rating scales and a matrix of options. Some demographic questions will also be included in these surveys. Online surveys  are the fastest and least expensive method to use especially if doing the research yourself rather paying a research agency.

Check out this post if want to do DIY research : 5 Best Survey Maker Platforms To Consider Using

Qualitative research

Qualitative research is exploring the in-depth behaviour, attitudes and opinions of a small group of individuals in a more open manner instead of strictly following a set of questions. These tend to be face to face in-depth interviews or focus groups, where people can discuss the subject at hand openly with guidance from the interviewer. Also, observational techniques like mystery shopping can be used as well.

Qualitative research is normally applied at the initial stage for exploratory purposes  and build understanding of the subject from the key target audience that tends to lead to further research, where the insights gained from the initial phase can feed into.

For more in-depth information of the research methods available then read this great post :

All the best methods of market research

Market research plays a vital role for entrepreneurs and start-ups due to various reasons:

It provides an understanding of the market landscape

First and foremost, it provides a comprehensive understanding of the market landscape. This enables businesses to gain valuable insights into their potential customers, their preferences, behaviours, and needs. Such information is priceless when it comes to designing a product or service that effectively caters to those specific needs and preferences.

Helps to facilitate competitor analysis

Secondly, market research facilitates competitor analysis. By studying the competition, start-ups can identify gaps in the market and discover opportunities for differentiation. This allows them to position themselves uniquely and competitively, offering products or services that truly stand out.

Helps to mitigate risk

Moreover, market research assists in mitigating risks. It helps identify potential challenges and risks in the market, allowing businesses to plan for or avoid them. This reduces the chances of unexpected setbacks and increases the likelihood of achieving success.

Examine the viability of a business concept

Additionally, market research can help determine the feasibility of a business idea. Preliminary research can reveal whether there is a demand for the proposed product or service, if the target audience is large enough to sustain the business, and if the idea is financially viable.

Provides guidance in developing business and marketing strategies

Lastly, market research guides business strategy, including marketing and sales strategies. By understanding the market, start-ups can tailor their advertising and sales approaches to directly appeal to their target demographic, thus increasing sales efficiency.

Overall, market research is an essential tool for entrepreneurs and start-ups, providing valuable insights and guidance for their business endeavours.

In getting the most out of your research budget when starting a business, you will need to follow the 10 steps below in how to do market research for a start-up to ensure the money is spent wisely and achieve your goals:

Step 1: Set the objectives for conducting the research

There are a number of questions that you will need answers to, in order for your new business to be successful and sustainable like:

What is my target audience?

Who are my competitors both locally and further afield?

What are the strengths and weaknesses of my competitors?

What price are customers willing to pay?

What is the likely frequency of purchase of the product or service?

Whether or not you will be able to make money from this business enterprise?

To help manage all these questions you need to approach this research by being more focused through setting objectives then you will get more value out of it. So rather than trying to research everything, it's best to focus on the information that will benefit you the most .

Step 2. Determine your target audience

Determine who your customers are with a description of their age, income, job, lifestyle, level of education and so on. Find out what they are currently buying with an explanation of their buying habits of relevant services or products. This can include popular features, the quantity of purchase, their preferred suppliers and the main price points.

Look for reasons behind the purchase of these products or services, which require more in-depth investigation into the minds of consumers and see what the triggers are. This could be a price promotion, the colours available, quality, better fit for purpose and many other things.

Also understand, what would drive your target audience to buy from you.

Step 3: Establish the market research methods to use

Both primary and secondary research are crucial for gaining a comprehensive understanding of your market. Plus, there are various tools available for conducting market research, including social media analytics tools, and market research databases. These tools can assist you in gathering, analysing, and interpreting data effectively.

This could be through secondary research (information already published by an independent party) such as trade associations or business libraries. You can develop and run your own surveys  with the assistance from bodies that represent small businesses. Alternatively, you can use a freelance researcher or a research agency agency if your budget allows for it.

With the internet you are able to do research without breaking the bank. It comes down to the what you need, the level of expertise required to get it and the budget available before deciding whether to use a researcher or not.

Step 4. Conduct a thorough analysis of your competition

The information you are likely to want to know about your competition, could be:

Competitors of a similar size.

Companies that may be serving the same locations or regions. So, if you’re a web-based business, this is likely to be worldwide.

Businesses with a similar structure of ownership, that could be a partnership or a limited company then it’s best to research those companies with the same composition.

Look for competitors who are relatively new as much older competitors maybe successful due to their long-term history and reputation.

Utilise the information you collect not only for how much business you could make but also find out how your business could fit and adjust to the marketplace.

After you have gathered all the answers to these questions, you will be able to do SWOT analysis of your competition by establishing what their strengths and weaknesses are. You can also check out the customer experience of your competitors by visiting their shop or website. By analysing the results, you may be able to establish an opportunity that you can exploit to meet the needs of customers or there is a niche that needs to be filled. Plus see any possible barriers to entry to the market.

Step 5. Determine market size and trends

It's important to gauge the potential customer base for your product or service and understand the demand. Additionally, keep an eye on industry trends to anticipate where the market is heading. Industry reports, trade associations, and market research firms can provide valuable information in this regard.

Step 6. Assess the viability of the product or service

Conducting a feasibility study is crucial to determine if your product or service can be profitable. This involves analysing production costs, market pricing, potential sales, and estimated revenue. If the numbers don't add up, it may be wise to reconsider your approach.

Step 7. Evaluate your pricing strategy

Pricing plays a significant role in perceived value and market demand. To find the optimal price for your offering, research what your target customers are willing to pay and what your competitors charge. Your pricing strategy should cover costs, generate profit, and resonate with your customers.

Step 8. Analyse your findings

Once you have gathered all the necessary information, it is essential to analyse and interpret your findings. Look for patterns, trends, and valuable insights that can guide your business strategies.

Step 9. Establish demand for your product or service by testing the market

Make sure to confirm the demand for your product or service by getting feedback from your target customers. You can do this by testing prototypes, conducting market tests, or accepting pre-orders. This step will allow you to make any needed changes before the official launch and reduce the chances of failure.

Step 10. Make informed decisions by acting upon the results gathered

Lastly, leverage the data and insights you have gathered from your research to make informed decisions about your business. This may involve refining your product or service, adjusting your marketing strategy, or identifying new opportunities for business growth.

The following are 3 common mistakes to avoid making, when carrying out market research:

1. Only interviewing family and friends

By relying on friends and family you are not getting the full picture of your potential customers, needs, wants, attitudes and buying behaviour as well as the competition. Those close to you are more likely to bias the information and data as they want to support you on your new venture. You need an independent view from customers or potential customers and peers from your sector.

2. Relying on one source of data

Using only one set of data like secondary research that maybe out of date and not specific to your business goals. In order to do market research well, you need both primary and secondary research through different resources to get a true unbiased opinion.

3. Understanding your own bias

Each person has their own views and opinions that could influence the way they interpret the results. Obviously, you want your business to work but you don’t want it to bias your opinion of the results. So be wary of this and make that extra step in finding another way to make sense of it.

The following are 5 real life examples of market research of brands when they first started out:

1. FirstKey Homes

FirstKey Homes, a real estate start-up, utilised market research to pinpoint the most profitable markets for single-family rental homes. They collected data on various factors like housing prices, rental rates, job growth, and population growth in different regions across the country.

The valuable insights gained from this research guided their investment and operational strategies, allowing them to focus on areas with great potential for high returns.

2. Blue Apron

During their early stages, the meal-kit delivery start-up, Blue Apron, extensively conducted market research to gain a deep understanding of their potential customers' lifestyles, eating habits, and cooking preferences.

They employed surveys, focus groups, and online analytics to gather data and extract valuable insights. These insights played a crucial role in shaping their product offerings, pricing, and marketing strategies.

Mint, the financial management app, conducted research to identify the challenges people face when managing their finances. They utilised an online survey to gather data on people's financial planning habits, the difficulties they encounter, and the tools they use.

This research helped them design a user-friendly app that specifically addressed these pain points, ultimately contributing to the app's remarkable success.

4. Warby Parker

The online glasses retailer, Warby Parker, conducted market research to understand the common issues customers encounter when purchasing glasses. They discovered that high prices and inconvenience were significant pain points.

Armed with this knowledge, Warby Parker adopted a direct-to-consumer model, designing glasses in-house and selling them directly to consumers at a more affordable price point. They also introduced a home try-on program to alleviate any hesitations customers may have had when buying glasses.

Before launching their communication platform, the Slack team conducted thorough market research to gain a comprehensive understanding of the communication needs and challenges faced by businesses. This research helped them identify a gap in the market for a platform that centralises all business communication. By focusing on solving a real problem for businesses, Slack experienced rapid growth and achieved great success.

All the methods explained above are valid and valuable in getting you the information, you need but as your starting out there maybe budget constraints on what you can do. However, there are many free secondary sources of information that you can start off with along with trying your own DIY online survey through platforms such as JotForm who provide you with easy to use tools for a range of different purposes and will help you along the way. Plus, they also have a wide range of online forms and templates for apps, PDFs, approvals, tables, online stores and more. Download this free E-book to learn how to make use of the platform's productivity and automation features.

