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How do I go about conducting market research before starting a business?

The ins and outs of market research.





Types of Research

What is primary market research?

When conducting primary market research, you can gather two basic types of information: exploratory or specific. Exploratory research is open-ended, helps you define a specific problem, and usually involves detailed, unstructured interviews in which lengthy answers are solicited from a small group of respondents.

Specific research, on the other hand, is precise in scope and is used to solve a problem that exploratory research has identified. Interviews are structured and formal in approach. Of the two, specific research is the more expensive.

Where to get primary market research data

This data comes from direct mail, phone surveys and face-to-face interviews.

Direct mail

When conducting primary research using your own resources, first decide how you will question your targeted group: by direct mail, telephone or personal interviews. If you choose a direct-mail questionnaire, the following guidelines will increase your response rate:

  • Questions that are short and to the point
  • A questionnaire that is addressed to specific individuals and is of interest to the respondent
  • A questionnaire of no more than two pages
  • A professionally prepared cover letter that adequately explains why you’re doing this questionnaire
  • A postage-paid, self-addressed envelope in which to return the questionnaire
  • An incentive, such as “10% off your next purchase”, to complete the questionnaire
  • An online survey

Using phone surveys

Even following these guidelines, mail response is typically low. A return rate of three percent is typical; five percent is considered very good. Phone surveys are generally the most cost-effective. Some telephone survey guidelines include:

  • Have a script and memorise it – don’t read it.
  • Confirm the name of the respondent at the beginning of the conversation.
  • Avoid pauses because a respondent’s interest can quickly drop.
  • Ask if a follow-up call is possible in case you require additional information.

In addition to being cost-effective, speed is another advantage of telephone interviews. A rate of five or six interviews per hour is typical, but experienced interviewers may be able to conduct more. Phone interviews can also cover a wide geographic range relatively inexpensively. Phone costs can be reduced by taking advantage of less expensive rates during certain hours.

Personal interviews

One of the most effective forms of marketing research is the personal interview. They can be either of these types:

  1. A group survey. Used mostly by big business, group interviews or focus groups are useful brainstorming tools for getting information on product ideas, buying preferences and purchasing decisions among certain populations.
  2. The in-depth interview. These one-on-one interviews are either focused or non-directive. Focused interviews are based on questions selected ahead of time, while non-directive interviews encourage respondents to address certain topics with minimal questioning.

What is secondary market research?

Secondary market research uses outside information assembled by government agencies, industry and trade associations, labour unions, media sources, chambers of commerce, and so on. It is usually published in pamphlets, newsletters, trade publications, magazines and newspapers. Secondary sources include the following:

Public sources

These are usually free, often offer a lot of good information, and include government departments, business departments of public libraries, and so on.

Commercial sources

These are valuable, but usually involve cost factors such as subscription and association fees. Commercial sources include research and trade associations, banks and other financial institutions, and publicly traded corporations.

Educational institutions

These are frequently overlooked as valuable information sources, even though more research is conducted in colleges, universities and technical institutes than virtually any sector of the business community.

How to conduct market research

The reason that research is so important for a start-up business is that you cannot assume that you know your market without having conducted any research into it – no matter how big or small a business is.

A learner at university is given a history assignment to complete. To pass and achieve high marks, the student has to visit a library and undertake web research to find information and facts to complete the project.

A well-researched assignment, featuring carefully substantiated facts, ensures that the student gets an A. If the student is lazy, conducts basic research, and guesses most of the information, the student will fail. The same principal applies when conducting research to write a business plan. The harder you work at gathering information the better your chance of success. However, there is no easy way to get the information unless you are prepared to pay a professional research company to do the work for you.


If you feel that you cannot do the research yourself but cannot afford professional help, approach a mentor or organisation that can provide you with the support that you require during the start-up stages of business. Some organisations will assist free of charge. Browse through the Entrepreneur mentorship directory for details.

Do you have any experience?

If you do not have skills or experience in a particular industry, but want to find out more about the industry, offer to work for a company free of charge. Other options include applying for an internship to learn the ropes or to “shadow” a staff member for a few days to get an idea of how they operate.

