Market research can be overwhelming, confusing, and often feel like it’s written in Klingon (nothing personal Star Trek fans). None of these characteristics make market research ideal for small business owners who want to get to the Who, What, and even the Why of the research so they can in turn use the data for critical business decisions.
So, to help you as a current business owner, new business owner, start-up entrepreneur, or resource partner that may refer others to the Kansas SBDC, we thought we’d approach market research through a real-world scenario.
Market Research: The Scenario
In this scenario, a prospective business owner that is interested in developing an assisted living facility for seniors in Hays, Kansas, approached the KSBDC at Fort Hays State University to schedule time with one of our consultants. A few days later when the consultant and entrepreneur meet, the conversation quickly turns to research.
Knowing that ‘research’ can result in a load of data that the entrepreneur has zero time to read, much less analyze, he stops the consultant during the discussion and asks, “How can the research provided by the Kansas SBDC help me?”
What follows are the questions that probably will be raised in this conversation.
Market Research: The Questions
What percentage of sales should I expect to use for payroll? How much of my debt might be short-term versus long-term when compared to peers in my industry? What’s a reasonable net profit from this type of business? ProfitCents – Industry Data & Analysis
What numbers might my lenders be looking at to compare my financials to the rest of the industry? For example, if I’m projecting $3M in annual sales, it would be reasonable to have a 15.5% (as a percentage of sales) operating profit. And, considering the risk associated with this type of business, I might learn that 1.4% is considered a sustainable growth rate for a business my size. RMA Financial Report
I can’t assume that my prospective lender understand the details of your industry. How can I educate my lender on key business challenges and opportunities in my industry? How can I back up my claims? First Research – Industry Profile. First Research Industry Profile provides data and conversation points you’ll want to address for your proposed business first, then be prepared to discuss with lenders. Make a note of ‘Call Prep Questions’ in the First Research – Industry Profile. Some examples of questions you’ll want to be ready for may include: How is the company curbing labor expenses? How will health care reform affect the company’s revenues? What is/will the company do reduce the risk at the workplace/improve worker safety? What’s the average number of units per facility? What is the company’s anticipated payer mix percentage among Medicare, Medicaid, private insurance, and private pay?
What type of businesses are in the area where I plan to locate? How many healthcare and social assistance establishments are in this area? Business (NAICS) – Type of Business Summary
What types of businesses are located in this area? What does this tell me about retirees? Business (NAICS) – Industry Occupation Summary
What income levels do potential customers have in this area? Do they have disposable income? Am I more likely to find more former blue collar or white collar workers? Or retired farmers? How will that impact my business – especially my marketing? Income Current Year & Socio Economic Benchmark Report
What are the ages of individuals living in my proposed market area? Age and Income Current Year
Are there older couples in this area? Are those age 75 or older often single households? How can this impact my business? What about culture and ethnicity? If I have a higher Hispanic population in which seniors typically live with younger generations versus using an assisted living facility, how will this impact my projections? Families Census Year & Summary Demographic Benchmark Report
What are people spending on healthcare? On insurance? On medical services and supplies? And who are my competitors or others offering related services in this area? Consumer Expenditures Current Year Summary & Competitor List2
What might my market area look like? Will I have an opportunity to reach individuals 90 miles away? What communities surrounding Hays would this include? How can this help me determine my marketing strategy and market share? Map
Is my proposed location at 2100 Vine Street in Hays a good location? Would I have higher visibility at another location? Traffic Points Basic Location Report (Rings_Drivetime)
Is this area growing? Is the population aging in place or are they moving away to retire? How might this impact my long-term strategy? Updated Summary Report
And while you may be an expert in elder care, for someone that doesn’t have extensive experience in the industry, we have additional resources through SBDCNet that we can access for our clients. For this example, you might want to know the following: What is the profile of the typical assisted living resident? Resident Profile research What does the typical assisted living community look like? What services do they offer? How are their fees structured? Facility Profile research Who are the top assisted living companies in the U.S.? What’s their typical occupancy rate? 2013 Top 40 Provider research
Market Research: The Conclusion
Our goal is that by reading this example, you’ll have a well-developed idea of how the Kansas SBDC can help achieve two major goals. First, to pull critical research for you that can help you make better, more informed business decisions. And second, to pull the research that can back your pitch to lenders and investors.
The beautiful thing about our research is that it’s free of charge to our clients. And, it’s free to become a client. If you’re not intrigued already, click the links provided in the post to see actual examples. We’re sure you’ll be impressed by the depth of information we can provide you to help you make your business decisions.
How to access Kansas SBDC Market Research
Kansas SBDC clients can access market research free-of-charge. If you are a current Kansas SBDC client speak with your consultant. To become a Kansas SBDC client request counseling online.