Doing Industry Research for Your Startup Business
What do you really know about the target market and location for your new business? Sources of solid research information are all around you, and many of them are inexpensive to use and vital to your success.
Where can you go to find out more information about the costs of starting a particular type of business?
Both federal and state governments spend billions of dollars on research. We'll cover where to look for it and hopefully help you from getting lost in the maze of government publications. State agencies and non-profit organizations also help small businesses. These agencies and organizations provide valuable information on the local area they serve. Also, if you're interested in selling overseas, the government is eager to help as well.
There are countless ways to research. Research may be as simple as sitting in your car and watching people walk by a specific location, or it may involve hiring a professional research firm to do market research and analysis. In addition, you could contact SCORE (Service Corps of Retired Executives). SCORE is a national organization sponsored by the U.S. Small Business Administration of over 13,000 volunteer business executives who provide free counseling, workshops, and seminars to prospective and existing small business people.
Federal Resources for Startup Research
The federal government's main conduit to help the new business owner is the Small Business Administration (SBA).
SBA loan guarantees. See our discussion of government financing to learn more about the specifics in obtaining an SBA loan. The following list gives a brief description of the most popular loans available from the SBA:
- 7(a) General Loan Program: This is the main type of loan that the SBA provides. A 7(a) loan is actually a guarantee of a loan provided by a commercial bank. With proper qualifications, the new or expanding business can obtain a guarantee of up to 80 percent of the amount provided by your commercial lender.
- SBA Express: This is a fairly new type of loan guarantee provided by the SBA. SBA Express is a low-documentation lending program with a turnaround time of 24 hours. The loan guarantee is typically for 50 percent of the amount loaned.
- 504 Development Company Loan Program: This program uses public and private partnerships to finance fixed assets.
- The Small Business Investment Company (SBIC) Program: This program's purpose is to combine private capital and SBA-guaranteed loans to provide a source of venture capital for startup and growth companies.
- The Microloan Program: This program provides small loans that help entrepreneurs in inner-city and rural areas form small, often home-based enterprises.
- Export Finance: This program is designed to promote exporting, and offers specialized loan guarantees that offer working capital and longer-term financing to promote exporting.
SBA counseling. The SBA is also the federal government's main provider of counseling to the small and new business person. Below is a list of some of the types of counseling that the SBA provides:
- Business initiatives, education, and training: The SBA provides a wide range of publications and audio-visual materials. This material is geared toward management of a small business and technical assistance.
- International trade: The SBA is available to provide guidance to a business in the export trade area, in particular to those wishing to take advantage of the new world markets in Mexico, the Pacific Rim, Canada and Europe.
- Women's business ownership: The SBA also provides training conferences specifically for women who are prospective or established business owners.
To contact your nearest SBA office, check in the blue pages of your telephone directory under U.S. Government, try the SBA's home page, or call 1-800-827-5722.
Census Bureau information. The Bureau of the Census information is a general term used for a wide variety of information. Most people think of the Census Bureau as just counting people living in each city. Actually this is done only every 10 years. The rest of the time, the Census Bureau is preparing other types of statistics that could be of use to you as a new business person.
Below are descriptions of some of the other Bureau of the Census publications that can be very useful to you in researching your new business. The Census Bureau web site may also be helpful.
- Catalog of United States census publications: The online catalog contains a list of all publications with appropriate descriptions and information on how to access or order the data you want.
- Census of retail trade: This is published every five years (years ending in 2 and 7) and updated monthly by the Monthly Retail Trade. This publication lists statistics for more than 100 different types of retail establishments by state, metro area, county, and community (population over 2,500). This includes information on the number of outlets, total sales, employment, and payroll. All the data is available online, or can be ordered in a variety of media.
- Census of wholesale trade: This is published every five years (years ending in 2 and 7) and updated monthly by the Monthly Wholesale Trade. This publication lists statistics for more than 150 types of wholesaler categories. The statistics include the number of establishments, payroll, warehouse space, expenses, end-of-year inventories, legal form of organization, and payroll. All the data is available online, or can be ordered in a variety of media.