A simple, inexpensive (starting at $15) alternative to survey makers is to firstly test out your business idea or product is appealing by running a quick poll with PickFu (50% off your first poll with promo code: ANPAR ) . This platform allows you to ask questions to their 15 million+ panel across 9 countries such as the UK or US. You just have to define your target audience, run a poll and you will quickly receive your results.

Once your business is more established and profitable, you can use more traditional and in-depth methods of research such as ethnography to further increase your business chances of sustainable success.

By getting in the mind of customers will help give you an edge as a small business because market research tends to be further down the list of things to do for many of your competitors.

RELATED HOW TO GUIDE POSTS BELOW FOR SURVEYS AND MARKET RESEARCH

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Market Research Online Surveys: Best Practices & Tips  

NPS Calculation: Learn All You Need To Know

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Top 5 Website Survey Questions About Usability

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12 Things You Must Do Before Starting a Business

Table of Contents

When it comes to launching a new business venture, the intrepid American spirit hasn’t suffered in the wake of the COVID-19 pandemic. According to the U.S. Census Bureau , a record 5.4 million new business applications were filed in 2021. It may be the right time for you, too, to embark on starting a new company. Before doing this, however, there are essential steps entrepreneurs need to take.

1. Identify a creative idea.

The most successful businesses all started from the same place: an idea. Think of a business idea as the seed of your company. You need that before you can begin adding fertilizer, watering and growing complementary plants. In other words, before you can do all the steps below, make sure you have a solid idea for your new company – it’s what your business hinges on. What is a unique service you can provide? Where is there a gap in the marketplace that you can fill? Consider these cheap business ideas for inspiration.

2. Write a business plan.

After identifying a business idea, experts agree that writing a business plan is the next step you should take. Creating a business plan displays a genuine level of commitment, but it also forces prospective business owners to answer essential and sometimes challenging questions at the start of the development process. A business plan is also the first thing any potential investor will request. It will give them a detailed overview of your proposed business venture, your level of industry expertise and understanding of the opportunity, and the financial requirements and potential upside. [Read related article: How to Find and Attract Business Investors ]

Identifying a solid idea for your new company and then writing a business plan are the critical first steps in the process of starting a business.

3. Choose a legal structure.

Selecting the proper legal structure for your business at the outset is critical, especially since it’s not an easy change to make after the fact. Each type of legal entity comes with specific requirements and restrictions, and only certain types of corporations may apply to your particular business needs. If you need help, a corporate attorney or experienced business accountant can offer timely and accurate advice for creating the proper legal structure for your proposed company.

4. Get your business registration, licenses and tax identification.

Once your business structure is in place, you need to register your business and obtain the correct licenses, taxpayer identification number (TIN) and employer identification number (EIN). There are various resources to assist with business names, filing incorporation paperwork, obtaining necessary licenses and registrations with your local municipality, and getting your federal tax information squared away. Aside from the IRS for federal tax matters, regional corporation commissions (typically at the county level) can assist any new business owner with meeting the regulatory requirements for each locale around the country. If you’re planning on hiring staff to help run your business, you’ll also need to apply for a federal tax ID or an EIN. Having an EIN will protect you and your identity, allow you to file business taxes separate from your personal taxes and help establish credit for your business.

5. Know your competition and the marketplace.

There’s nothing wrong with a bit of competition. It allows business owners to innovate and evolve their products and services continuously. Knowing your business’s market, what your competition is doing and how your company fits into this landscape is critical in establishing your business. Including this information in your business plan will showcase your thorough knowledge of the industry for your proposed company. Without this information, no serious investor will rise to the occasion, and it will be hard to stand out in the marketplace. Know your industry, know your competition and understand how your business will become a differentiator in the market.

6. Finance your business.

Unless you’re an accountant, have a degree in finances or are a sophisticated investor, you’ll need some help nailing down this part of your pre-launch planning. Investors will want to know how much money your company will have to begin with and how much it will need in the future. Regardless of where your revenue will come from, list it in your business plan. Will you use your credit cards and home equity to start? Will you need a loan to get started? Are you willing to give up a percentage of your ownership in exchange for cash? Will you have sales the day you open your door? These are all critical questions to address.

Find out the best business loan and financing options so you can make an educated decision on how to finance your new business.

No matter how you plan to finance your business, include that information in your business plan. There are many investors out there, and they’ve seen it all. Don’t assume that no one will invest just because you aren’t also bringing some capital to the table. Investors typically want to know three things:

• For how long?
• What is the exit strategy?

Answer these three things to an investor’s satisfaction, and you’re very likely to strike a deal. [Read related article:  How to Know an Investor Is Offering You a Good Deal ]

7. Identify and secure a location.

Whether it’s a home office or an entire building in an industrial park, you need to know where your business will be located before you launch it. Prior to your first day of operations, you’ll want to have the following in place:

• Phone and internet service
• Business directory listings
• Lease or purchase agreement for your workspace

If you haven’t identified or secured a location for your business before meeting with investors, don’t fret. Investors, bankers and legal counsel generally don’t see the lack of a specific location early on as a dealbreaker or red flag.

8. Get proper insurance.

Selecting the right business insurance for your company is not a decision to make lightly. There are several types of insurance to consider, including health, auto, directors and officers, liability, performance bond, travel (including AD&D) and life. In addition to understanding the differences between the available options, it’s important to identify any local regulations that might require your type of business to carry certain types of insurance. For example, if you’re starting a carpentry or plumbing company, you’ll need liability insurance, which typically isn’t necessary for businesses in other industries. Learn what else you need to keep in mind when choosing business insurance .

9. Obtain legal counsel.

Whether you want to have in-house counsel or hire an attorney as needed, your business needs to have access to legal advice. You may need legal representation specializing in corporate, tax, intellectual property, labor, or international law. Wherever regulatory requirements demand compliance, asking a lawyer to review and sign off on this part of your business will save you time and money and protect you from potential legal ramifications.

10. Establish a web presence.

In addition to securing your business’s physical location, you’ll also need to establish a virtual presence on the web. First, you’ll want to register a domain name that matches your business’s name so you’re ready to build your website when the time comes. Then, once you’re ready to develop your website, research the options available to ensure you’re selecting the best website builder that will meet your immediate needs and be able to support your desired functionality in the future, such as online ordering capabilities. Enlist the help of an SEO expert before starting so that they can ensure your website’s design and content are fully optimized. You may also want to consider the cost of starting an online business when deciding which kind of company to start.

In addition to a website, set up accounts to build a social media presence for your business . A consistent username across all of your preferred social channels will build credibility for your business. Read more about the importance of social media for small businesses .

11. Use local and national business resources.

There are plenty of local, county and national resources to make sure your business name is available, verify the legal structure you’ve chosen is correct and in compliance with location-specific ordinances, and advise on the different business loan options and other funds available to entrepreneurs. You can also refer to resources provided by your local corporation commission, the Small Business Administration and the IRS throughout the planning process.

12. Create a marketing plan.

Writing a marketing plan that complements your overall business plan will help ensure your new business’s success. A fully optimized website should be at the center of your marketing plan, even if you’re planning a brick-and-mortar business. Review these additional tips for creating a marketing strategy for your business.

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Why Market Research Is So Important When Starting a New Business

The importance of market research should never be underestimated, especially for those starting a new business.

Market research builds a sturdy foundation for a business to be built upon, preparing the company for any threats or weaknesses that may arise as the business grows.

From getting to know your target audience to exploring potential competitors, market research gives businesses a competitive edge, allowing them to thrive in new environments.

If you’re still wondering why market research is so important when starting a new business, keep reading to see why it should be at the top of your to-do list.

To Make Sure You Have an Audience

Before you begin making any big steps in business, you need to ensure there’s an audience for you to sell to. Without customers, there are no sales. Market research will determine if you have a potential audience and where they’re hiding.  

If no one’s interested in the product or service you’re offering, you’ll need to reconsider if starting a new business in that direction is the best idea. On the other hand, if there is a promising audience, it’s important you make the right decisions regarding where and how to sell to these customers.

To Know How to Sell to Them

Considering only 50 percent of new businesses make it past the five-year mark , knowing how to sell to your customers should be your number one priority. The way people buy is changing . Having a thorough understanding of your target audience will help you determine not only who to sell to, but how to sell to them.  

If your audience isn’t reading the newspaper, why try to reach them there? Market research allows you to know the best platforms for you to sell to your audience. From online solutions to in-store promotions, knowing how your audience shops is crucial for your business and its success.

To Know Your Competition

When starting a new business, it’s imperative that you’re aware of any companies that may be considered competition. Whether it’s a direct or indirect competitor , knowing how their businesses may threaten yours will help you better promote your own product and remain competitive within the shared audience.  

