How to Do Market Research for a Business Plan Step by Step

Market research gives your business plan evidence, not assumptions. It helps you understand who may buy, how much demand exists, what competitors offer, and whether your pricing or positioning makes sense. When you know how to do market research for a business plan, you can test the idea, spot risks early, and explain the opportunity clearly to partners, lenders, investors, or your own team.

To do market research for a business plan, define what you need to learn, identify your target market, collect reliable secondary data, estimate market size and demand, conduct primary customer research, analyze competitors and pricing, and interpret the findings. Your final market analysis should explain what the evidence means for the business, not simply list statistics.

What Is Market Research in a Business Plan?

Market research is the process of gathering and interpreting information about customers, demand, competitors, pricing, and relevant trends. In a business plan, the purpose is practical. You want to show that you understand the market and that your assumptions are supported by evidence.

Market research helps you understand customers, while competitive analysis examines competing businesses and available alternatives. Both questions matter when evaluating a business opportunity. For example, a bakery planning to open in Manchester should not rely only on a national bakery-industry figure. It needs local evidence about nearby customers, competing bakeries, prices, foot traffic, and buying patterns.

Primary vs Secondary Market Research

Market research usually combines two broad approaches.

Primary Market Research

Primary research comes directly from the people or organizations you want to understand. You might interview potential customers, run a short survey, speak with existing buyers, observe behaviour, or test an offer.

Imagine a meal-preparation startup interviewing local office workers. Asking how often they buy lunch, what they spend, and what frustrates them about current options can reveal more than asking whether they “like” a new meal service.

Secondary Market Research

Secondary research uses existing information. Useful sources include national statistics agencies, government databases, trade associations, industry reports, company filings, local authorities, and credible published research. I’d usually begin with secondary research. It helps you understand the market before spending time or money collecting your own data.

How to Do Market Research for a Business Plan

A useful process moves from questions to evidence, then from evidence to business decisions.

1. Define What You Need to Learn

Start by writing down the questions your business plan needs to answer.

These may include:

• Is there enough demand?
• Who is most likely to buy?
• What do customers currently pay?
• Which competitors serve them?
• Is demand seasonal?
• What could make the business difficult to grow?

In my experience, founders often collect far too much information because they have not defined the decision first.

A mobile car-detailing business, for example, may need to know how many suitable customers live within its service radius, what competitors charge, and whether customers value home service enough to pay more.

2. Identify Your Target Market

A target market is the specific group of customers your business intends to serve. Avoid descriptions such as “everyone who wants better service.” Narrow the audience using characteristics that genuinely influence purchasing, such as location, budget, household type, job role, business size, needs, or buying frequency.

Consider a gym in Leeds. “Adults interested in fitness” is too broad. Professionals living or working within a realistic travel radius who want early-morning or after-work access is more useful. A defined target market makes the rest of your research easier.

3. Collect Reliable Secondary Research

Next, find existing evidence about that market. Government statistics can help with population, employment, income, industry structure, and geographic comparisons. Trade bodies and local authorities can add sector or regional context. Before using a source, check who produced it, when it was published, and whether it matches your actual market. A neighbourhood café cannot justify local demand with UK-wide coffee consumption alone. Use broad data for context, then narrow it toward the customers you can realistically reach.

4. Estimate Market Size and Demand

Market size answers a simple question: how large is the relevant opportunity? Start with the number of potential customers in your target geography or segment. Then narrow the estimate using factors such as eligibility, buying frequency, budget, and realistic reach.

You may also use TAM, SAM, and SOM to separate the total theoretical market from the portion you can serve and the share you could reasonably capture. Suppose 40,000 households live in a service area. That does not mean a home-cleaning company has 40,000 customers. Some will not buy professional cleaning, others use competitors, and your capacity may limit how many clients you can serve. Market size is an opportunity estimate, not a sales forecast.

5. Conduct Primary Customer Research

Once secondary research gives you context, talk to potential customers. Surveys can quantify patterns, while interviews can explain why people behave as they do. Avoid leading questions. Instead of asking whether someone would buy an “excellent new subscription,” ask about current behaviour:

• How do you solve this problem now?
• How often do you buy this type of product?
• What do you normally spend?
• What frustrates you about current options?

A SaaS founder interviewing small accounting firms might discover that the main problem isn’t missing features, but the time required to move data from existing software. That insight could change both the product and the business plan.

6. Analyze Your Competitors

Identify direct competitors selling similar offers and indirect alternatives solving the same problem differently. Compare consistent factors such as price, product range, target customer, location, reviews, opening hours, positioning, and sales channels.

