How to Perform Market Research for a Business Plan That Lenders and Investors Trust

Learning how to do market research for a business plan matters because lenders and investors read your market analysis to decide whether to believe your sales forecast. A bank officer will compare your revenue projections against the demand you prove. 

An investor will check your market size against the data you cite. Good research gives both readers numbers they can trace to a source. This guide walks you through the PROBE Method, a five-step process that takes you from your first question to a market analysis section ready for the plan.

Key Takeaways

 

• Market research in a business plan proves demand, sizes your market, sets your price, and supports your revenue forecast.
• Start with free secondary data from Statistics Canada, ISED, or the US Census Bureau before you spend money on surveys.
• Build your market size from the bottom up. Lenders discount “we only need 1% of the market” claims.
• Tie each research finding to a line in your financial projections.
• Two to four weeks of focused work covers most small business plans.

What Market Research Does for a Business Plan

 

Market research gives your plan evidence. Without it, your sales forecast rests on hope.

The U.S. Small Business Administration lists six factors to assess:

• Demand: Do people want your product or service?
• Market size: How many people would buy it?
• Economic indicators: Income range and employment rate in your area
• Location: Where your customers live and how far you can reach
• Market saturation: How many similar options already exist
• Pricing: What customers pay for alternatives today

Each factor feeds a section of your plan. Demand and market size support the market analysis. Saturation shapes your competitive analysis. Pricing and location feed your financial projections and your marketing plan.

Primary vs Secondary Research

 

Factor	Secondary research	Primary research
Source	Data someone else collected	Data you collect yourself
Cost	Free or low cost	Time, incentives, or survey fees
Speed	Hours to days	One to three weeks
Specificity	Broad: industry, region, demographics	Narrow: your customers and your offer
Examples	Census data, industry reports, trade association studies	Surveys, interviews, focus groups, test sales
Best use	Sizing the market and spotting trends	Testing price, features, and buying intent

Start with secondary research. It answers the big questions for free and shows you which gaps need primary research. The SBA notes that existing sources save time but may not match your audience, while direct research gives a sharper view at a higher cost.

The PROBE Method for Market Research

 

P: Pose the Questions

 

Write down what your plan has to prove before you open a single database. A lender reviewing a café plan wants to know three things: how many people pass your location, what they spend on coffee, and how many cafés already serve them. Your questions keep the research focused and stop you from collecting data you won’t use.

Good research questions name a number. “Is there demand for mobile dog grooming?” is too loose. “How many dog-owning households sit within a 30-minute drive, and what do they pay per groom?” gives you something to measure.

R: Read Secondary Data

 

Free government data covers most of what a small business plan needs.

Canadian sources:

• Canadian Industry Statistics, from Innovation, Science and Economic Development Canada (ISED), organizes Statistics Canada data by NAICS industry code. You can drill down from a sector to a six-digit industry and review trends and financial data.
• Statistics Canada’s data portal lets you filter tables by subject, such as income, population, or housing, and by geography down to census metropolitan areas and dissemination areas.
• Key Small Business Statistics, a semi-annual ISED publication, reports business counts, employment by firm size, and firm survival rates.

US sources:

• data.census.gov provides demographic data by geography. The SBA also points founders to the Bureau of Labor Statistics for income and employment data and to the Bureau of Economic Analysis for consumer spending.

Add trade association reports, your public library’s business databases, and annual reports from public competitors. Record the source and publication date for each figure as you go.

O: Observe and Ask Customers

 

Primary research tests what secondary data cannot: whether people will buy your offer at your price.

• Surveys: Aim for at least 100 responses from people who match your target customer. Ask about current behaviour and spending before you describe your product.
• Interviews: Ten to fifteen conversations reveal why the survey numbers are what they are. Ask about the last time they bought something similar.
• Focus groups: Useful for testing names, packaging, or service bundles with six to eight people at a time.
• Test sales: Pre-orders, a landing page with a deposit option, or a market stall give you the strongest evidence. A person who pays has proved demand.

Avoid leading questions such as “Would you love a faster delivery service?” Ask “How do you get groceries today, and what frustrates you about it?” instead.

B: Benchmark Competitors

 

The SBA recommends identifying competitors by product line and market segment, then assessing each one’s market share, strengths, and weaknesses. Include indirect competitors. A new yoga studio competes with other studios, but also with gyms, home workout apps, and free park classes.

Build a comparison table with five or six competitors across price, location, target customer, key strength, and gap you can fill. Note barriers to entry, such as licensing, equipment costs, or long-term supplier contracts. Lenders read this section to judge whether you can win customers from businesses they already trust.

E: Estimate Market Size

 

Three figures describe your market:

• TAM (total addressable market): Total annual spending on your product category in the broadest market you could serve
• SAM (serviceable available market): The share of TAM within your geography, channel, and customer type
• SOM (serviceable obtainable market): The revenue you can capture in your first one to three years

Build SOM from the bottom up. Take a hypothetical mobile dog grooming business with two vans. Each van completes six appointments a day across 250 working days. That gives 3,000 appointments a year.

At an average price of $90 from your competitor research, your capacity ceiling sits at $270,000. Your survey then tells you whether enough households in your SAM will book at that price to fill those slots.

