If you are considering undertaking a new business venture one of the questions you will hear most often is – Have you done your market research?  It stands to reason then that you should quickly run off and commission a market research company to conduct a full and comprehensive feasibility study to ensure the success of your new business – off course not!

Often people starting off in business interpret market research as being something that requires a market research company to conduct. While this is sometimes the case, very often the research required can be conducted by the entrepreneur themselves.  The biggest deciding factor I believe in determining your market research budget is how much capital is at risk for the new venture.

Say for example that the total start-up costs for your new venture are $10,000. It hardly makes any sense to spend $7,000 on a research project to determine whether or not there is a market for your product or service. My advice would be to try your luck and dedicate your $10,000 to the development of the venture.  This advice does not hold true for when the venture requires larger amounts of start up capital.

Now say for example that the total start-up costs for your new venture are $100,000 (or insert any larger figure that is appropriate). Spending $7,000 on a research project to protect your investment of $100,000 now starts to make sense. Why risk your all your start-up capital when it is likely that a small cost effective research project will be able to determine whether or not your new venture is viable or not. Hence the notion of market research acting as an insurance policy for your venture. Why put all your start-up capital at risk when market research can provide you with the insurance you need.