How to do market research for a small business

There’s no replacement for good market research. It’s a sure way to find out those little things you might have missed amidst the frenzy of starting up a new business, tightening up a business plan or entering a new market.

You can only make good decisions if you have all the information to hand. Doing market research is how small businesses can obtain that insight.

Dedicated market research firms know their stuff and have the tools and techniques to help you gain the information you need, but their work can also be prohibitively expensive for small businesses and startups.

The good news is that do-it-yourself market research is inexpensive and effective, and it can get you closer to your target market than you think. Let’s dive into how you can conduct market research without the big bill.

What is market research?

Market research is directed, targeted information gathering. It’s all about working out what people like, what they want and need, and how they behave.

It’s also a good way to discover general trends in your industry – small businesses and startups need every advantage they can get, after all.

If you’re looking to apply for a startup business loan, you need to prove that you have more than a vague idea of what you’re doing. Market research brings everything into focus.

Small business market research is about finding out information, analysing it, and taking action. It helps small businesses and startups to make smarter business decisions.

The results of your research could dictate pricing, help improve a product or direct your marketing efforts. To borrow a cliché, the customer is always right, and your potential customers could reveal the direction your business should be going.

How can market research help small businesses?

Performing market research gives you information that can help your small business:

• Better understand customers: Learn about their needs, preferences and pain points so that you can tailor your offering to match

• Identify opportunities: Market research helps find gaps in the market that your business could fill

• Improve marketing: If you know what makes your customers tick, you can build effective marketing campaigns

• Reduce risk: Trialling a new idea or launching a new business is inherently risky, but market research helps avoid costly mistakes

• Keep up with the competition: You’re not alone out there, but good market research helps you both spot your competitor’s strengths and differentiate your own business

• Secure funding: A better business plan based on real-world data proves that you’re a good potential investment

We know that finding the time to do market research isn’t easy. Without it, though, you could be leaving money on the table. Don’t go into business blind.

What methods can small businesses use to perform market research?

You don’t need a special toolkit or even any professional skills. Everything you need is readily available and is either very affordable or entirely free. 

The process is broadly simple. Just roll up your sleeves, get online, and:

• Find interesting and relevant information

• Compile it

• Make sense of it

• Act on your findings

If you have the means, you can also employ a third party to perform market research for you. This costs money, but it saves time. It also provides professional results, and it might help you avoid bias. Market research is about finding out the truth of the market, not confirming what you think you already know.

How to conduct market research in seven steps

Step 1: Define your target market

You need to know what you’re looking for. Before you even start looking, nail down exactly what your target market is. Find out the kind of people that might use your product or service.

How old are they, what are their interests and preferences, how much do they have to spend? Answering these questions offers a good foundation for your research.

Step 2: Find online discussions

Browsing the web is one of the simplest and most affordable market research methods, as it connects you directly to the thoughts and opinions of potential customers while costing you absolutely nothing. 

Check out sites like:

• Reddit: Probably the world’s most popular link-sharing and discussion site. Look for individual subreddits that relate to your business and its goals to learn directly from the people that matter most – potential customers.

• Quora: A popular question-and-answer site, Quora helps highlight the hot topics of the day, splits its discussions into useful subject groups, and handily links previous answers to often-asked questions. Just be selective about which answers you trust.

• Amazon: Amazon may be a retail giant, but it’s also a strong source of opinion. Look at the reviews of products related to your field to gauge exactly how customers feel about them and their reasons for purchasing.

Don’t go in too heavy-handed. If you respond to a potential customer online with encouragement to use your product or service, it might just have the opposite effect.

Most discussion forums aren’t too happy about direct advertisement, either – pushing your product too hard is a good way to get your posts deleted or your account banned. Market research is all about the pull, not the push. Marketing comes later.

Step 3: Check social media

Social sites are a gold mine. People use them to speak their minds, and they’re generally up to date. Even better, you can promote your business freely once you’re established.

