Category Archives: Business Research

How Startups Estimate Market Size

It’s a common question. How do I know market size?

Of course what one does for that depends on the type of business. What works for a web app won’t work for a restaurant. The kinds of information available in one market differs from another. Local demographics might be quite enough for a retail business, but irrelevant for a web business.

Know Your Market or Prove Market Size

What you do, how much research you do, also depends very much on your real business need. Do you want to feel comfortable taking a risk, for yourself; or are you looking to prove a market to the satisfaction of outsiders (such as investors)? Knowing the market is one thing, proving it quite another. Many entrepreneurs will skimp on market research when they are comfortable with their feel for their market. And why not? Business information is worth the decisions it causes, and if you are going to take the risk anyhow, and market research is difficult and expensive, then it’s not good business. But you really do need to know your market. If you don’t know, for sure, find out. Market Segments

Crossword Puzzle

Think of it as like a crossword puzzle. You search for clues. You put clues together to fill gaps. And with that in mind, figure out how many customers are potentially in the market as a whole, and how many of them you can reach. Use available demographics, industry-by-industry data, web searches, financials of existing companies, whatever sources are available.

Here are some additional tips, from Market Information: Needles and Haystacks, part of my book  Lean Business Planning:

Try to divide the market into meaningful groups, called segments. That will help you guess how much potential there is by segment. As an example, a computer manufacturer might segment the market by usage, as in homes, schools, small business, enterprise, and government.

Avoid Tunnel Vision

Don’t get tunnel vision about data and research. Way too often I see people struggling to find information to fit their preconceived notions of what’s needed instead of accommodating what’s available. For example, I dealt with a person who was going crazy trying to divide businesses into categories of annual revenue, which is impossible, instead of just defining categories by numbers of employees, which is easy to find. Take what information is available, if it works and takes you to meaningful business decisions; not what information you thought you wanted.

For example:

  • If you want to divide U.S. businesses into segments according to size, use the numbers of employees data the government offers; don’t insist on some other size factor such as revenues or office space.
  • If you want to divide businesses into size using employee numbers, use the government classifications. The U.S. economic census divides employee numbers into the classifications shown below. It obviously makes no sense to decide to break the sizes into 1-15 and 16-20 when the government already uses a different classification.
  • As you look for market information you’ll often find classifications established by somebody else, before you started looking. Be flexible. Use what’s available.

The point? Do what you have to, to make your business decisions. If you have to prove your market, watch sources and validators.


Business Plan Market Research and the Fresh Look

The Artist
The artist takes a fresh look at the scene every time paints it. How many times as this man seen the banks of the Seine? It doesn’t matter, because he takes the fresh look every time.  The business needs to take a fresh look at its market and its strategic situation at least once a year.

Back in the 1970s when I was a foreign correspondent living in Mexico City, I dealt frequently with an American diplomat who provided information about Mexico’s increasing oil exports, which were a big story back then. We had lunch about once a month. He became a friend.

The Fresh Look

Then one day he told me he was being transferred to another post because he had been in Mexico too long. “What? but you’ve only been here for three years,” I said. I was disappointed for two reasons. “You’ve barely learned the good restaurants!” He explained to me that the U.S. foreign service moved people about every three years on purpose. “Otherwise we think we know everything and we stop questioning assumptions,” he said, “that’s dangerous.”

I remember that day still because I’ve seen the same phenomenon so many times in the years since, in business. We — business owners and operators — are so obviously likely to fall into the same trap. Our business landscape is constantly changing, no matter what business we’re in, but we keep forgetting the fresh look. “We tried that and it didn’t work” is a terrible answer to a suggestion when a few years have gone by.  What didn’t work in 2000 might be just what your business needs right now. But you think you don’t have to try again what didn’t work five years ago.

Not Necessarily Business Plan Market Research

For the record, I disagree with so many experts who insist on detailed and thorough business plan market research for every plan. I vote for a lean business plan that includes only what you are going to use. And a lot of us know the market already, so we don’t have time, resources, or budget to do market research for our normal planning process. I make this point here in my latest book on Lean Business Planning.

However, I do also suggest taking the “fresh look” at the market at least once a year.  Existing businesses that want to grow too often skip the part of business planning that requires looking well at your market, why people buy, who competes against you, what else you might do, what your customers think about you. Think of the artist squinting to get a better view of the landscape. Step back from the business and take a new look.  Use the standard Know Your Market techniques and content, just applying it to your business, not a new opportunity.

It’s about your now and future customers

Talking to customers — well, listening to customers, actually — is particularly important. Don’t ever assume you know what your customers think about your company. Things change. If you don’t poll your customers regularly, do it at least once a year as part of the fresh look.  As an owner, you should listen to at least a few of your customers at least once a year. It’s a good exercise.