Your own research is best

If you opt to do your own research it will not be easy, but it is one of the best ways to gather accurate information. Start by creating a list of questions you need to complete your research.

You can gather information from these sources:

  • Reading the local press
  • Talking to possible customers and suppliers
  • Industry associations
  • Web searches
  • Trade Magazines
  • Government agencies
  • Library

Who is your potential market?

For the business to be a success, establish that you are approaching the right target market. Study the demographics of the area; talk to members of the public to establish what they want and need.


You have to decide where you want to set up business and ensure that the area attracts the target market.

Legalities and regulations (bylaws etc)

Ensure that you comply with all relevant legislation regarding the marketing format of choice – billboards, posters and any other form of outdoor advertising that you are planning to use. You may have to obtain written approval from the council and find out if there are any fees to pay.

What the competition offers and charges

Tailor-make the product so that you can compete successfully in the market place. To appeal to advertisers you need to offer a package that is unique, different or includes extra value of some kind to make your offering tempting.


Contact at least 3 suppliers to find out production and the other expenses associated with the marketing method of choice. Consider other issues such as transport, insurance and labour costs.

How to conduct market research on a budget

Some companies with new products go into a beta testing phase, where they supply the product to members of the target audience and monitor how they enjoy using it–and this is something you can do with virtually no budget at all.

Another option is to introduce the product to groups and observe their reactions. You don’t need formal focus groups for this, just several gatherings (or even roundtables) of people who are representative of your target audience, the right facility, and well planned meetings. Also, be sure to look at all published information concerning the market and purchasers of products that you deem similar to the one you plan to introduce. And by the way, you’ll definitely need that identity package no matter how you choose to proceed.

Advanced search techniques that can be used to get better research results on Google

The major search sites on the World Wide Web offer incredible research resources, which can help you find almost anything. The web is not known as the “information highway” for nothing. However, even the best search engines index less than a quarter of the web pages available unless you know how to refine research requests. This is why it is important to follow the correct procedure to find what you are looking for as quickly as possible.

What makes Google so popular?

One of the reasons why is probably the best search engine available at the moment is that it is the fastest, but also because it includes full-text site searches, not just title/url searches as many other search engines do.

How to refine a Google search

For example if a browser is searching for suppliers of shoe soles (not ballet shoe soles) in the Western Cape, they would need to type this formula in to the search box: “western cape” + “shoe soles” + manufacturers – ballet.

Below is the explanation of why you would use this method to achieve the best results:

Phrase search (“Word String”)

If you are searching for a specific product that you need in a particular province, such as the Western Cape, by putting double quotes around a set of words (“Western Cape”), you are telling Google to consider the exact words in that exact order without any change.

Search exactly as is (+)

By adding a plus sign (+) you are asking for specific information about a product or a service. By attaching a + immediately before a word (remember, don’t add a space after the +), you are telling Google to match that word precisely as you typed it. (Putting double quotes around a single word will do the same thing).  As you are also looking for manufacturers, you must add more information to refine the search even further. In this example you would add a plus sign (+) before manufactures.

Terms you want to exclude (-)

Attaching a minus sign immediately before a word indicates that you do not want pages that contain this word to appear in your results. The minus sign should appear immediately before the word and should be preceded with a space.
For example, many kinds of shoe soles are manufactured in the Western Cape – rubber, leather and even ballet shoe soles. If you don’t want the search to find ballet shoe soles add a minus sign (-) before ballet and the search engine will ignore any references to ballet.

Fill in the blanks (*)

The *, or wildcard, is a little-known feature that can be very powerful. If you include * within a query, it tells Google to try to treat the star as a placeholder for any unknown term(s) and then find the best matches. [ Zuma voted * on the * Act ] will give you information about different votes on different laws.

Easy advanced search

You can create advanced searches by either using the Advanced Search link on to construct your search using their interface or you can build your own advanced search by using various combinations of the criteria provided. You will find Advanced Search located just below the search button at the top of a Google page. Simply click on it and it will open up the advanced search box that will request a variety of questions to narrow down the search and find what you are looking for.