Market research determines who might pose a threat to your new business, giving you the upper hand. If you’re aware of the competition, you can strategically work towards changing customer loyalty and positioning your brand in a unique light. Without this knowledge, you’ll find yourself feeling like a small fish in a big pond—unable to get past competition you didn’t know existed.

To Know Who Can Help

Understanding the ins and outs of marketing and sales can be confusing, especially when you’re starting a new business. Marketing tactics may seem unclear. How can you best reach and communicate with your audience? Where do you even begin?  

Thankfully, combining market research with the professional support of a full-service digital marketing agency can help you improve your communication tactics. From content creation to social media management, an inbound marketing agency can combine the information from your market research with the most effective marketing and sales tactics to drive results. Only with the in-depth knowledge of your target audience can an agency effectively successfully promote your business.  

Starting a new business may seem scary. However, it doesn’t have to be. Going the extra mile and conducting market research ensures you have all the information you need to make your new business a success. Don’t stay in the dark—know the information you need to succeed.

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13 steps on how to start a business (2024).

Starting your own business can be an exciting and rewarding opportunity. With careful planning and the proper legal considerations, it can be a straightforward process. This is especially true if you have an entrepreneurial mindset, a positive attitude, persuasive communication skills, and self-motivation. You’ll also need the right information to set you up for success. In this article, we’ll discuss how to start a business in 13 steps.

Key Takeaways 

• Your business idea should have unlimited earning potential.
• Competitor research helps you determine product viability.
• A business plan can help you acquire funding or partners.
• Your business structure has tax, legal, and liability implications.
• You’ll need a business bank account, EIN, registered business name, and business number.
• Use business tools to help streamline your processes and simplify tax time.

Table of Contents 

• Determine Your Business Idea
• Research Competitors and Market Trends
• Build Your Business Plan
• Select Your Business Structure
• Register Your Business and Get Licenses
• Set Up a Business Account for Your Business
• Secure Funding for Your Venture
• Obtain a Business Credit Card
• Prepare for Tax Obligations
• Get Business Insurance
• Invest in the Right Business Tools
• Market Your Business
• Make Your Business Scalable

1. Determine Your Business Idea 

To start your own business, you need to have an idea. Your idea creates the foundation for the business. The more you expand on the concept, the stronger your base is. 

Your idea must have earning potential. It can be a one-time project, like developing an app or an invention you plan to sell. But in most cases, it should have unlimited earning potential and be something people will pay for. 

Your business idea should be something you have some skill at or a strong interest in. One of the top markers of a successful entrepreneur is motivation and determination. Your business is unlikely to succeed if you lose interest or faith in your product. 

Ask yourself if your business idea solves a problem. You are more likely to succeed if there’s a market gap that your business can fill. A diluted market drives down the value and increases your marketing overhead.

While you’re developing your idea, keep an open mind. Review and critique your idea often and ask for feedback from friends and trusted experts in the field.

A great business idea is the cornerstone of how to start a successful business. Take your time with this step and think it through carefully.

2. Research Competitors and Market Trends

A critical step in how to start a company is performing due diligence. Start with primary research by exploring the market. Connect with your potential market and perform interviews. Use social media or footwork to conduct surveys about consumer interest. Observe how the lack of your product impacts your market or how consumers use similar products. Utilize focus groups and contract research services, if applicable.

Move on to secondary research by collecting and analyzing existing data. Find and examine any competitors, including variations on your theme. Note their price point, marketing scheme, delivery methods, storefronts, and locations in your market area. Review all their iterations, versions, color options, size choices, flavors, and other options that might reflect their market research. Read their customer and peer reviews, where applicable. 

Run a thorough SWOT analysis by exploring your strengths, weaknesses, opportunities, and threats. Use your primary and secondary research to support your results. This data can help you focus your idea and make the necessary adjustments before settling on a concept. 

Complete a financial viability analysis to determine if you can produce the product in a way that allows for continuity and reasonable profit. Consider supply chain issues (shipping, flights, trains, etc.), resource trends (lumber, steel, gold), and common staffing issues. Many people assume it’s easy to find employees, but the reality can be different in many markets.

Perform a minimum viable product (MVP) test. This means you create a prototype or simplified version of your product and launch it to a select group of potential clients. Observe whether they find it valuable, how they use it, and whether or not it fills the market gap. 

3. Build Your Business Plan 

Writing a business plan is often the most overwhelming of the steps to starting a business. It is a key document used to attain financing, stakeholders, and partners. Even if you don’t want partners or need a loan, your business plan acts as a written foundation. 

If you were thorough during steps 1 and 2, creating a business plan is easier than you think. In many cases, it’s as simple as filling in the blanks with the data you’ve already collected. Follow this outline for the key components of a business plan:  

• Executive Summary: This is a short overview of the main aspects of your business. It’s meant to capture attention and interest in your project. 
• Company Description: Use this section to describe your company. Give an overview of your vision and answer the five W’s—what, where, when, why, and how. You’ll have a chance to go into detail later. Keep it concise. 
• Market Analysis: In this section, you’ll distill your market research into key points. Demonstrate that you’ve completed a thorough market analysis without going into too much detail about your process. 
• Management and Organization: Outline your organization structure and business type. Include how and who will make decisions and an organizational chart if it’s relevant.
• Products and Services: List your products and or services in detail, including descriptions and pricing.
• Customer Segmentation: Divide your customer base into segments with shared characteristics or preferences.
• Marketing Plan: Include your marketing plan in detail. How to create a marketing plan is discussed later in this article. 
• Logistics and Operations Plan: Add a section that discusses how you’ll achieve the end product.
• Financial Plan: Include a detailed financial plan. It’s likely to be the most scrutinized section if you’re applying for funding or seeking partners.
• Appendix: Include any other detailed information on the aspects you outlined earlier in the business plan, particularly about your logistics and market research. 

4. Select Your Business Structure 

Many small businesses start as sole proprietorships 1 IRS. “ Sole proprietorships ” Accessed on March 20, 2024 2 IRS. “ Business structures ” Accessed on March 20, 2024 for the ease of establishment and financial benefits. Sole proprietorships don’t require legal consultation to establish, they’re easy to dismantle, have fewer upfront fees, and reporting taxes is as simple as completing a personal tax return. You also don’t need to share the profits.

The major drawback to a sole proprietorship is personal liability. Your business is not registered as a separate, legal entity, so you have no protection against lawsuits and tax implications. 

Partnerships 3 IRS. “ Partnerships ” Accessed on March 20, 2024. are a business structure type that’s suitable if you choose to work with one or more other people. Partnerships include general, limited, or limited liability partnership (LLP) structures. In a general partnership, all parties share the profits, debts, and liabilities. A limited partnership combines both structures in that one person takes on the liability while the other remains a silent partner. An LLP is common among doctors and lawyers who share a practice. Personal assets are siloed against liability in an LLP. 

In a partnership, both parties can pool labor and resources. They can act as sounding boards for each other, helping to bring new ideas to life. However, with a partnership comes the opportunity for disagreement or mismanagement, additional debts or liabilities, and increased difficulty in selling or dissolving the business.   

A corporation is a legal entity of its own. 4 IRS. “ Incorporating ” Accessed on March 20, 2024 It separates the individual business owner, shareholders, and board members from any legal liability and business assets . Starting a corporation involves a significant amount of paperwork and ongoing annual filings. 

It’s easier for an incorporated business to raise capital, sell shares, and divest ownership. While corporations can enjoy decreased tax rates, you are essentially taxed twice, first as a corporate entity on profits, then personally on your dividend income and capital gains. 

Small businesses that start as sole proprietorships can always scale up to a partnership, corporation, or limited liability entity.

5. Register Your Business and Get Licenses

This step in starting a small business has a lot of variation. As a sole proprietor, you don’t need to register a business name if you do business under your own name. You also don’t need an employer identification number (EIN) if you don’t have employees, but it helps when it comes time to open a business bank account and pay taxes. Visit the IRS website to register for an EIN 5 IRS. “ Apply for an employer identification number online ” Accessed on March 20, 2024 when and if you decide to hire employees.

You will need to register your business and apply for a license or permit depending on your state and the nature of your business. A state tax ID can also help protect sole proprietorships against identity theft. 6 SBA. “ Get federal and state tax ID numbers ” Accessed on March 20, 2024 Visit your local municipal, state, or county website for more information. 

To stand out as a business entity, it’s important to choose the right business name. Research other businesses with similar names to see if your name infringes on their registered identity. The US Small Business Administration (SBA) can help you determine if you need to register your name with the local, state, and federal government. 

6. Set Up a Bank Account for Your Business

Setting up a business bank account 7 SBA. “ Open a business bank account ” Accessed on March 20, 2024 can make managing your business finances much simpler. A business bank account can also help you remain legally compliant. It’s easier to attain a business credit card and merchant services with a business checking or savings account. You receive limited personal liability protection and better purchasing power. 

Shop around for a bank with lower fees, introductory offers, and good benefits. When you’ve made your choice, you’ll need your social security number (SSN) or employer identification number (EIN), business license, ownership agreement, and proof of business address. If you are incorporated, you’ll need your articles of incorporation and proof of address for the named director.