For example, a coffee shop could compare five nearby cafés by drink prices, seating, opening times, review themes, food options, and location. I’ve found competitor research more useful when every comparison supports a decision. If nearby cafés close early, evening hours might represent an opportunity. If reviews repeatedly mention slow service, operations may matter more than competing on price.

7. Research Pricing and Customer Spending

Competitor prices give you a reference point, but they shouldn’t automatically dictate your price. Look at what customers pay now, what they receive at different price levels, and where premium or budget competitors sit. Then compare those findings with your costs and intended positioning.

A mobile pet-grooming service may find that salon grooming is cheaper. That does not mean the mobile service must match it. Customers may pay more for home visits if convenience has real value. Your business plan should explain the pricing logic, not merely copy an average rate.

8. Identify Relevant Market and Industry Trends

Trends matter when they can change demand, costs, customer behaviour, or competition. I’d include a trend only when you can explain what it changes for the business. For example, a tutoring company may find that exam periods create predictable seasonal demand. That affects staffing, marketing timing, and revenue forecasts. A trend that has no meaningful effect on your customers or strategy does not need space in the business plan.

9. Analyze What the Research Means

Collecting information is only half the job. Compare the evidence with your original assumptions. Ask whether the target customer is still right, demand looks sufficient, pricing appears workable, competition is stronger than expected, or the offer needs changing.

Research does not have to confirm your idea. One mistake I keep seeing is treating contradictory evidence as something to explain away. If interviews show customers do not value a feature you planned to build, changing the offer may be the most useful result of the research.

10. Write the Findings Into Your Business Plan

Your market-analysis section should summarize the evidence that affects the business. This information is also an important part of how to write a business plan, helping you build a realistic market analysis section based on customers, demand, competition, and pricing.

A practical structure is

• Target market
• Customer needs
• Market size and demand
• Relevant trends
• Competitor landscape
• Pricing insights
• Market opportunity
• Key risks or limitations

Do not paste every survey answer or statistic into the main plan.

A Birmingham cleaning company, for example, might summarize local household characteristics, competitor prices, customer scheduling preferences, and what those findings mean for its service model. Detailed survey results can sit in an appendix if needed.

Examples of Market Research for a Business Plan

Local Coffee Shop

A Manchester coffee-shop founder could study office workers and residents, map competing cafés, compare menu prices, examine review themes, and observe busy periods. If research shows strong morning traffic but weak evening demand, the business plan could prioritize breakfast trade instead of assuming all-day demand.

Online SaaS Business

A SaaS startup could interview small-business users, compare existing software, review subscription pricing, and identify common complaints. If potential customers consistently say onboarding takes too long, the plan may emphasise simple setup in the product and positioning strategy.

Mobile Pet-Grooming Service

A mobile groomer could research pet-owning households within a service radius, local salon prices, appointment availability, and customer views on convenience. Those findings could help define service zones, pricing, scheduling, and the realistic size of the initial market.

Common Market Research Mistakes to Avoid

Common mistakes include:

• Starting without a clear research question
• Defining the target market too broadly
• Using outdated information
• Depending on one source
• Using national data for a local business
• Asking biased survey questions
• Ignoring indirect competitors
• Treating market size as guaranteed revenue
• Collecting statistics without interpreting them
• Looking only for evidence that supports the original idea

Always note limitations.

A small survey may reveal useful patterns, but it should not automatically represent thousands of customers. Good research makes assumptions clearer. It does not make uncertainty disappear.

Frequently Asked Questions

What market research should be included in a business plan?

A business plan should include research on target customers, demand, market size, competitors, pricing, and relevant industry or customer trends. Include findings that directly affect your strategy rather than every piece of data collected.

What is the difference between primary and secondary market research?

Primary research is information you collect directly through methods such as surveys or interviews, while secondary research uses existing data and published sources. Many business plans benefit from combining both methods.

How do you determine market size for a business plan?

Estimate market size by identifying the relevant customer group, geographic area, demand, spending, and realistic portion your business can serve. Avoid treating total industry size as the revenue your company can capture.

How do you research competitors for a business plan?

Identify direct and indirect competitors, then compare pricing, offers, target customers, locations, reviews, strengths, and positioning. Use those findings to explain where your business fits in the market.

How much market research is enough for a business plan?

You have enough research when you can support the main assumptions about customers, demand, competition, pricing, and market opportunity with credible evidence. The required depth depends on the business and who will read the plan.

Final Thoughts

Knowing how to do market research for a business plan means learning which questions matter, finding reliable evidence, and turning that evidence into decisions. Start with a defined target customer and clear research objectives. Use secondary data for context, then add direct customer research when it can answer questions existing sources cannot. Most importantly, stay willing to change your assumptions. Useful market research should make the business plan more realistic, even when the evidence is not what you expected.

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