Most startup founders know exactly what they want to design and sell, and they are personally convinced that everyone will buy one. Yet they often fail to realize that their view is likely biased, and will be instantly discounted by potential investors. Business plans with no “industry expert” data on your target opportunity size and growth are routinely rejected.
Your business plan must have an “Opportunity” section, where industry market size and growth projections are included. Within this section, investors look for footnotes referencing external sources, or quotes from notable domain experts. Absence of these raises a big red flag.
Yet most startup teams have no idea where to start, and what kinds of data to look for, in building this key section of their business plan. Is it possible to get this information with minimal cost? Let me offer a few suggestions which should allow you to do the work yourself:
Use Internet search engines. The Internet today is like the Library of Congress at your fingertips. Search on any product name for census data, online research reports, trade association publications, and online newspapers with relevant statistics. Look for growth and opportunity tables than can be copied and footnoted in your plan.
Visit your local university library. On or off the Internet, there are dozens of reputable market research reports available for purchase. To give you a look first, and often get the data you need, visit a university library where many of these are stocked for free access.
Check local economic development offices. Almost every county and municipality has an economic development office which features market research on popular market segments in your area. Also, this is a good place to ask for pointers to other sources.
Visit the local bookstore. Browsing in the business section of your local bookstore is a great way to do market research, while enjoying a cup of coffee. Information here is more current than your local library, and you might even buy a book for later research.
Purchase online reports for a fee. After exhausting all the free sources, go back to the Internet and order for a fee any additional report or association journal that you need. Credible sites include Gartner Group, Market Research Reports, and Frost & Sullivan.
Informal focus groups. In conjunction with some outside expert data, it is acceptable to add your own research, like setting up a small focus group and documenting results. Variations include online bulletin boards, telephone surveys, and direct-mail surveys.
There are two types of research you'll want to collect. The big-picture market opportunity data is called secondary. It consists of previously collected data like demographic information, industry trends and census information. Next, you need data as specific as possible to your product and your market. This is called primary research, and may include information that you generate yourself.
The information you discover will help you build a profile of your market and the industry. For instance, if you're developing a product for vehicle owners, you'd want to find out the number of vehicle owners broken down by gender, age, and geography. Then how much this market spends on vehicles, spending growth or shrinkage in the past 10 years, and industry projections.
Having no data to back up your opportunity and financial forecast is the kiss of death for any startup funding request. We all know that you can use statistics to prove any point you want, so just quoting data doesn’t mean your plan is sound. Certainly, paying more for the data doesn’t make it any more sound either, so check the low budget alternatives first.