7. Secure Funding for Your Venture 

Acquiring funding is one of the most important steps in how to start a small business. This financial decision can affect your business structure and the operation of your business. Draw on the financial section of your business plan to determine how much funding you’ll need. 

Self-funding through personal investments, mortgages, and family or personal loans can ensure you remain in control of the business. Speak to your mortgage advisor and financial planner about all the risks associated with leveraging your real estate assets or tapping into your retirement investments to fund a business venture. You take on all the risks with self-funding.

Venture capital from investors offers upfront financing for a share in the business and participation in the business decisions. It’s not a loan but an exchange for equity. It can also change your business structure.

Crowdfunding is another option that requires low risk for the reward. Crowdfunders donate or give money to your business in return for an acknowledgment rather than a share of your company.

A small business loan from a bank or professional lender is the perfect opportunity to pull out the business plan you worked so hard on. Be prepared to shop around for the best rates and terms for your loan. You’ll likely use the same bank or credit union for your business bank account and credit card.

You can also double your odds with a US SBA-guaranteed loan. Lender Match can pair you with a partner bank that offers SBA-guaranteed loans.

The US SBA also offers several investment programs 8 SBA. “ Fund your business ” Accessed on March 20, 2024 , including the Small Business Investment Company (SBIC), the Small Business Innovation Research (SBIR) program, and the Small Business Technology Transfer (STTR) program. Each program offers funding to specific small businesses.

8. Obtain a Business Credit Card 

A business credit card helps establish lines of credit with your suppliers and for large purchases required for product development. Getting a business credit card is difficult without an adequate credit history. 

Some banks will put you on a probation period with a business-secured card that acts like a credit card but needs to carry a balance to make purchases. As you regularly make work-related purchases and payments to the card, the bank reports your history to various credit bureaus. It’s a good way to build credit history for your business when you are just starting out.

Credit card companies require the same information the bank asks for when you open your business account. And, just like with your bank and loan, you’ll want to shop around for a good rate, terms, and benefits.

9. Prepare for Tax Obligations

Small business owners operating general partnerships or sole proprietorships have the same tax responsibilities as regular taxpayers. You are responsible for filing your tax returns and paying your taxes owed on time—failure to do so results in penalties.

A corporation or LLC business structure will have additional obligations, including filing annual reports. However, corporations can file in calendar years or fiscal years. 

Filing your taxes as a small business owner can be easy with the right support. You’ll want to get as much for each deduction as possible. Tracking your expenses, billable hours, and invoices is easier with expense-tracking software .

10. Get Business Insurance

Business insurance 10 SBA. “ Get Business Insurance ” Accessed on March 20, 2024 offers protection against unforeseen costs like natural disasters, lawsuits, death, and accidents. 

Some types of business, loan, bank, and lease agreements require insurance. If you have employees, you are federally required to have Workers’ Compensation, Unemployment, and Disability Insurance. Other insurance requirements vary by state.

Common types of business insurance include:

• General Liability Insurance : Suitable for any business, general liability covers financial loss from settlements, judgments, bodily function loss, libel, slander, medical expenses, and property damage.
• Product Liability Insurance : This type of insurance protects businesses that manufacture, wholesale, distribute, or retail a product from financial loss resulting from a defective product.
• Professional Liability Insurance : Suitable for service businesses, this insurance protects against financial loss from malpractice, negligence, and errors.
• Commercial Property Insurance : This type of insurance protects businesses with property and physical assets from loss and damage resulting from weather, vandalism, and riots.
• Home-Based Business Insurance : This is a rider added to home insurance for business owners who operate out of their homes.
• Business Owner’s Policy : This policy suits all small business owners and combines other typical coverages into one convenient, low-cost option. 

Not all business owner’s policies cover everything. Your business location can also influence your coverage and rates. Carefully read your proposed policy and discuss the details with your provider before purchasing.

11. Invest in the Right Business Tools

Investing in business tools can streamline your small business administration and processes, leaving you more time to focus on aspects of your life you can’t automate, like self-care.

Accounting Software 

Accounting software can help streamline your financial processes. FreshBooks accounting software is cloud-based for your convenience. It offers industry-standard double-entry accounting, invoicing, bookkeeping features, and expense tracking. 

Project Management Software 

Utilize project management software to create professional documents, RFPs, SOWs, and project plans. FreshBooks project management software includes templates, collaboration tools, and web-based centralized file storage.

Payment Processor 

Payment processors allow you to take online and in-person payments for invoices and services. FreshBooks Payments can do all that and more, integrating with multiple payment providers and making it easier for clients to pay for your products or services. Send invoices directly from the FreshBooks app or your online account. Invoices contain links and one-click payment options to streamline the process for your clients. 

CRM Software 

Client/Customer Relationship Management (CRM) software combines all your client data into one cloud-based location. FreshBooks software offers multiple CRM integration partners to make collaboration and customer management easy.

Scheduling Software 

Scheduling software can save time and streamline your small business administration. You can manage shifts, clock in and out, assign salaries and permission, and more. FreshBooks integrates with several top-rated scheduling products to help simplify your business processes.

Inventory Software

Inventory software helps you to track incoming and outgoing inventory, identify weaknesses in production, and streamline production efficiency.

12. Market Your Business 

In this digital age, there are more ways of marketing your new business than ever before. Start by developing your brand package. It can be as simple as selecting a font and colors for your business name. Your brand will be the most recognized feature of your online presence. It’s worth taking the time to consult a professional to develop a brand package. Professionally developed brand packages should include original logos in digital and print-ready format. 

When it comes to an online presence, at a minimum, you should have a Facebook page or website. These platforms allow you to inform people about your services, hours of operation, and contact information. Facebook offers step-by-step instructions on how to set up your page and best practices to maximize the platform.

When creating a website, you get what you pay for. Some companies offer free websites but charge you to unlock features like using your own domain name and adding payment options. 

You can also use social media platforms like Instagram and TikTok to put your brand in front of prospective buyers. Paid social media advertising can ensure customers in your preferred demographic see your product by utilizing data mining and algorithms.

Advanced online marketing techniques use search engine optimization (SEO) techniques. These methods use keyword and phrase strategies to boost your position in browser searches.

Analog marketing includes talking about your product at service groups, church functions, and other public speaking opportunities. Print advertising in specialized or location-specific magazines can provide long-term visual exposure, depending on the display location.

13. Make Your Business Scalable 

A common mistake small businesses make is failing to plan for success. Breaks in production or delays in promised services can cause the consumer to move on to other options. Design your new business so that you can expand production, add partners to help manage workload, or develop collaborative relationships with other creators that give you options when you need to pivot.

Your upscale plan should include tools that help your growing small business administration needs.

Introducing your products in phases is another way to scale your business, rather than rushing all your products to market at once. 

You can also expand your marketing plan in phases to allow you to reach broader markets as your brand gains recognition.

How To Start a Business With No Money 

Starting your own new business can seem like a fantasy when finances are tight or in a deficit. But before you give up hope, know there are ways to do it. 

The first recommendation is to keep your current job. It provides you with an income while you get your business plan together. Another step is evaluating your financial needs and what it will take to make your entrepreneurial dreams come true. For example, you might need to take out a small business loan.  

Don’t forget the power of experience. Talk to someone who’s succeeded in small business ownership, knows about money lending and leveraging capital, or has experience in the field of business you want to get into, or all three. 

Finally, get out into the community and meet people. Networking with the right people can open doors you may not know about.

You can learn more in our article on How to Start a Business with No Money . It outlines the steps to starting your own business and explores which businesses are the cheapest to start. 

Launch Your Business Dreams 

Small business ownership can put you in control of your destiny. With careful planning and the proper support, starting a small business can be an exciting and rewarding endeavor. Follow the steps outlined in this article to begin your entrepreneurial journey. 

Set yourself up for success by utilizing tools designed for small businesses. FreshBooks business suite of software tools offers features, integrations, and solutions for small business owners.

Article Resources

• IRS. “ Sole proprietorships ” Accessed on March 20, 2024
• IRS. “ Business structures ” Accessed on March 20, 2024 
• IRS. “ Partnerships ” Accessed on March 20, 2024.
• IRS. “ Incorporating ” Accessed on March 20, 2024
• IRS. “ Apply for an employer identification number online ” Accessed on March 20, 2024
• SBA. “ Get federal and state tax ID numbers ” Accessed on March 20, 2024
• SBA. “ Open a business bank account ” Accessed on March 20, 2024
• SBA. “ Fund your business ” Accessed on March 20, 2024
• IRS. “ Filing and paying your business taxes ” Accessed on March 20, 2024
• SBA. “ Get Business Insurance ” Accessed on March 20, 2024

Sandra Habiger, CPA

About the author

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

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BUSINESS STRATEGIES

How to start an eCommerce business in 10 steps

• Amanda Bellucco Chatham
• 18 min read

Get started by: Create an online store →  | Getting a domain →

Learning how to start an eCommerce business can be a complex endeavor. To put your business on the path to success, you need more than an idea; you need a plan. This post provides a step-by-step guide to the process of starting a business , from initial inspiration to the first online sale and beyond. 

