How to do market research for your small business: Step-by-step guide

Published Friday 17 October 2025

Table of contents

• What is market research?
• What's the point of market research?
• Types of market research
• Where to start
• How do I do my own market research?
• What to ask
• Tools and resources for market research
• Ask your own questions
• Don't let research slow you down
• Make market research work for your business
• FAQs on market research

Key takeaways

• Start with secondary research using free government resources like the Australian Bureau of Statistics and industry reports before conducting your own primary research to save time and money while building foundational market knowledge.

• Conduct 5-10 customer interviews or surveys with your actual target audience (not friends or family) to gather specific insights about pricing, features, and customer needs that existing research cannot provide.

• Focus your research on essential questions about market demand, pricing validation, core features, and target audience identification rather than getting overwhelmed with comprehensive analysis that delays your launch.

• Launch your business after gathering essential insights, then use real customer feedback and sales data to refine your product and marketing approach based on actual market behaviour.

What is market research?

Market research is the process of gathering information about your target customers and the market you operate in. It helps you understand who your customers are, what they need, and how your business can meet those needs. Market research helps you understand your customers so you can create products, services and marketing that meet their needs.

What's the point of market research?

Market research is the process of gathering information about your customers and market to make better business decisions. It helps you understand what your customers want before you invest time and money in products or services they might not buy.

Market research delivers 3 key benefits:

• Make sure your product meets real customer needs
• Connect your messaging with target customers
• Find out what customers value and how competitors perform

This research helps you build products your customers want and market them in ways that appeal to them.

Types of market research

Market research generally falls into two main categories:

• Gather new information yourself through surveys, interviews or focus groups
• Use existing data collected by others, such as government statistics, industry reports or articles about market trends

Use both types of research to understand your market fully.

Where to start

Secondary research involves finding existing data about your market before conducting your own studies. This saves time and money by using information that's already available.

Key research sources:

• Find demographic trends from the Australian Bureau of Statistics
• Compare your performance using small business benchmarks from the Australian Taxation Office
• Get market size data from trade associations and research companies
• Find area-specific information on local government websites

Define your target customer by identifying specific characteristics:

• Demographics (age, gender, income level)
• Professional background (job titles, industries)
• Geographic location (suburbs, cities, regions)

Secondary research provides the foundation, but don't rely on it entirely. Other people's research won't answer your specific business questions.

How do I do my own market research?

Primary research methods fall into five main categories, each suited to different information needs and budgets.

Individual interviews:

• Best for: Deep insights and detailed feedback
• Approach: One-on-one conversations with target customers (not family/friends)
• Benefit: Honest feedback and follow-up questions

Focus groups:

• Best for: Group dynamics and quick insights
• Approach: 6-10 people discussing your product for 1-2 hours
• Benefit: Multiple perspectives in a short timeframe

Online surveys:

• Best for: Large-scale data collection
• Approach: Standardised questions sent to many people
• Benefit: Quantifiable, statistically reliable results

Community building:

• Best for: Ongoing feedback and engagement
• Approach: Facebook groups or email lists for regular interaction
• Benefit: Continuous insights and relationship building

Beta testing:

• Best for: Product trials and user experience feedback
• Approach: Invite customers to test your product in person
• Benefit: Real-world usage insights and early adopters

Offer something valuable in return for participants' time, such as early access, a discount or helpful content.

What to ask

Market research questions should focus on two main areas: product development and marketing strategy.

Product development questions:

• What would you expect to pay for this product or service?
• Which features are most important to you and why?
• How easy was this to use? What frustrated you?
• What do you like or dislike about [competitor name]?

Marketing strategy questions:

• Which tagline do you prefer?
• What does this brand name suggest to you?
• Which design stands out to you on a shelf?
• Where do you usually look for products like this?

Test real products or prototypes when you can. You will get more reliable insights than by discussing ideas.

Tools and resources for market research

You do not need a big budget to do research. Many simple tools and resources can help you start.

• Online survey tools: Platforms like Google Forms or SurveyMonkey make it easy to create and share surveys with your audience.
• Social media polls: Use the poll features on Instagram or Facebook for quick feedback from your followers.
• Government data: Websites like the Australian Bureau of Statistics (ABS) offer free insights into demographics and industry trends.
• Your own business data: If you use Xero accounting software, your sales reports can show you which products are popular and how your customers behave.

Ask your own questions

Primary research means gathering new information directly from your target customers. This gives you specific insights that no existing study can provide.

Why primary research matters:

• Get answers to your specific business questions
• Ask deeper questions when you get surprising responses
• Understand current customer needs and preferences
• Test demand and generate early interest

Speak with potential customers early. Their feedback helps you improve your product, pricing and marketing before you launch.

Don't let research slow you down

Research scope management prevents analysis paralysis and keeps you focused on launching your business.

Essential research (must-know):

• Market demand: Do enough people want your product?
• Pricing validation: What will customers pay?
• Core features: Which features are absolutely necessary?
• Target audience: Who are your primary customers?

Nice-to-know research (can wait):

• Detailed demographic breakdowns
• Secondary market opportunities
• Advanced feature preferences
• Comprehensive competitor analysis

Focus on essential research first, then launch. Real feedback from paying customers gives you better insights than long pre-launch research. For context, the median remuneration paid for a small business restructuring process is nearly $22,000. You can refine and improve your business based on actual sales data and customer behaviour.

Make market research work for your business

Market research doesn't have to be expensive or overwhelming when you follow a structured approach. Start with free secondary research, then move quickly to primary research with real customers.

Your market research action plan:

1. Gather existing data from government and industry sources
2. Define your target customer profile
3. Conduct five to ten customer interviews or surveys
4. Analyse findings and make product and pricing decisions

Focus on essential insights first, then launch and learn from real customers. The data you collect through market research becomes valuable business intelligence that informs everything from pricing to product development.

Once you are in business, Xero reporting features can help you track customer behaviour, sales patterns and financial performance. This gives you ongoing market insights to guide your decisions.

FAQs on market research

Here are answers to some common questions about getting started with market research.

What are the 4 main types of market research?

The four main methods are surveys, interviews, focus groups and observation. These methods help you collect both numerical and descriptive data to understand your market.

How do I start market research with no experience?

Start simple. Look at industry reports and competitor websites. Then talk to a few potential customers for direct feedback. You can ask good questions and listen, even if you are not an expert.

What's an example of simple market research for a small business?

A local cafe owner could create a short online survey about new food items. This is important in a competitive field. The Accommodation and Food Services industry accounts for 23 percent of all small business restructuring appointments, according to a recent ASIC report. The owner could also chat with regulars to learn what keeps them coming back.

How much should I spend on market research?

You do not need to spend much. Many effective methods, such as online surveys or talking to customers, are free or low cost. Focus on what you need to know for your next business decision and choose methods that fit your budget.