- Census of selected services: This is published every five years (years ending in 2 and 7) and updated monthly by the Monthly Selected Service Receipts. This publication is similar to the Census of Retail Trade for retail service organizations such as auto repair centers and hotels. This publication does not include any information on real estate, insurance, or the professions.
- Census of manufacturers: This is published every five years (years ending in 2 and 7) and updated yearly by the Annual Survey of Manufacturers. This publication lists statistics for 450 different classes of manufacturing industries. The statistics are compiled by industry and include information on capital expenditures, value added, number of establishments, employment data, material costs, assets, rent, and inventories.
- Census of population: This is published every 10 years and updated yearly by the Current Population Report. This publication lists statistics on the population characteristics of states, counties, standard metropolitan statistical area (SMSA), and census tracts. The demographics that are reported include age, employment income, family composition, level of education, marital status, occupation, race, and sex.
- Statistical abstract of the United States: This annual publication is a source for finding historical statistics about various aspects of American life. It was discontinued after the 2012 edition. The publication includes statistics on income, prices, education, population, law enforcement, environmental conditions, local government, labor force, manufacturing, and many other topics.
- State and metropolitan area data book: This is a supplement to the statistical abstract listed above. This publication provided statistics on states and metropolitan areas in the United States and on subjects such as area housing, income, manufacturers, population, retail trade, and wholesale trade. It was discontinued after the 2012 edition.
- County and city data book: This was published every five years as a supplement to the statistical abstract listed above. This publication provides 144 statistical items for each county and 148 items for cities with a population of 25,000 or more. The information is organized by region, division, state, and SMSA for income, banking, capital expenditures, education, employment, housing, manufacturing, population, retail and wholesale sales, and other factors. It was discontinued after the 2012 edition.
- County business patterns: This annual publication includes a summary of statistics on the number and type (by SIC code) of business establishments as well as their employment and taxable payroll. This information is categorized by industry and county.
The above list of publications is intended to give you a working knowledge of what is available to the general public. Most larger libraries will have these publications available, and (of course) they are available online.
State and Local Government Resources
State and local government assistance varies from location to location. Most states and local governments will have some type of economic development program. These programs will range from providing economic information to giving low interest loans and forgivable grants.
To find out what is available in your state, contact your state department of economic development for eligibility requirements. The city and county governments are also a source of assistance. To find out what is available in your area, look in the local government section in the telephone book. The usual name given for city, county, and state departments is "Economic Development" and is listed as such in the phone book and on the internet.
The loan department at your bank may also be a valuable resource in identifying state, local, and agency assistance to the new business person. They may have gone through the steps with other new businesses in your area.
Another suggestion is to call the regional or federal HUD office. HUD (the federal Department of Housing and Urban Development) provides job and other grants to startups and small businesses for job creation (e.g., $10,000 per job created) in the form of low interest loans, often in conjunction with the Small Business Administration. HUD will be able to provide the names and phone numbers of local city, county, and state organizations in your area who represent HUD for development of targeted geographic urban areas.
Another potential resource may come from local nonprofit economic development agencies. If your community has an economic development agency, this agency may be your best source of providing information on a complete package for the new business. These agencies may assist you in all your research, along with providing financial assistance.
The local economic development offices at the city and county levels will also be a good source of identifying specific area banks that are most experienced with SBA loans or are willing to work with small businesses and startups.
Small Business Information on Exporting
According to the U.S. Small Business Administration, good sources for information and advice on exporting are:
- The Small Business Exporters Association.
- Small Business Development Centers.
- Small Business Institutes. SBIs provide small business owners with intensive management counseling from qualified business students who are supervised by faculty. SBIs provide advice on a wide range of management challenges facing small businesses — including finding the best foreign markets for particular products or services.
- Department of Commerce. The U.S. Department of Commerce's (DOC) International Trade Administration (ITA) is a valuable source of advice and information.
- District Export Councils (DECs). The 51 District Export Councils located around the United States are comprised of 1,800 executives with experience in international trade who volunteer to help small businesses export.
