Is there a simple way to do market research for a new business?

The words "market research" are often scary to entrepreneurs. They don't need to be. Your challenge is to determine if there are customers for your product or service and how will you get them to buy. Furthermore, how many customers are there, how much will they pay and how quickly will they write you a check.

Please understand, this is not an academic exercise. Its objective is to generate meaningful operating numbers that can be used for your proforma (projected income and operating expenses). Relate the data to your company. Market research should not look like a generic chamber of commerce report. Demographics, census tracks and traffic counts are meaningless without explaining how it will get customers in your door. Growth in your industry is only beneficial if you can relate it to your increased revenues. Market research lends 3rd party credibility to your proforma.

Start with a wide base of information available from the chamber of commerce and your local library. While there, ask for the Encyclopedia of Associations. Industry trade associations collect extensive data and operating statistics. Perhaps they can introduce you to companies willing to share information with you.

Many trade magazines also publish industry statistics. The more corroboration you obtain from various sources the better. Footnote the sources used to produce your proforma. Avoid fluff that doesn't directly relate to your business and its proforma. Make the data relate to the uniqueness of your company. Your own experience may help in the narrowing process but it's not nearly as credible or objective as a third party source.

Talk to prospective customers and salespersons with competing companies. How do they like the product or service? What would they do differently? What do they think of your idea and how much are they willing to pay?

If possible, test the market by making actual sales calls and trying to close deals. Go to a similar market elsewhere if confidentiality is a consideration. This is a hands-on process. Don't hire a professional to produce a slick, generic product. It's important that you struggle through it, step-by-step. Internalize it and commit it to memory when telling the bank how you will repay their loan.

Your accountant can help create the proforma financial statements. But be sure its based on you own research and you internalize the numbers. You may have to explain them to your lender.