LSU professor Daniel Holt, research director for the university’s Stephenson Entrepreneurship Institute, says a business only needs one thing to be successful: paying customers. To get those customers, new companies need quality market research.

That means entrepreneurs need to know who their customers are, what they need, what they want, what problems they have and whether the business solves them. Entrepreneurs also need to know how many potential customers there are and whether they can pay for the company’s goods or services.

“That starts to help us understand the size of the market, the potential for us to make money, the potential for us to scale,” Holt explained at a recent Tech Park Academy event at the Louisiana Technology Park.

Effectively utilizing databases is the key to finding this valuable information, Holt says. Databases offer key insights into four major areas: market research, financial benchmarks, industry analysis and competitor analysis.

Holt, along with Kenneth Anderson, the executive director of the Stephenson Entrepreneurship Institute at LSU, shared insights into navigating these data sources at the event. Here’s an overview.

Collecting Data on Demographics and Attitudes

For basic demographics, the fundamental databases are available through the U.S. Census Bureau, Holt says. The Census’ data site helps users drill down into more granular detail by geography. CityData is an independent and publicly available site that also offers useful demographic information by geography.

Demographics are not sufficient for companies looking to fully grasp their competitive landscape, Holt says. “I can better explain my venture’s potential with an understanding of the target market, their preferences, what their key attitudes and behaviors are — that ultimately give me insight into whether my venture has the potential to be successful or not,” Holt says.

Businesses, he says, also need to understand behaviors and psychographics. Psychographics give insights into consumer attitudes and beliefs, Holt says, and behaviors represent the specific activities that people engage in. “I want you to think about the activities in a way that helps you know where your customers are so you can actually [and] efficiently get in front of them in the least expensive way possible,” he says.

To accomplish this, Holt highlighted three database sources:

The American Time Use Survey — Measures time spent on various activities.

Pew Research Center — Provides data on public opinions, attitudes and trends.

Gale Business: DemographicsNow — Provides compiled reports that take Census data, retail spending and other sources and provide demographic information with geographic territories in mind.

Understanding the Customer

Holt says online customer surveys are a relatively easy and cheap way to collect firsthand data on potential buyers. The market leaders, each with free versions, are SurveyMonkey and Qualtrics. “With 10 questions we can get a lot of insight into the buying patterns and trends associated with your potential target customer,” Holt says.

Holt says Amazon Mechanical Turk is an effective and low-cost way to reach large amounts of survey respondents. “We do that a lot with consulting engagements, especially when we’re doing initial client and customer discovery and validating some attitudes, opinions and beliefs about products,” Holt says.

Research for similar firms and how much money they make can help entrepreneurs understand expected revenue and what a profitable cost structure could look like, says Holt. Research resources fall into the following categories:

Financial Benchmarks and Cost Structures

D&B Hoovers — Provides brief histories and financial information on companies, industries, people and products.

Bizminer — Provides detailed reports in hundreds of industries, including industry financial reports, micro-firm profit-loss reports and competitive market analysis.

Bizstats — Provides detailed financial data on various industries. On the site, projected income can be put in for a firm by industry, and a mock income statement will be returned.

Understanding Investors

Angel Resource Institute — Provides market surveys and research on angel, seed-stage and early-stage investing that captures the angel investment activity covering the US. Produces the annual HALO Report.

Understanding Industry Health

Business Source Complete — Provides access to a definitive scholarly business database that includes peer-reviewed, business-related journals as well as industry and trade publications.

Mergent Online — Provides access to financial data on publicly traded firms, including income statements, balance sheets and cash flows.

IBISWorld — Provides detailed reports on a variety of industries, including industry statistics, trends, buyer behavior and expected returns.

Holt says many of the databases are available through East Baton Rouge Parish Library or the LSU Library, while others are free to the public.

But he urges people to use these databases carefully. “As you interpret the data, be incredibly cautious,” Holt says. “We have an inherent bias to look for information that aligns with our thinking — and that’s tricky.”