You have a business idea and you’d like to build it online. After all, eCommerce is big and the market is growing; with a tap or two on your phone, you can place orders for everything from dog treats to jeans to meal planning kits. And with the variety of ecommerce tools  available, building an eCommerce website and an eCommrce business is easier and more accessible than ever.

Ready to start selling? Build your eCommerce website  with Wix.

What is an eCommerce business?

An eCommerce business is a company that sells products or services online. With an online store, you can serve customers around the world, and buyers can browse and make purchases at any time of the day. 

Ecommerce sales have increased faster than other retail businesses in recent years. In the third quarter of 2023, for example, the U.S. Department of Commerce reports that retail eCommerce sales grew 7.6% year over year  to $1.8 billion, compared with 2.3% growth in the overall retail sector. In the past 10 years, eCom merce has grown from 6% to more than 15% of all retail sales, according to the Department of Commerce.

Given this growth, it’s no wonder that merchants of all types now view eCommerce as an essential part of their business. The number of eCommerce websites worldwide nearly tripled  between 2019 and 2023 to 26.5 million.

It’s worth noting that while some eCommerce sellers operate exclusively online, others use their websites to enhance and complement offerings at physical store locations, manufacturing plants or offices. Business-to-consumer (B2C)  eCommerce serves individual retail shoppers, while business-to-business (B2B)  sellers offer products or services to other companies. 

Learn more: What is an eCommerce website?

Types of eCommerce

How to start an eCommerce business

As with any entrepreneurial venture, careful planning and preparation are essential to your success. Here are the steps to follow to get started with your own eCommerce business: 

Identify your online business niche

Do market research

Select the right product mix

Secure product sources

Write a strong business plan

Set your business name and legal structure

Choose an eCommerce platform

Create your online store

Manage your eCommerce business finances

Market your eCommerce business

01. Identify your online business niche

While it may seem counterintuitive, your chances of making it big in eCommerce are better when you start by thinking small—that is, when you start by defining a niche for your business.

While it’s helpful to study the general trends, broad categories can be crowded with competitors. As one example, health and personal care is slated for growth to over 13% of the eCommerce market  through 2027 but trying to compete with major drug chains or beauty retailers can prove difficult (if not impossible) for new players.  

Instead of targeting a large, general market, target a niche market. For instance, you could start an eCommerce business that focuses on organic skin care for teens, with a selection of cleansers, moisturizers and sunscreen for acne-prone skin.

It helps to have expertise in your chosen niche. You’ll spend a lot of time researching the right products or services to provide. You’ll dive into every detail of the business. And, at least at first, you’ll likely manage day-to-day operations, so you should be passionate about what your ecommerce business idea . 

Related reading: $300K in 7 days: building a million-dollar beauty subscription business  

02. Do market research

Once you’ve pinpointed an ecommerce business niche or idea, it’s time to research and evaluate your potential market. Not only will you learn more about your audience but you’ll also gather the quantifiable data you need to make revenue projections and calculate costs. To understand the market, consider these strategies:

Identify your audience type :   Are you catering to corporate professionals or individual consumers? The audience you have in mind will help determine th e type of business  you intend to operate. While many eCommerce businesses serve exclusively B2B or B2C customers, some sellers serve both. For example, a gourmet food seller that typically sells to individual consumers may offer corporate gifting services for the holidays. Or, an apparel retailer may provide customization options for bulk orders, enabling companies to print custom uniforms that include their logos. Get familiar with the main ecommerce KPIs before getting started.

Size your market : Build a profile of your ideal customer based on their demographics, geographic location, interests, spending habits and any other salient details. Then use that profile to guide your research into census and market data to arrive at realistic numbers. Your goal is to understand your potential customers better as you gauge the ultimate potential for growth for your eCommerce business. These benchmarks will also help you forecast revenue and demand as accurately as possible until you begin generating sales and have an earnings history to use as a guide.

Immerse yourself in the trade : Follow trade media and individual thought leaders in your chosen category and read up on overall eCommerce trends via publications. The Wix eCommerce Blog  is a great place to get started.

Study the competition : Dive deep into competitor websites, sign up for their email updates and track news coverage on your competitors. Pay attention to how they market themselves, both online and offline. If you can dig up financial reports or earnings, that information can guide your own forecasts and projections.

Ask your audience directly : Use surveys and polls to gather information from your potential customers. Hang out in relevant social media groups and forums and attend in-person events where potential customers congregate. 

03. Select the right product mix

Your niche and your target market will guide decisions about which products to sell or services to offer. Consider, for example, whether your audience would be receptive to curated kits or gift sets, and whether seasonality is a factor.

Price and profit margin are essential to consider, as they determine the potential for your business to scale. A break-even analysis will help you figure out how much of each product you need to sell to recoup your initial costs and begin making a profit. 

When selecting products to sell, you’ll want to consider factors like: 

Product life : Know your expected  product life cycle . This will help you create a multi-year plan for your eCommerce business. Some big-ticket items are built to last decades; buyers who ordered a sofa may not return to your site immediately, unless you offer complementary items. On the other end of the spectrum, replenishable goods like pet food or beauty supplies may inherently attract repeat purchases. For these, you may want to offer bulk discounts or start a subscription box business  to further encourage repeat business. 

Price expectations :   While offering a variety of price points can broaden your appeal with buyers, if your audience is used to purchasing luxury goods, then you may want to limit your selection to top-of-the-line offerings. If you’re a B2B seller, consider whether your corporate clients expect you to offer items in bulk at wholesale  prices. 

Cost of goods sold (COGS) :   As you select products, consider overhead costs and logistics , such as whether items require fancy packaging or “white-glove” delivery and installation. Digital products, by contrast, have no shipping or physical  procurement  requirements. You can calculate COGS with the following formula: beginning inventory + purchased inventory − ending inventory.

Once you have guidelines in place, dive into the specifics. If you need inspiration and want to see what’s trending, turn to competitor websites or search best-selling items on marketplaces like Amazon. Ecommerce tools like Google Trends and Algopix can also help identify hot products. Or, use your favorite SEO or keyword research tool, like Semrush, to find frequently searched products, validate a product concept and/or discover which brands are most frequently searched in your market.

04. Secure product sources and suppliers

Once you have specific items in mind, you’ll need to determine the right product sourcing method. Perhaps you create all of your products by hand and want to keep it that way. Or, maybe you’re interested in dropshipping with a platform like Modalyst , Wix’s native dropshipping solution.

Depending on your budget, resources and preferences, you have a few options to choose from:

Make goods by hand yourself : Quality is fully within your control, but it can be tricky to scale your business or keep up with high order volumes. 

Hire a manufacturer :   You source products from a third-party manufacturer but sell them under your brand name. Items are made to your specifications, and you retain control over production, pricing and branding. You can make goods efficiently in large quantities, but good communication with your production partner is essential to ensure quality is up to snuff.

Partner with name-brand manufacturers : If you seek products from specific manufacturers or designers, you can contract as an official reseller or dealer and offer those products through your eCommerce site. While your brand will get a boost from the affiliation, you’ll need to price items low enough to compete with other sellers, and some brands may have policies around a product’s minimum advertised price (MAP). Both can cut into margins. Retailers can also create their own branded merchandise via private label  lines in partnership with manufacturers, straddling the manufacturer/retailer divide. Costco’s Kirkland line or Amazon’s AmazonBasics are just two examples of this strategy.

Source from wholesalers : Wholesale suppliers offer catalogs of goods, often from multiple manufacturers. You can find inexpensive products to buy wholesale, which gives you leeway in pricing. On the flip side, products sourced overseas may bring additional delivery costs and tariffs as well as the expense of inventory and warehousing.

Work with dropship suppliers :   Dropshipping  shifts traditional retailer responsibilities to suppliers, enabling you to launch an eCommerce business with minimal upfront investment. You handle the marketing and choose your products, but incoming orders are routed directly to your suppliers, who are responsible for shipping items directly to your customers. You never have to buy and hold inventory, run a warehouse or ship items yourself. On the flip side, you have less control over product quality and delivery, putting your brand in a vulnerable position if suppliers slip up.  Ghost commerce  takes it a step further, where the supplier ships items, yet you maintain your brand’s image and handle customer relations.

It’s important to weigh your options when choosing a product sourcing method, and truly evaluate all of them carefully. Before you make a definitive decision, ask yourself the following questions:

Do you want to customize or brand your products? Because wholesale suppliers produce in bulk, it may be hard to tweak selections to match your criteria. As an intermediate option, some suppliers offer white labeling, which allows you to sell ready-made products with your logo and branding. And if you want to personalize products further, explore print on demand . This is a subset of dropshipping that allows you to offer custom designs on a selection of products created to your specifications as orders come in. 

