You have a great idea for a business and are ready to take the next step. But what is the next step? According to the U.S. Small Business Administration, doing some market research can track consumer behavior and economic trends to help improve that great idea.

Running a small business is all about minimizing risks and maximizing returns, and understanding the potential customer base for a new venture can go a long way toward reducing risk, according to information on the SBA website. That includes collecting demographic information about potential customers, including population data on age, wealth, family interests or any other topic relevant to a particular business.

To get a more refined sense of the market for a business idea, the SBA recommends finding the answers to the following questions:

Demand: Is there a desire for your product or service?

Market size: How many people would be interested in your offering?

Economic indicators: What is the income range and employment rate?

Location: Where do your customers live and where can your business reach?

Market saturation: How many similar options are already available to consumers?

Pricing: What do potential customers pay for these alternatives?

According to the SBA, research can be done using existing sources, or by going directly to consumers.

“Existing sources can save you a lot of time and energy, but the information might not be as specific to your audience as you’d like,” the SBA said. “Use it to answer questions that are both general and quantifiable, like industry trends, demographics, and household incomes.”

By asking consumers directly, prospective business owners can get a nuanced understanding of their specific target audience, according to the SBA. That can be done through surveys, questionnaires, focus group sessions or in-depth interviews.

For more information on market research and other small-business topics, visit the U.S. Small Business Administration website at sba.gov.

SOURCE: U.S. Small Business Administration