The words "market research" are often scary to small business persons -- even if they have advanced college degrees. They don't need to be. Simply stated, your challenge is to determine if there are customers for your product or service and how will you get them to buy. Furthermore, how many customers are there, how much will they pay and how quickly will they write you a check.

Understand that this is not an academic exercise. Its objective is to generate meaningful operating numbers that can be used for your proforma (projected operating numbers). Ultimately, you will have to execute your business plan and place the actual results along side of your proforma numbers to see if you are meeting your benchmarks.

View the procedure as an upside-down triangle or funnel starting with a wide base of information gathering. Ultimately, the wide base of knowledge is narrowed down to specifically reflect your operating numbers on your proforma. Nonrelevant information is discarded.

The wide base of information is available at the library in publications such as Robert Morris Associates and Dun and Bradstreet. The business section librarian can help. Major accounting firms also publish operating numbers for various industries. Your accountant may be able to help you get to the right accounting firm. Each industry's trade association has operating statistics. A list of all trade associations is catalogued in a good business library. Many trade magazines publish industry statistics. A list of most trade magazines can be found in Standard Rate & Data Services at your library or the print media department of advertising agencies. The more corroboration you obtain from various sources the better. Your business plan must identify the sources used. Avoid fluff that won't start your journey from the base of the triangle to its ultimate objective -- your proforma operating numbers.

This broad information may not reflect the uniqueness of your product or service, specific selling techniques, the personality and size of your company. Therefore, you need to narrow it down by making it a better fit. Perhaps the trade association or the accounting firm can refer you to some of the actual companies in your industry that may be willing to share information with you. Sometimes the companies are willing to help budding entrepreneurs who are introduced through credible channels. Your own experience may help in the narrowing process but its not nearly as credible or objective as a third party source.

Narrow the operating numbers even further by talking to prospective customers and salespersons with competing companies. If you are a would-be restauranteur or retailer for example, visit every restaurant or similar retail store in the area. Tactfully question customers exiting competing establishments. How did they like the product (food)? The service? What would they like to see in the neighborhood? What do they think of your idea and what are they willing to pay?

Often you can learn from experienced personnel you interview to fill sales positions in your company. Ask them to document their historic production claims with commission statements and pay stubs. What do they think of your concept? Your pricing? How would they improve it? Sell it? What mistakes are their current employers (your competition) making? Obviously, this anecdotal information should be weighed carefully depending upon the motives and credibility of the source. However, by interviewing enough people, a pattern of accurate data begins to emerge that is useable.

If possible, test the market by making actual sales calls in your market (or in a similar market if confidentiality is a consideration) and trying to close deals. Often you will learn more by asking a customer to put up their money than gathering hypothetical data. Of course if you are already in business, your historical numbers become very important in projecting the future.

Include all the details and the math. Refer back to it when footnoting the operating numbers in your proforma.

So far, this is a hands-on process. It must make sense to you. Don't hire a professional to produce a slick, generic product. It's important that you struggle through it, step-by-step. Internalize it and commit it to memory when telling the bank how you will repay their loan. Use it to share your aspirations with your business partners, key managers and sales persons.

Choosing the style of your proforma, chart of accounts, when to use month-by-month, quarterly or annual numbers are determined by how it is to be used. Here your accountant can help. Your banker may have certain requirements. For example, SBA wants month-by-month for the first year and then annually for the next 2 years. Some equity partners like to see 10 years of proforma. If you need help, take your market research and ask your accountant to put it in the right form or do the spreadsheets You may even want to get someone to make it more presentable.

One last word of caution. There are many well-intentioned packagers and academics wanting to do your homework for you. They offer seminars, CD ROMs, books, audio or video tapes and even may do the entire process for a fee. Most of the time, their finished product is too generic and full of fluff. Their credentials may be superb, but their product is not what you need to get your loan or to run your company. If you don't clearly understand how the information specifically gets you down the triangle to the operating numbers in your proforma, it doesn't belong in your business plan.