Every word matters

It is important to keep in mind that every word matters. Generally, the search engine will use all the words you put in the query or search box.

Keep it simple

If you’re looking for a particular company, just enter its name. A search engine is a program that matches the words you give to pages on the web. Therefore, before you type any information into the “search box” think carefully and use the words that are most likely to appear on the page. For example, instead of saying [my stomach hurts], rather type [stomachache].

Describe what you need with as few terms as possible

For example, [weather johannesburg] is a simple way to find the weather and it is likely to give better results than the longer [weather report for Johannesburg south africa].

Google searches are insensitive

A search is always case insensitive. A search for [Mail and Guardian] is the same as a search for [mail and guardian].  Generally, punctuation is ignored, including @#%^&()=[] and other special characters.

Punctuation that is not ignored

Punctuation in popular terms that have particular meanings, like [ C++ ] or [ C# ] (both are names of programming languages), are not ignored. The dollar sign ($) is used to indicate prices. [ nikon 400 ] and [ nikon $400 ] will give different results.
The hyphen – is sometimes used as a signal that the two words around it are very strongly connected. (Unless there is no space after the – and a space before it, in which case it is a negative sign.)  The underscore symbol _ is not ignored when it connects two words, e.g. [ quick_sort ].

Before you Begin

Evaluating a start-up before taking the plunge

One of the best ways to find out about a business is to talk to other business owners who have had experience in the same field. They can be a gold mine of useful information.

Gathering Competitive Intelligence on Similar Businesses

A competitive intelligence investigation is another route that can be taken and this will define and analyse the market and gather information about products, customers and competitors in order for you to be able to make a strategic decision as whether or not it would be viable to continue with your business plans.

Today, competitor intelligence is a practical and useful tool designed to accurately understand and predict the competition’s behaviour with precision. You can approach local companies to customise a competitive intelligence report so that it meets your specific needs. CBIA is South Africa’s oldest company who offer competitive intelligence services, outsourcing, consulting and training.

Five tips to Gain Business Intelligence

  1. Which everyway you choose to gain business intelligence make sure it is done legally and never obtain information through industrial espionage.
  2. If you have budget restraints conduct your own consumer research to examine your competitors. Study their strategies and operations. Your analysis should provide a clear picture of potential threats, opportunities, strengths and weakness.
  3. Focus on building a reputation. While products can easily be replicated, a strong reputation or brand is nearly impossible to breakdown.
  4. When your niche is overrun by strong competitors, target “sub-niche” exclusively to capture a larger share of the targeted market
  5. By offering specific unique features or benefits that your competitors do not offer such as loyalty-programs with attractive advantages can be implemented alongside your product or service offerings.

Where to find market research data on SA household income and other demographics

The South African Advertising Research Foundation (SAARF) is also a good source of demographic data for market research. The acronyms AMPS®, RAMS® and TAMS® are the registered trade names of the major research surveys conducted by SAARF.

  • AMPS® stands for the All Media and Products Survey
  • RAMS® for the Radio Audience Measurement Survey and
  • TAMS® for the Television Audience Measurement Survey

The SAARF produces ten research products:

  • The SAARF All Media and Products Survey (SAARF AMPS®)
  • The SAARF Radio Audience Measurement Survey (SAARF RAMS®)
  • The SAARF Television Audience Measurement Survey (SAARF TAMS®)
  • The SAARF Universal Living Standards Measure (SU-LSM®)
  • SAARF Branded Data (Branded AMPS®)
  • SAARF Media Groups Measure (SAARF MGM)
  • SAARF Lifestyles
  • SAARF Life Stages
  • SAARF Development Index
  • SAARF Crime Monitor

These products provide reliable, comprehensive and unbiased research. This research offers demographic profiles and lifestyle information about South Africa’s adult consumers (aged 16 and older) and data about these consumers’ media habits, and their consumption of products, brands and services. All the SAARF data is available free of charge to anybody who wants to use it.