For creativity’s sake, think about revising your market segmentation, creating a new segmentation. If for example you’ve divided by size of business, divide by region or type of business or type of decision process. Aim for strategic segmentation.

Remember to stress benefits. Review what benefits your customers receive when they buy with your, and follow those benefits into a new view of your market.

Question all your assumptions. What has always been true may not be true anymore. That’s what I call the fresh look.



Don’t Be Fooled By Mismanaged Data

Here’s another great example of why you don’t blindly trust research. This illustration comes from this Gizmodo post. Post author Jesus Diaz is not saying this means what it seems to say (see his conclusion below). But here you are with another example of how easy it is to get the wrong conclusions, especially when the research is summarized to easy conclusions.

Correlation is not causation

Gizmodo author Jesus Diaz doesn’t say where this data comes from, nor does he define the terms, which is fine with me because the data makes the point.

And I like the way he concludes:

p.s. If you take this seriously, you are an idiot and you should go stick your head up some dark hole.

Truth is a Believable Story

I grew up believing that facts, like research, numbers and percentages, told the truth. I believed in objective, verifiable truth, based on fact. I distinguished that from mystical religious truth, based on faith.

I was a mainstream journalist for almost 10 years in the 1970s. Every professional journalist believed in objective verifiable truth based on fact. That was the goal of reporting. We separated subjective opinion from objective truth. Truth was hard to find, yes. It often had to be dug up and uncovered. But it was there.

Now I know better.

Truth is not research and data. Although my generation grew up believing hard numbers were truth, it just isn’t so.  Nowadays there is data to prove anything, regardless of how absurd. And people routinely hide their opinions as data. Eggs are good? There’s data to prove it. No, eggs are bad? There’s data to prove that too. The same for coffee, sugar, exercise, structure, discipline, whatever.  The truth is not in the data.

Truth is not just a believable lie, either. It’s more like a matter of angles and reflections and angles of light, like a gas, not a solid. It’s something like what William Blake implied about  300 years ago, in Proverbs of Hell:

Every thing possible to be believ’d is an image of truth.

Truth is a believable story. And much of human truth is better told in stories than a facts, and much less numbers.

And in business, Seth Godin says marketing is stories. I say planning is stories. Truth isn’t what the research says, or the focus group, or the latest survey.

Take a step back from it and ask, always: Does this make sense? Is this credible?

Truth as told in stories is still truth. I love how Harvey Cox says truth is in stories. This is from his book When Jesus Came to Harvard:

All human beings have an innate need to hear and tell stories and to have a story to live by…religion, whatever else it has done, has provided one of the main ways of meeting this abiding need.

I don’t mean it as disrespectful to see the “story” to religious doctrine. On the contrary: The right stories, real stories, the best stories communicate truth better than so-called facts. And it’s almost a proof of God how themes and meanings overlaps between the different stories of the different religions. Maybe there is a good gene, in our species DNA. And the stories are an expression of how humans all struggle to understand God, or creation, or whatever that immensity is, in their own way. With their own background and culture.

My summary: truth is a believable story.

(photo credit: h.koppdelaney via photopin cc)

Interesting Chart on Age as People Marry

Every so often I stumble on interesting statistics and good simple business graphics that show them. That applies to this line chart of Median age at first marriage by sex: 1890-2010 published by Imgur at, and developed by the U.S. Census:

I’m intrigued with the way the marriage age dropped suddenly after the second world war, then increased steadily for several decades. And is still increasing today. I like it when actual data matches what we see in the real world, and we definitely see people waiting to marry at more advanced ages. 

Sometimes this kind of data generates business ideas, business opportunities, or business threats. Does it affect your business? 

Bad Advice on Data Decisions

Oh dear, there it is again: somebody else pushing data over common sense. Paul B. Brown, on, writes: 

data vs. intuition

data from your customers is always better than your best intuition.

Wait, what? Did he really say that? 

 Not that Steve Jobs was right on everything, but I can’t resist my favorite Jobs quote here:

It’s not the customers’ job to know what they want. 

Paul Brown tells a story of a mouse pad combined with paper that he thought was a great idea, he bought, he used, and he didn’t like. He suggests that asking customers would have been better than guessing.

Talking to customers, sure; great. Data from customers? Not so much. 

My problem is that so-called “data from customers” is rarely truth. Data gathering is plagued with problems of research design, random lists, skewed questions, half truth and innuendo disguised as data. If it were really good data, the real result of actually talking to customers, that would be pretty good. But seriously, how often are customer polls and primary research really valid? Seldom. 

And ironically, his story argues for using the darn thing, not polling potential customers. He says he liked the idea until he actually used it. I think that’s a clue. No? 

My career has been software, and I can tell you this: The best software comes from people who use what they create. Not from customer data. 

The problem with thinking like this is that then data ends discussion and trumps common sense. Which would be okay, most of the time, if so-called data were truth. But it rarely is. 