How much capital do you have to invest in inventory ?   If you’re working with limited startup funds, dropshipping can be a more economical route for launching your brand. 

How complex are your warehousing and fulfillment needs?  If you offer recurring subscription shipments, corporate gifting services or bulk order capabilities, you may need to manage logistics yourself to ensure deliveries are accurate and on time. 

How do your competitors source their products?  While you don’t want to outright copy your competitors, research as much as you can about their processes to identify any potential differentiating advantages they have. Do they have exclusive dealer rights to brand-name merchandise you want to stock? Do they offer products sourced exclusively from sustainable suppliers? 

What is your backup plan if one of your suppliers has issues? Nearly four in 10 shoppers  have abandoned online purchases due to items being out of stock, so take proactive steps to avoid disappointing buyers. Find backup sources of widely available wholesale products, and cover contingencies in your contracts with suppliers. 

How will you scale  your business?  Manufacturing or making your own products gives you the greatest amount of control, but they also make it difficult to meet rising demand. You may need to contract with a new factory altogether, hire staff or find other expensive solutions. For a more flexible option, you may want to consider dropshipping or wholesaling. 

What are your audience’s expectations?  Buyers are prioritizing sustainability more and more. In fact, U.S. consumers are reportedly willing to pay an 11% premium  for products with reduced environmental impact. If your customers expect ethically sourced products, include those factors in your sourcing criteria.

05. Write a strong business plan

Document all the research and planning you’ve done up to this point with a formal eCommerce business plan . Not only does a business plan capture your work in a comprehensive and detailed format, but it also provides a touchstone for keeping your day-to-day operations focused on your mission. The strongest business plans keep teams aligned during launch and lay the foundation for attracting the right business partners and investors. 

While the individual components of a business plan can be tailored to your unique priorities, you should include the following elements to be sure the document is relevant and useful: 

Mission, description and unique selling proposition (USP) : Your business plan should outline the reason your company exists, summarize at a high level what it does and identify what sets your brand apart from others. This information helps you stake your claim in the marketplace and guides future decisions about priorities. In particular, it’s critical to flesh out your  unique selling proposition . Your USP guides your product positioning , helps you to stand out from the competition and identifies partners and consumers who share your values. For example, “plastic-negative” water company and Wix merchant  Mananalu  differentiates its products by supporting a larger cause. Mananalu water is packaged in refillable aluminum bottles, which are easier to recycle than plastic. In addition, each time a consumer buys a Mananalu water, the company pledges to remove a plastic bottle from the ocean waste stream. Shoppers can even buy further “plastic offsets” to support the company’s cause. Climate Neutral certification and “1% for the Planet” membership provide third-party credentials attesting to the company’s commitment to sustainability.

Market and SWOT analysis : Summarize your market research and describe your company’s position relative to the competition. Provide an analysis of strengths, weaknesses, opportunities and threats (SWOT) to pinpoint your areas of greatest potential growth. A realistic analysis will help maintain focus not only as you launch, but as you scale and add new offerings. 

Your offering :   Use your previous research and planning to create a detailed description of your products and/or services, product sourcing and pricing strategy. Describe how this offering aligns with your audience’s needs. In addition, describe your plans for customer service and order fulfillment as crucial components of the brand experience.

Marketing  plans : Describe how you plan to introduce your eCommerce business to your target audience, including which digital channels you’ll prioritize and which technologies you’ll rely on to execute marketing tactics.

Financial forecasts : Using your previous research, build a model forecasting expenses, revenues and growth. To ground your projections in reality, use real-life results from competitors or other businesses in your field. Consult trade publications and category experts for growth benchmarks and formulas to incorporate.

Funding sources : Describe how you’ll secure the startup resources you need, whether through your own savings, private equity, crowdfunding or investors. If you’re presenting your plan to potential funding sources, customize the information to explain the rationale behind your request and describe the benefits of funding your business.

06. Set your business name and legal structure

After you put your business plan together, you’ll need to set up the actual legal framework to support your business.

Start by picking a business name that reflects your brand identity and USP. If you need some inspiration, try researching popular search keywords, brainstorming names related to your niche or playing with different spelling variations. Wix’s free business name generator  can provide more ideas. As you narrow the list, check that the names are:

Easy to read, say, spell and remember

Search-friendly

Available as a website domain 

Not being used by another business (in the U.S., individual states maintain registries of businesses you can check)

Once you have your business name figured out, you’ll need a logo. You can create one yourself, work with a graphic designer or try out the Wix logo maker  for free.

Next, you’ll want to choose the right legal structure for your eCommerce company—a key step in starting a business  of any type. Your overarching business structure will define your liabilities, tax status and more.

Consult with legal professionals and accountants to determine whether a sole proprietorship ,  partnership ,  limited liability company (LLC)  or corporation  is right for you. In the U.S., you’ll also need to register your business and apply for a federal employer identification number (EIN) in order to pay taxes, open a business bank account or obtain financing. You can do this through the IRS’s website for free.

07. Choose an eCommerce platform

At this point, you’re ready to bring your brand to life through your own website. 

The first step is to choose the best eCommerce platform  for your needs. There are dozens of website builders on the market, so evaluate your options carefully. To ensure your eCommerce website development  goes smoothly, look for a platform that provides:

Professional aesthetics : Wix offers hundreds of specialized online store templates  you can customize to reflect your brand.

A domain name : You’ll need a domain name  of your own to match your business name.

Enterprise-grade security : Wix offers a secure infrastructure  with 24/7 security monitoring to protect against data breaches.

Top performance : It’s critical to have web hosting  with the capacity to support a speedy, high-performance site  on both mobile and desktop devices, even during peak sales periods.

Built-in analytics : Wix’s analytics dashboard helps you track key metrics, such as website traffic  and generate historical performance reports.

Customizable shopping cart pages : A customizable shopping cart page  will ensure your branding and messaging are consistent throughout the purchase process.

Variety of checkout options : Flexible eCommerce checkout  options should support whichever payment method your customers prefer. Wix Payments  is an integrated payment gateway system that can connect to in-store point-of-sale (POS) registers, too.

A content management system : A content management system  (CMS) should ideally support robust product information and brand-building features such as blogs, how-to articles and buying guides.

Back-office functionality : Look for integrated tools that help automate back-office functions, like bookkeeping and order fulfillment. Wix offers tools for tasks like inventory management , invoice creation  and more.

A reasonable pricing model : Your platform’s pricing model should make sense financially for your business, both now and in the future. As you research, pay close attention to recurring fees and special surcharges so you understand the total cost. With Wix, you can build a website with eCommerce functionality for as little as $27 per month.

Get ready for launch. Sign up  for Wix today.

08. Create your online store

Regardless of which eCommerce platform you choose, it’s important to research the best practices for designing an online store. Knowing how to make a website  includes the following best practices:

Be clear about what you sell : Make it easy for customers to understand your business and products by using consistent design elements and language throughout the site. Avoid jargon-heavy or overly cutesy names for product categories and individual items; use accurate language that matches the search terms your audience enters. Once shoppers are ready to buy, don’t beat around the bush; use clear calls-to-action like “Shop Now” or “Buy Now.” 

Invest in high-quality imagery : A picture is worth a thousand words, and that’s especially true in eCommerce. Buyers can’t physically touch and try products, so photos and videos help convince them to have faith and click “Buy.” High-quality photos that clearly show details and features are essential, while videos demonstrate products in action and can be repurposed for social platforms like TikTok. 

Showcase user-generated content (UGC) : Buyers trust others like them to communicate authentically about products and services, so find ways to spotlight customer reviews, user-submitted photos and social media comments. The same holds true in the B2B world; 86% of businesses  consider verified reviews a critical factor in purchase decisions when deciding vendors.

Embrace mobile : Transactions on mobile devices already account for four in 10 online sales , and an even higher share of product research occurs on smartphones thanks to their “anywhere, anytime” availability. Your eCommerce site shouldn’t just be mobile-compatible. You should assume the majority of interactions with your brand will occur on the go. Make sure that pages load quickly even when wi-fi isn’t available, and that images render clearly on small screens.

09. Manage your eCommerce business finances

Once you’ve launched your eCommerce business, you need the tools to track sales, profit and growth. These eCommerce money management tips  offer best practices to ensure you have adequate cash flow from month to month and can keep your business humming along. 

Three things in particular are worth monitoring closely:

Plan for seasonality : Holidays, annual weather patterns and other cyclical influences can cause your income to spike and dive. For example, in the U.S., the final quarter of the year can account for more than 30%  of annual sales for some categories of retailers. Other cycles might be particular to your industry: if you offer bookkeeping or accounting services online, for example, your peak season might end on April 15, the filing deadline for personal income taxes. Accurate forecasting can help predict when sales will pour in so you can manage cash flow to cover leaner months.

Get a handle on fulfillment costs :   If your eCommerce business involves delivering physical goods, be prepared to spend 15% to 20% of net sales on fulfillment costs . Of course, if you provide a virtual service or a downloadable app or software product, you can avoid these costs altogether. If you use dropshippers to fulfill orders instead, you won’t carry those overhead costs yourself, but the suppliers will likely pass them on to you as part of your fees.