This kind of market research provides a great deal of data with regard to how the consumer ticks. The Living Standards Measure (LSM) paints a comprehensive picture of what consumers want and what they can afford. Developed by the South African Advertising and Research Foundation (SAARF), LSM has become the most widely used segmentation tool in South Africa. It is a means of segmenting the South African market that cuts across race, gender, age or any other variable used to categorise people. Instead, it groups people according to their living standards.

How many registered SMME’s are there in South Africa?

According to the Companies and Intellectual Property Registration Office of South Africa (Cipro), the total registered entities (different types of business registrations) can only be measured by registration type rather than size of the business. The two most useful sites to visit for more statistics are CIPRO and Statistics South Africa.

According to the Companies and Intellectual Property Registration Office of South Africa, the total registered entities per year between the 1st of January 2000 and the 31st of July 2009 are:

  • Close Corporations 1 564 965
  • Public Companies 2 454
  • Private Companies 1 597 991
  • Non Profit (Section 21) 17 600
  • Limited by Guarantee 8
  • External companies 1 383
  • External Companies (Section 21) 11
  • Incorporated (Professionals) 5 698
  • Co-operatives 21 880

Since 2000 there have been 3 211 990

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

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Business Plans

Why do I need a business plan?

The process of developing your business plan allows you to focus on the business and how it’s going to operate.

Peter Gossman




I’m starting my own business and have downloaded business plan templates from your website. But it seems like a huge amount of information is required and it’s going to take me ages to complete. Exactly why do I need a business plan?

Starting, and developing, a sustainable business takes more than just a good idea, a superior product or great trade skills. Being the very best electrician, fashion designer, or website developer may cause you to be an excellent employee in a company, but it will not guarantee that you will be able to grow a successful business of your own.

An employee only needs to focus on his specialised role in the company, but a business owner needs to focus on every single aspect of the entire business.

You need a map to success

Building a business is like building a house. Can you imagine building a house without any designs or drawings? Or starting to build without first raising sufficient money to complete the house?

This is no less foolish than trying to build a viable and sustainable business without first sitting down and planning every aspect of your business. How many people could successfully build a house if all they had were some building materials and a picture in their mind of what they wanted their house to look like?

Sadly, this is exactly what happens to so many small businesses in South Africa. They start out with a good idea, some resources and practical skills, and they begin their businesses without any further planning or research. A recent survey revealed that only one in five small businesses manage to survive beyond three years.

There are many reasons why businesses fail, but in most cases, these failures could have been avoided if they had developed a comprehensive business plan before starting their business.

As with building a house, you will need to plan and develop beyond the scope of just your area of skill or expertise. Being a great bricklayer will help you to build the walls, but you will need more than just bricklaying skills to successfully complete the entire project. Similarly, having a skill, or a thorough knowledge of your products and services, will help you to build your business, but you will need more than just this to be successful.

Things to think about

  • You will need to research your industry, market and competition.
  • You must consider your marketing strategy, target market, ideal location
  • Know your potential customers “needs” and “wants”
  • What are your operational and management structures?
  • You must consider the financial components of running your business. This includes properly costing your products and services, preparing a realistic cash flow forecast and sourcing any required start-up finances.

How many financing institutions would give you a loan to build a house if you were unable to produce proper building plans, architectural drawings and a detailed cost analysis? Similarly, financiers will not give financial aid to your business if you are unable to present a detailed business plan.

A DIY plan is best

It is important that you write your own business plan, and not just pay someone to draw one up for you. Successfully running your own business requires you to know the very fabric and heartbeat of your business, being personally familiar with every aspect of it.

Take the time, effort and energy to personally research, plan and develop the best possible business plan for your new venture.

This is probably one of the most important things you could ever do for yourself and your business!

A business plan is not as difficult as it sounds. There are many great resources out there to help you to draw up a good business plan. If you are going to take the risks, and make the sacrifices, of running your own company, then you cannot afford not to develop a thorough business plan.