The Power of One Simple Question

I like this. If you want real customer feedback, keep it simple. My friend Stephen Lahey, of Small Business Talent, understand email, and who he’s talking to, when he asks his small business owner clients one simple question:

Stephen Lahey simple survey

“When you think of me and our working relationship, what are the five adjectives that first come to mind?”

The illustration here on this post shows the survey link he offered. There it is, a single question, with the promise of “done” showing right there on the submit button. 

And — no surprise — this keep-it-simple strategy works great for getting responses. The subject line of the email was “Single Question Survey.” The open rate was higher than average, almost all who opened clicked-through to view the survey, and about 60% of this number actually submitted survey feedback. Those are really good results. 

I think that’s a brilliant example of how to use data and surveys, and get people to join in. Even though yesterday I posted Don’t base business decisions on data and statistics on Up and Running, which contradicts this post, I still think this is brilliant. And yes, the one does contradict the other.  That happens all the time. 

Steve said: 

The feedback I received was consistent and encouraging. But it wasn’t exactly what I expected — it challenged my assumptions. Valuable? Yes, indeed.

And he makes this point: 

My point? If you want to understand the reality of your brand, then don’t assume anything. Ask your clients for their feedback. I think that you’ll find it’s an eye opening experience.

Yes. Well said. Great example. 



I Can Find Research to Prove Anything

One of these days I’m going to start a new consulting company based on the sad truth that in today’s world a good search turns up nice-looking data to prove anything. 

For example, you want eggs to be bad for you? We’ll find research to prove it. No? You want eggs to be good for you? We’ll find research to prove that. 

3 silly reasons to quite social media

Yesterday over at I posted 3 Silly Reasons to Quit Social Media in 2013, quoting a post on offering the following:

… a UK study from the fall found that over 50% of social media users evaluated their participation in social networking as having an overall negative effect on their lives. Specifically, they singled out the blow to their self-esteem that comes from comparing themselves to peers on Facebook and Twitter as the biggest downfall. 

In defense of the author of that post, she’s obviously making fun. Another reason is blood pressure. She says there’s bad behavior in social media that will make your blood pressure rise. 

And negative, or contrarian headlines, like 3 reasons you should quite social media, get more readers. I understand. When it’s surprising, I’m more likely to click. 

But seriously: When something starts with “a study found that…” do you pay attention?

I used to, back in the old days, before the Internet, when information was hard to find. These days I don’t have the same respect for “a study found that” because there are studies to find anything you want to say. No matter how preposterous.  

Facts? Truth? 

Can Research Make You Dumber?

(Reposted with permission from my social media business plans blog)

Can research make you dumber? It can if you believe it.

I just read Can Facebook Make You Fat and Poor? on Mashable. It’s a post by David Mielach, of BusinessNewsDaily.

In particular, the researchers found that social media users were more likely to binge eat and have a higher body-mass index. Frequent Facebook users also were more likely to have certain financial problems, including a lower credit score and higher levels of debt.

But wait. It says the research was based on the responses of 541 Facebook users in the United States. So what does that really mean? What does this research really mean? And to be fair, I haven’t gone into the actual research. I’m just commenting on the coverage. Maybe they did everything right and avoided the problems I see. And maybe not.

First, who’s in the sample? Is it Facebook users, really, or Facebook users who answer surveys? Those are different sets of people. Is it balanced for age, demographic, technology, geography?

Maybe people who answer surveys have less self control, which is part of the reason they answer surveys. And maybe people who answer surveys have less money, caused perhaps by the behavior that finds time to answer surveys. Maybe they are just younger, on average, and that causes the money difference.

Research depends on the sample. So that’s a good reason to be skeptical.

So maybe what it really shows isn’t about Facebook users but rather about people who answer surveys. Maybe they — survey answerers have less self control so they couldn’t resist taking the survey really know is that people who answer surveys on Facebook have less self control — that’s why they took their time to answer the survey. And maybe people who answer surveys have less money — because they waste their time answering surveys.

And there is that whole issue of causation and correlation: Could we just as easily say living in a large house makes you rich, or attending college makes you young? That’s as logical as saying Facebook users have less self control and less money. Right?

Here’s a direct quote from the research:

These results are concerning given the increased time people spend using social networks, as well as the worldwide proliferation of access to social networks anywhere, anytime via smartphones and other gadgets. Given that self-control is important for maintaining social order and personal well-being, this subtle effect could have widespread impact.

So now it’s widespread impact. The emphasis above is mine. Wow: Is this looking for a news lead, or rather reaching out, stretching to the ultimate, to look for a news lead? Or what?

I’m not saying that information is bad. Misinformation is.

I’m not saying that research is bad. Believing it is. Question the research, question the assumptions, look through it, and then take what’s valuable in it. Never just believe it.