Guard against costly chargebacks and returns :   It’s estimated that 17.6% of all online sales are returned . Add in the cost of reverse logistics—where goods are returned to stock for resale or simply discarded—and you’ll want to prevent returns in the first place. Try to create detailed product pages that include fit and sizing guides, compatibility information and materials. In addition, bolster your customer service content to address common questions before purchase; communicate shipping timeframes so consumers don’t cancel orders in transit if they don’t arrive in time. Finally, set a return policy  you can actually afford.

Read more:   SMB online commerce  for acquiring banks and merchant acquirers.

10. Market your eCommerce business

Launching your online store is an achievement, but by no means can you “set it and forget it.” With so many eCommerce websites available, you need to promote your brand to attract new buyers and create incentives that keep customers coming back.

As you allocate your marketing budget to sell more products online , focus on the digital channels you know your audience uses. Follow these strategies: 

Personalize the shopping experience : Seven in 10 consumers  now expect personalized interactions with companies, and businesses meeting that expectation can boost their marketing return on investment (ROI) anywhere from 10-30%. Seek out tools that enable you to automate eCommerce personalization  in email campaigns, product recommendations and post-purchase promotions. For example, with Wix, you can add a “Best Sellers” or “Related Products” gallery  to your product pages.

Boost word-of-mouth buzz : Encouraging customers to create and share reviews is just the start when it comes to building word-of-mouth advocacy for your brand. Create promotions that reward customers for referring friends and family, and post share-worthy takes and exclusive offers on the social media networks that your customers use most. To further boost visibility on social media, consider working with micro-influencers. These personalities may not have millions of followers, but they have devoted audiences whose interests can align closely with your brand offering.  

Prioritize SEO : More than half of consumers  rely on search engines as their top tool for shopping research, so stay up-to-date on best practices for search engine optimization to give your brand the best possible chance at visibility. Develop rich content, optimize for mobile devices, maximize site speed and earn inbound links to improve your rankings. 

Build loyalty :   While it’s natural to devote attention to finding new customers during launch, you also need a plan for keeping the customers you already have. It’s less expensive to build a loyal following than to continually churn through one-time purchasers, and repeat customers tend to outspend new buyers . Consider creating a loyalty program that rewards buyers with perks and exclusive offers based on how much they spend.

Drive more sales with Wix eCommerce marketing .

How much does it cost to start an eCommerce business?

The cost of starting an eCommerce business depends on many factors, from the type of products you sell to the features you need to power your online store. But when all is said and done, you could spend anywhere from $5,000 to $50,000 .

That range may seem high—in fact, you may wonder if you could drop a zero from the lower end of the scale. Dropshipping can eliminate upfront inventory and fulfillment costs, and platforms such as Wix offer inexpensive eCommerce site hosting plans and design services. But even with this minimalist approach, you still may need to factor in costs for things like marketing, technology and software, legal and administrative fees, and more.

No matter how much startup capital you have at your disposal, it's important to do your research and plan carefully before starting an eCommerce business. This will help you avoid costly mistakes and increase your chances of success. The potential costs to consider include: 

Business formation and licensure : Setting up your business structure and governance, securing any required licenses and filing registration and tax paperwork can add up to several billable hours from legal and accounting professionals. 

Ecommerce platform : The technology behind your eCommerce website is all-important and should support integrated shipping, payments and marketing from one unified dashboard. Depending on the platform, each module may be priced separately, or you may be charged a single annual fee for all-in-one service.

Products : The upfront cost of your products will vary depending on what you're selling online  and which sourcing method you choose. If you hold inventory, add the overhead expense of storage or warehousing space.

Design, eCommerce photography and copywriting : As you set up your online store, you may wish to enlist professional help with the website design, product photos and written content. If you’re launching in more than one country, you may need to find translation services to ensure product copy is localized accurately.

Customer service : Responsive service is a must for building your brand’s reputation. Make a plan to personally handle incoming questions and requests or hire staff to ensure adequate coverage.

Logistics : If you want to handle order management yourself versus outsourcing to a dropshipper, you need to invest in packaging, staff to pick and pack orders, and contracts with freight carriers or third-party logistics providers to handle deliveries.

Marketing : Even if you don’t allocate budget to paid advertising, you’ll still need to invest hours into setting up social media accounts and optimizing your website for search engines.

Why start an eCommerce business in 2024?

U.S. eCommerce sales are expected to grow 10.5% year over year in 2024 , so there’s no time like the present to get started. Here are just a few reasons to start an eCommerce business this year:

The barriers to entry are (relatively) low :   While launching an eCommerce business successfully does take some initial investment, it’s far less expensive to build a brand online. In the past, shopping technology was prohibitively expensive and required a professional IT staff to manage.

You can earn a profit (relatively) quickly : While you won’t generate millions overnight, the relatively low startup costs and efficiencies of scale you can access via dropshipping means that you may be operating in the black within a year to 18 months. While the size of your profits depend in large part on your category and your wholesale product costs, relevant, high-quality products and superior service can help justify the higher prices that lead to bigger margins.

You can access rapidly-growing global markets : As much as the U.S. represents a huge eCommerce market, other parts of the world are seeing even more exponential growth—and you can sell to these nascent markets without needing a physical presence or local staff. While China is dominant in terms of eCommerce market size and penetration, countries that are potentially more accessible, such as Canada, Mexico and the U.K., are all top global targets to consider .

You can run your business your way :   As the world discovered during the COVID-19 pandemic, digital businesses can be managed remotely. You can route orders to dropshippers and respond to customer service queries on your own time, anywhere—a stark contrast with traditional retail, which tethers you to a store location and requires staff to serve customers during set hours. 

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It’s rare to drive down a main street or thoroughfare in America and not see a franchise operation. Many are familiar to most of us, like McDonald’s, Dunkin’ Donuts, or Taco Bell. (And no, despite popular belief, Starbucks is not a franchise.)

But you may not know that many hotels and motels across the country are franchise operations, as are many service businesses, such as The UPS Store and H&R Block, and retailers, like Ace Hardware or 7-Eleven.

In other words, franchising is a very popular business model. According to Statista , about 792,000 franchise establishments in the U.S. are ringing up $827 billion in sales annually and employing around 8.5 million people.

Are you interested?

Here’s what you need to know before you invest in a franchise. 

What is a franchise.

Franchising is a way of doing business where the business owner/s, called franchisors, sell the rights to use their system of doing business, including their name, logo, policies, procedures, and an operating manual, to an individual or group of individuals, called franchisees, for a contracted period. Then, you can renew your contract and maintain ownership when that time is up.

In exchange for your initial franchise fee and ongoing royalty payments, you also get access to their marketing expertise and advice, product sourcing, initial training, ongoing support, and more when you invest in a franchise. But, perhaps most important, owning a franchise gives you, in most cases, almost instant brand recognition. 

How much experience do you have in your chosen industry?

None. That’s the beauty of franchising—the franchisor teaches you everything you need to know about running that business. And many provide ongoing support. 

In fact, if you have a lot of experience in this type of business, it could be a negative, which leads to the next question…

How independent do you want to be?

Are you a rule-breaker? If you want to be or are an entrepreneur because you don’t like following the rules or taking orders, franchising may not be for you. 

Franchise success depends on following the franchisor’s system precisely. While some franchisors give their franchisees some degree of independence, most demand that you commit to doing exactly what they tell you to do. In some cases, that means buying products or ingredients from them. 

Franchises have the right to make changes, add or subtract product offerings, reduce their national marketing budgets, redesign their logos, etc. And while they may ask for franchisee feedback, they don’t have to. But franchisees must go along with the changes.

That’s not to say franchisors don’t invite input from their franchisees. For example, McDonald’s Quarter Pounder was developed by one of its franchisees. 

This doesn’t mean you are not responsible for running your business—you are. You have to hire and manage employees, deal with challenges at your location, create local marketing strategies, and manage the company daily.

How much money do you have to invest?

When you invest in a franchise, in addition to paying the franchisor a franchise fee, you are responsible for most other startup costs, ranging from several thousand dollars to several million. So, as with most startups, you’ll want to have several months of living expenses saved. 

Unlike independent businesses, you have to pay a certain percentage of your sales (not profits) to the franchisor. So before you start your research, determine (perhaps with the help of your accountant) how much you can afford to invest in a franchise opportunity.

If you have some experience in the industry, you may want to contrast the costs of starting a similar business from scratch with investing in a franchise. Make sure you include the benefits you get from investing in a franchise, including ongoing support, brand recognition, marketing assistance, and more.

Some franchisors offer financing options. It is sometimes easier for a potential franchisee to get outside financing since the lenders’ risks are mitigated because they’re investing in a proven system of operation. Check out Small Business Administration (SBA) approved lenders. 