Start by breaking it down into its various components and focus on one at a time. Do it yourself, but seek advice and mentorship from others who have experience. Keep working on it, and keep reworking it, until you have developed the best possible business plan for your business. This will be one of the greatest factors in ensuring the success and sustainability of your business.

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Business Plans

Do I need a business plan for my one-man business?

All businesses, regardless of size, will benefit from having a business plan.

Guy Cloete




I have a small business in which I am the only employee. Do I still need to write a business plan?

In my experience (as a business mentor) my answer to this question is a resounding “Yes!”

Here’s why:

  • One Person Business: As a one-person business, you might feel that you have all the knowledge and information needed to run the business and to steer it in the right direction in your mind. However, a business plan can be used as a working document that can be moulded and adjusted over time as things progress. Michael Gerber in the E-Myth book points out that as an entrepreneur you need to know your primary aim because it provides you with purpose and energy for your daily activities. You should consider asking yourself questions that will help you to understand your primary aim.

By having an official business plan that has been designed by you to steer your course, you can assess any potential  opportunities as they arise and make a decision about whether or not they stray from or affect the original vision of your business.

If so, how far does it stray? And if it strays from it too much, will you be able to get back on course after the detour by making a lateral move? Or will it mean that you would have to backtrack after the detour to get back on to the original road.

It’s very important that your business plan is aligned to your life vision because it becomes product of your life.

  • Future Growth: You should also look at future growth in the business and the possibility of needing investment such as financial investment at a later stage. Without a decent business plan it will be extremely difficult (if not impossible) to attract any assistance. Ask yourself, “Would you get on board a ship which has no compass and simply trust the captain who says he knows where he is going?” I don’t believe you would. A solid business plan will provide some assurance to potential investors that you do have a plan and know where you’re headed!
  • Review: As previously mentioned, your business plan is a working document that should be reviewed every year. Add information where necessary and take out information which has become obsolete or irrelevant. This will allow you to look at opportunities which were perhaps not capitalised on during the year and others that could be put in to the plan for the upcoming year – all the while keeping the vision of the business in mind when making any decisions.

Every business, including the ‘one-person-owned business’, should view a current, relevant and company specific business plan as a powerful tool to assist them in ensuring that the business stays on course and ultimately reaches its full potential.

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Business Plans

What information should my business plan include?

Your business plan should capture who you are.

Darren Ryder




I’m in the process of doing a business plan but am swamped by information overload. Which information and how much detail should I include in the business plan?

The most critical information for any business plan is your vision and mission – the heart of who you are. Take time and effort over this part of your plan because this speaks to the core of everything your business is about and why you started it.

Your passion for your business becomes clear to the reader through the key words of your vision and your motivation behind starting your business is reflected in your mission statement.

This is what makes you, you, and why your business stands out from the crowd. These elements tell the reader this is where your business is headed.

  • It can excite a potential investor particularly where there is a “connect” with your dream.
  • It allows a marketing agency to properly understand your dreams and put together a package to successfully push your business into your target market.
  • It will speak to the heart of a potential employee, creating a desire to work for you and be a part of your team.

Your business plan also serves as a reminder to you the business owner of who and what you are about and in the tough times, it’s your bench mark, for things past, present and future.

6 important elements of a business plan

The guidelines below give you an overview of what the business is about, and demonstrate your research, planning and understanding.

Bear in mind that even if the reader knew nothing about you or your business, that after they have read your business plan, they should have a good idea and enough information to begin making some informed decisions.

Broadly, cover the following:

  1. Business and industry information
  2. Type of legal entity
  3. Where you fit into the related industry
  4. Your product or service offering and what makes it unique
  5. Your target market – ie who is your customer
  6. Marketing – how you plan to reach your target market
  7. Broad operations and structure of your company
  8. Financial projections and requirements
  9. Personal investment into business
  10. Start-up requirements
  11. Expected returns

Each business plan is unique and specific to that business, so these are just some guiding principles. And, remember that your business plan should be viewed as a living document that you need to keep up to date and relevant.

You’ll find a free business plan template here.

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