FORTUNE Small Business:

Sizing up a market opportunity

An aspiring entrepreneur wants to make sure that her town needs her services.

By Elaine Pofeldt, FSB senior editor

(FSB Magazine) -- Dear FSB: I'd love to start a small business in my hometown, but how do I analyze the market? What's an effective strategy for identifying a need in a town of 30,000? --Sidra Louis Miller, Edwardsville, Ill.

Dear Sidra: The most useful market research reports cost tens of thousands of dollars, so entrepreneurs on limited budgets need to get creative, says Verne Harnish, CEO of Gazelles (gazelles.com), a consulting firm for fast-growth companies in Ashburn, Va. "The key is to tap into your own experiences," he says. "Ask yourself: 'What service or product would I like to receive that I can't find in my town of 30,000?' "

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And don't stop there, advises Harnish. Talk with five residents of your community every day to ask them what products and services they find lacking. Then challenge yourself to think of new ways to address those needs.

"Nothing can substitute for good, shoe-leather research," he says.

Another simple exercise that Harnish recommends is to peruse the online Yellow Pages (yellowpages.com) of towns near yours that are roughly the same size. See what products and services are being promoted that are not available in your town.

You might also check out the International Franchise Association's Web site (www.franchise.org). By researching the types of franchises that are currently doing well, you may be able to come up with some good, alternative ideas of your own.

For more inspiration, Harnish suggests that you check out the work of Doug Hall, a Cincinnati-based inventing guru who founded Eureka! Ranch (eurekaranch.com), an organization that helps companies and inventors introduce new products. His Web site (doughall.com) offers a variety of useful articles for entrepreneurs like yourself. (Also be sure to check out our article, "Can Doug Hall Save You from Yourself."

Once you know what type of business you want to launch, your local Chamber of Commerce (chamberofcommerce.com) can provide basic demographic data that will help you determine if your city has enough target customers to support your business.

If your research doesn't support your idea, you don't necessarily have to abandon it, says Harnish. Brainstorm for creative ways to turn it into a viable business.

"Entrepreneurs dream up things that no market researcher would have ever thought possible," he says.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.