Explore Your Options

Now it’s time to do some research to find the franchise that’s best for you. If you want to invest in a franchise in a particular industry, start there. Make a list of the various franchises in that industry (there are numerous listings of franchises you can find online or check out the International Franchise Association’s website).

Compare the franchisors’ offerings, including franchise fees, royalty, training, ongoing support, etc., and narrow your choices. Then, do an online search of the companies. Are there many complaints about the system? Are its franchisees upset at the parent company? Check out reports from the Better Business Bureau. 

Reach out to the franchisors. You’ll likely be put in touch with their franchise development people (salespeople). Don’t be afraid to ask a lot of questions. 

This process may help you further narrow down your options. 

Disclosure Requirements

Once you know the franchises you want to learn more about, you can ask the salesperson for the company’s Franchise Disclosure Document (FDD). Franchises are regulated by law and the Federal Trade Commission (FTC) and must provide an FDD within 10 days of signing a contract.  It is possible to obtain an FDD before asking the franchisor for one. Some sites sell them (use a reputable site like FranData ), and some states make them available for free online, including California, Indiana, Wisconsin, and Minnesota. 

FDDs have 23 sections that offer information about costs, territories (if any), equipment lists (if applicable), etc. Most FDDs do not say how much money you can expect to make as a franchisee. There is a section in the FDD that does address earnings claims. Some franchisors will show how much money past franchisees have made but don’t promise you can do as well. Some leave it blank altogether. 

Perhaps the most important part of the FDD is the list of franchisees. If you have a conversation with the franchisor, they will undoubtedly give you the names of some franchisees to call, but they are likely to be the system’s best performers. So use the list in the FDD to find the names of at least 10-20 franchisees in locations similar to your own (in terms of population and demographics) and reach out to them. 

Here are some questions you can ask:

• Are you satisfied with the franchisor?
• How would you describe your relationship with them?
• Have you gotten all the support you were promised?
• Is the franchisor easy to communicate with?
• Do they listen to you and other franchisees?
• What aspect, if any, of the franchise relationship are you disappointed in?
• Are you making the money you expected to earn?
• Are your sales steady or cyclical?
• Would you invest in the franchise again?

The Franchise King suggests you ask franchisees if there’s an internal franchisee network within the company where they share tips and advice. 

Some states (California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, Virginia, Washington, and Wisconsin) require franchisors to meet other regulatory conditions. 

Other Factors to Consider

How well-established is the franchisor .

Brand recognition is a big part of what you're paying for as a franchisee. However, well-known brands come at a cost. Fledgling franchisors, on the other hand, typically have lower startup costs, and getting in on the ground floor has its benefits. You'll need to assess whether the higher price of a well-known brand is worth it and whether a new franchise has enough name recognition and experience to help you succeed.

If you are considering investing in a newer system, make sure the franchisor has opened and operated several units of the company successfully, so you can be assured they know what operating a unit is like. 

And no matter what size company you’re investing in, you want to ensure the franchise has a stellar reputation. 

What are the terms of the franchise agreement? 

Some companies require you to sign a long-term commitment. Are you prepared to commit to working with this company for 20 years or so? Is there an option to sell your franchise? Will the company buy it back?

Where is the franchise located? 

Many franchises sell territories to franchises. Make sure the company has available territories in an area you are willing to live and work in.

Once you’ve completed your due diligence, tell your contact (whether a company salesperson or a franchise broker) that you’re interested in pursuing this opportunity. The next steps vary depending on the company, but you’ll likely have a series of meetings with company representatives. And the franchise is going to vet you as well to make sure you have the financial resources to invest in the franchise and that your reputation is sterling as well.  

Hire Professionals

Purchasing a franchise is a big investment and one you shouldn’t undertake alone. The FDD is a legal and financial document, so your accountant should review the financials. It’s also smart to hire an attorney with franchise experience to review any contracts and the franchise agreement. 

And remember, everything is negotiable. At least have your attorney ask about certain elements you’re uncomfortable with. Newer franchisors, anxious to grow their systems, might be willing to negotiate the franchise fee. 

The Entrepreneur's Source

The Entrepreneur's Source® is the largest Career Ownership Coaching™ organization in the world. For nearly 40 years, we have helped nearly one million professionals explore their career possibilities with our powerful approach to education, awareness and discovery and our unique Income, Lifestyle, Wealth and Equity™ assessment. Our unique approach fosters meaningful connections through earnest interaction, empowering aspiring entrepreneurs to identify, pursue and achieve their dream of self-sufficiency.

Questions to Ask Franchisees Before purchasing a franchise, talking to a current franchise owner could help you decide whether to buy a franchise or not. Learn what to ask.

4 Essential Tips for New Franchise Owners Succeeding as a new entrepreneur is more assured if you have the powerful brand recognition of an established company, rather than a standalone start-up.

Thinking About Buying A Franchise, Now What? Many individuals are realizing that franchise ownership could be the pathway to the American Dream. Not sure if franchising is for you? Join us to learn more!

Copyright © 2024 SCORE Association, SCORE.org

Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

How to Start an Online Business in Kenya

As the booming e-commerce market continues to grow in Kenya, transactions are expected to reach $3.1 billion in 2024 and keep growing at a healthy clip of over 6% annually, reaching nearly $4 billion by 2028. 

This growth is fueled by a rising user base, expected to hit 12.9 million by 2028. The average person is projected to spend around $360 per transaction this year, but that number could rise as well.

This rise presents an opportunity for entrepreneurs in Kenya to position their businesses for growth online. With the right online strategy you can convert this opportunity to leverage the potential of e-commerce. In this guide, we will cover the fundamental practices and steps that can either make or break your venture into doing business online and thriving in the booming e-commerce market in Kenya.  

Market Research: Uncovering Opportunities and Demand

Before you think of venturing into the world of online business , you have to know what you are up against. Who are your competitors? What's the demand for your product or service? Do not assume there is an existing market waiting for you.

Conduct thorough market research, identify pitfalls in your competitor's strategy, and point out lucrative opportunities and consumer demand. Analyse market trends and consumer preferences to gain insights into potential niches and target audiences. Tools like Google Trends and social media analytics can help you find valuable data to inform business decisions, and it’s important to leverage them.

Before launching that online business, there are questions that you must answer:

Are there existing companies that provide comparable goods or services?

Will there be a gradual rise or fall in the demand for this product?

Will it be challenging to make a profit?

What is the primary issue that your product or service resolves?

Will money be spent by individuals to address this issue?

Business Registration: Formalising Your Venture 

Having identified your business’s target market, the next step will be to professionally register the business in line with the legal requirements of Kenya. Ensure your company is properly registered with relevant agencies, like the Business Registration Service (BRS). Obtain the licenses and permissions it needs to run lawfully. 

Depending on your interests and goals, choose the form of business that best describes them, such as a sole proprietorship, partnership, or limited liability company (LLC). 

Furthermore, starting an online business in Kenya involves registering with various entities. The core registrations include the Registrar of Companies, National Social Security Fund (NSSF), National Hospital Insurance Fund (NHIF), and the Kenya Revenue Authority (KRA). Additionally, you'll need a business permit from your County Government, which may have further requirements based on your business type.

Website Development: Crafting a Compelling Online Presence

As soon as you have all the legal work sorted to start up your online business, it’s time to go full throttle on making your business online presence count! Your website acts as your primary online salesperson. It's like your digital storefront—a place where customers can explore your offerings and get to know your brand.

Craft a customer-centric website that's your launchpad for success. Here's what makes a great e-commerce website:

Search engine friendly: Get discovered easily online.

Effortless navigation: Let customers find what they need fast.

Mobile-friendly: Cater to the growing number of mobile shoppers.

Product powerhouses: Include detailed descriptions, high-quality images, and clear pricing.

Trustworthy transparency: Outline your privacy policies and data protection measures to build customer confidence.

Seamless payment options: Offer a variety of safe and secure payment gateways for a smooth checkout experience.

Once your website is rocking, it's time to spread the word! Simply level up your reach by marketing your business online. Consider strategies like online advertising or engaging with potential customers on social media.

Fulfilment Methods: Delivering Excellence to Customers:

The online business in Kenya is very competitive, and hence, to maintain high-level customer satisfaction, one must have seamless order fulfilment and brand loyalty. Different types of online businesses experience different shipping pains. It is therefore important to look for reliable providers and, among others, choose one with fast and reliable shipping lanes like DHL Express, which offers tailored shipping solutions for online businesses in Kenya.

At DHL Express , you benefit from having the greatest reach in the world, tracking your shipments from end-to-end, and a fast shipping option so your customers receive orders on time, both nationwide and beyond.

For more, you can open a DHL Express business account today.

• https://truehost.co.ke/legal-requirements-for-starting-an-online-business-in-kenya/#:~:text=Business%20permit%20for%20online%20business%20in%20Kenya&text=The%20legal%20requirements%20for%20starting%20a%20business%20in%20Kenya%20include,the%20nature%20of%20the%20business . 
• https://www.statista.com/outlook/dmo/fintech/digital-payments/digital-commerce/kenya

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