Consider using the following:

• Twitter / X: X and competitors like Bluesky and Threads help users communicate directly with each other and with brands, usually publicly. It’s trivial to search for terms you’re interested in and see what people are saying or to monitor a competitor’s communications to spot the pain points they’re dealing with.

• Facebook: Person-to-person communication is a little more closed off on Facebook, but looking for brand pages and discussion groups related to your field is a good way to see user feedback.

• Instagram: The Instagram algorithm is useful. Follow a few pages with links to your business, and the platform will automatically fill out your feed with related content. It’s a great way to find new and related ideas. 

• LinkedIn: As a business social network, LinkedIn is packed with aspirational posts, business tips and success stories. It’s a fantastic way to learn the ways others are doing business. Just tread carefully when checking competitors’ pages, as LinkedIn informs its users when their profiles have been viewed – and sometimes, by whom.

Step 4: Find formal data

While social posts help you draw your own conclusions about the state of the market, it’s important to back that up with verifiable facts. It’s possible to pay companies to do research for you, but in many cases, you can find completed research online that reveals the truth about your industry.

Look at the websites and blogs of the leading companies in your field, which often include facts and figures that could be helpful. Investigate what industry bodies might be offering, too.

For more detailed information, it could also be useful to look at:

• Statistics providers: Sites like Statista offer a wealth of professionally researched data on all manner of topics

• Search analysis: Check out services like Google Trends or AnswerThePublic, which can help indicate the kinds of things that people are searching for online 

• Website behaviour: If you’re already running a website, Google Analytics is a must to find out exactly what visitors are looking at and for how long. It also details other key points

Step 5: Reach out directly

There’s no better research than that which comes straight from the horse’s mouth. If you really want to know what your customers think of your business or your products, ask them.

You could use things like:

• Surveys, whether online or in-person

• Informal focus groups

• Social media engagement

• Incentives and encouragement to offer feedback and reviews

• Email marketing

Of course, some of these things are difficult to achieve if you are just starting up your small business. It’s hard to get reviews on a product you haven’t launched yet, or feedback on a shop that is still to open.

But laying the groundwork while you’re building your business plan proves you’re plotting a course to growth and means you’re ready to change course if the market demands it.

You don’t need to invest a lot in reaching out, beyond your time. A simple Google form is enough to set up a survey, for example. Focus groups can be put together with friends and family or held online. 

Step 6: Put it together

If you want to use market research to propel your small business forward, you must make sense of it. Keep screenshots of posts, save key statistics, and compile any direct feedback you’re given. Use this data to build an unbiased document which shows the market’s needs and desires. 

Make sure you’re honest with yourself about the viability of your business idea. If you pick and choose only the pieces of research that support it, you’re wasting your time. Similarly, don’t be too disheartened if you find a lot of evidence against your plan.

The point isn’t to prove or disprove anything – it's to create a picture of the market, good and bad, and to help your small business meet its needs.

Step 7: Make a change

With a round of market research complete, you should put it to work. Use that data to influence future marketing efforts, tweak your pricing, or strengthen your branding. Tweak the way you’re doing things to be more competitive with – or different from – other businesses in your field.

Build what you have learned into your business plan, and use it to help secure a business loan or funding.

Read more: 

• How to fund your business idea

• How to write a business plan

• How to brand your business

When should you carry out market research?

Market research is always relevant. It’s useful when you’re starting a small business and vital to help prove that your business plan makes sense. It’s helpful if you’re launching a new product or entering a new market. 

But don’t stop there. The world is constantly changing, and market research is a great way to keep up with those changes. Even if you’re not starting something new, make time to get a feel for where your customers and industry are heading, and you’ll be set for whatever might happen in the future.

Does market research to start a business cost a lot?

Not at all. You can do your own research using free or very affordable tools. This does mean you’re responsible for making sense of it, though. It also takes time and effort that you might otherwise put towards your day-to-day business operations. 

If you’re willing to invest, a third-party market research firm might be able to offer you better results – it’s their job to know how to do market research for a business idea or a startup, after all. Just be mindful of your budget and weigh any spending against the potential value of that research.