- The United States and Foreign Commercial Service. US and FCS offices provide information on foreign markets, agent/distributor location services, trade leads and counseling on business opportunities, trade barriers and prospects abroad.
- The United States Department of Agriculture. If you have an agricultural product, you should investigate the U.S. Department of Agriculture's (USDA) Foreign Agricultural Service (FAS).
- Most state commerce and economic development offices, which have international trade specialists to assist you. Many states have overseas trade offices.
- Port Authorities, which are a wealth of export information.
- Private organizations such as Exporters' Associations, World Trade Centers, import-export clubs and organizations such as the American Association of Exporters and Importers and the Small Business Exporter's Association.
- Trade associations. The National Federation of International Trade Associations lists over 150 organizations in the U.S. to help new-to-export small businesses enter international markets. Many of these associations maintain libraries, databanks and established relationships with foreign governments to assist in exporting efforts.
Customized Economic Research
Customized economic research covers a wide range of categories. The research can range from sitting in your car and watching people walk by a specific location, to hiring a professional research firm to do your market research and analysis for you. Don't overdo your market research; see market research on a budget for more information.
Generally, a do-it-yourself economic research approach will provide you with the necessary information to evaluate your new business. If your new business is going to be a retail establishment, your two main questions in this area are where will the store be located and who are the customers? Assume that you plan to open a submarine sandwich shop in a strip mall that has a vacancy.
Some of the questions that should be addressed are as follows:
- Was there a store in this location before? If two other restaurants have already tried it and failed, do you want this location? The best and easiest way to find out this information if you don't already know it is to ask business people in the same strip mall or the mall management. Be careful that they are not just telling you what you want to hear.
- Are there competing or complementing stores in the same area? If three restaurants are already there and all appear to be extremely busy, then maybe your research may be almost done for you. This may be a location that has a high need for more restaurants. But, if two of the restaurants are also sub shops, why would a customer choose yours over the others?
- What time of the day will your sub shop make money? Is this a strip mall that is a destination for the lunch crowd or is it busiest in the evening after work? The most effective way to answer these questions may be to sit in your car and watch the traffic patterns. If you note that over the lunch period the parking lot is packed and most of the people are there for lunch, this may be the place where you want to open your restaurant. If you notice that in the evening hours very little traffic comes to this strip mall and the other restaurants have very few customers, then you will know that you probably will not be able to depend on the evening hours to make any money.
- Why do people come to this location? Talk to shoppers that are in the area. Ask them questions about why they shop or eat in this location. Be careful on how you phrase your questions or they may tell you the answer you want to hear instead of their true beliefs.
- What is in the future for this location? Will major road construction or store closings affect your new business location? Is this location in an area that is growing in business and population? To answer the questions on population, market size, etc., look at the government information resources section. This will provide you with a road map on more specific economic research.
Another way to obtain customized economic research is to hire a professional research firm. This can be a very expensive way to do your research. Much of the information that they will provide can be obtained from other sources, e.g., government information resources, interviewing potential customers, etc. If the new business will be a larger company, a high financial risk, or have a very specific and narrow customer base, then it may make sense to use a professional research firm.
SCORE, the Service Corps of Retired Executives, is a national organization sponsored by the U.S. Small Business Administration (SBA). This organization has over 13,000 member volunteers. SCORE provides free counseling to new and existing small businesses. SCORE provides workshops for new business, and these workshops provide a general overview of what it takes to start a new business. It has helped almost 20,000 new businesses to start operations.
SCORE also provides counseling and training to existing businesses. The volunteers help businesses identify management problems, determine the causes, and propose solutions to the problems. The volunteers can also help existing businesses in other areas by evaluating expansion plans, reviewing product distribution, and assisting in other business counseling.
Almost any small independent business that is not dominant in its field can get assistance from SCORE volunteers. The business does not need to have any other affiliation with the SBA to receive counseling and training from SCORE. To contact SCORE, go to the SCORE home page, look in the telephone directory under U.S. Government or call the Small Business Administration (SBA), which is also listed under U.S. Government.
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