The top-down shortcut, “the market is worth $50 million, and we only need 1%,” gives a lender nothing to verify. Bottom-up math shows your capacity, price, and customer count, and each input traces back to your research.

Defining Your Target Market

 

Your research should end with a clear picture of who buys. The Business Development Bank of Canada describes two sets of segmentation criteria:

• Consumer businesses: Demographics (age, income, occupation), geography, psychographics (lifestyle and values), and behaviour (buying habits and brand loyalty)
• Business-to-business: Firmographics (industry, company size, revenue), geography, purchasing behaviour, and the decision-making unit, such as the owner or a procurement team

Pick one or two primary segments for the plan. A plan that targets “anyone who eats” tells the reader you have not done the work. Your segment research also feeds your go-to-market strategy; our comparison of the business plan vs marketing plan explains where that detail belongs.

How to Write Your Research Into the Business Plan

 

What the Market Analysis Section Includes

 

The market analysis section of a traditional plan covers your industry overview, target market, market size, competitive analysis, and pricing.

Our guide on how to write a business plan shows where this section sits among the others. Lead with your conclusion: who buys, how many, and at what price. Put the supporting data after it.

Connecting Research to Your Financial Projections

 

Your projections should reuse your research numbers. Your price comes from competitor benchmarks and survey answers. Your customer count comes from your SOM. Your growth rate comes from industry trends in your secondary data.

If a reviewer can trace each revenue line back to the market analysis, your forecast gains credibility. On plans The Write Direction prepares, our writers match each revenue assumption to a cited figure before the draft reaches the client. The same figures carry into the market size slide of your pitch deck; see our guide to the pitch deck vs business plan for how investors read each document.

Citing Your Sources

 

Cite each statistic with the publisher, the table or report name, and the year. Put full survey results, interview summaries, and competitor tables in the appendix. A lender who can check your sources in five minutes will trust the rest of the plan more.

How Much Research Is Enough

 

Match your research depth to your reader:

• Bank or credit union loan: Local demand, competitors within your trade area, and pricing. Lenders focus on whether sales cover repayments.
• BDC or Futurpreneur financing: The same local evidence, plus a monthly cash flow forecast built on your research assumptions.
• Angel or venture investors: A credible TAM, SAM, and SOM, proof of demand such as pre-orders or pilot customers, and a competitive landscape.

For most small business plans, two to four weeks covers it: one week on secondary data, one to two weeks on surveys and interviews, and a few days to write the analysis.

Plans for regulated sectors or new product categories may need longer. The Write Direction’s research team builds custom business research reports when founders need deeper industry analysis than a two-week sprint allows.

Common Market Research Mistakes

 

• Top-down sizing: Starting from a giant industry figure and claiming a small percentage of it
• Stale data: Citing figures more than three years old without checking for an update
• Convenience samples: Surveying friends and family, who tell you what you want to hear
• Missing indirect competitors: Listing only businesses that look like yours
• Research that stops short of the numbers: A strong market section next to projections that ignore it

Frequently Asked Questions

 

What is the difference between primary and secondary market research?

 

Secondary research uses data someone else has already collected, such as Statistics Canada tables, census data, and industry reports.

Primary research is data you gather yourself through surveys, interviews, focus groups, or test sales. Most founders start with secondary research to size the market, then use primary research to test price and buying intent with real customers.

How much market research do I need for a business plan?

 

Enough to support each number in your projections. A local loan application needs evidence of demand, competitor pricing, and your trade area.

An investor raise needs a credible market size and proof of demand. If you are working out how to perform market research for a business plan on a deadline, prioritize the figures your revenue forecast depends on.

How do I calculate market size for a business plan?

 

Start with TAM, the total spending in your category. Narrow it to SAM, the share you can reach by geography and channel.

Then estimate SOM from the bottom up: your capacity, your price, and the share of customers your research says will buy. Show the math in your plan so a reader can check each input.

Can I do market research for free?

 

Yes, for most of it. Statistics Canada, ISED’s Canadian Industry Statistics, and data.census.gov offer free industry and demographic data.

Public libraries often provide free access to paid business databases. Free survey tools, customer interviews, and competitor visits cover primary research. Budget for paid reports only when free sources leave a gap your plan needs filled.

How long does market research take for a business plan?

 

Two to four weeks covers most small business plans. Spend the first week on secondary data, one to two weeks on surveys and interviews, and the remaining days writing the market analysis.

Anyone learning how to perform market research for a business plan in a new industry or regulated sector should allow extra time.

Turning Your Research Into a Plan Funders Believe

 

Market research gives your business plan the evidence lenders and investors look for.

The PROBE Method keeps the work focused: pose the questions, read secondary data, ask customers, benchmark competitors, and estimate your market from the bottom up. Then carry each finding into your financial projections so the numbers agree.

At The Write Direction, we research and write business plans for founders across Canada and the United States, from local loan applications to investor raises. Our team sources the data, runs the competitor analysis, and builds market sections that tie to your forecast. Explore our business plan writing services, or start with our free ebook, Business Plans Made Easy.

Ready to start? Book a consultation or email us at [email protected].