Don't let the term throw you.   "Market Gaps" is just what it sounds like.  In the market you are researching you are looking to see if there is some "gap", or demand need, for you to fill.  If you have a general direction, take "retailing" for example, you can use the old "Yellow Pages" trick.  Take a phone book from another large city or a suburb of a city far away from you and compare the Yellow Pages with your own telephone book.  Find out what's missing.  Compare the number of firms for different services or products for each geographical area.  You'll be amazed at how much you can learn from this simple trick.

You can calculate "slippage".  This is a term for expenditures that should be spent in your area but for one reason or another the money is being spent in some other geographical area.  This doesn't have to be a difficult calculation.  You might simply survey cities or towns close to you and count the number of firms in each locality.  Relate the number of firms to the population of the localities.  If you have two pizza shops per 100,000 people and the other locality has four pizza shops per 100,000 population...you have probably found a gap.   (Caution:  make sure the firms you are counting are making a profit!)  Another simple method is to compare the number of square feet of specific business space in two areas.  For example, you may find six thousand square feet of women's retail clothing in one area, compared to two thousand square feet of women's retail clothing in another.    Again, compare the square footage per population for each area.

Or you can get very specific with the study of market gaps.  Most states have a planning office which compiles many, many statistics.  If you live in a state which has a sales tax, the sales tax department also compiles many statistics on expenditures by product/by area.   Armed with these statistics you may calculate with very close precision where the gaps exist.  Be sure to use common sense.  I remember one college professor who spent the first thirty minutes of our initial Statistics class writing names, dates, numbers and formulas on every blackboard in the room.  Then he went to his desk at the front of the room, sat down and said, "These are the statistics...what do you want me to prove?"

Be on the watch for business closings in your area.  Try your best to determine why the business closed.  There are sometimes reasons other than lack of demand.  Death of a business owner might cause a business to be closed while the demand for products and/or services might actually be on the rise.  Businesses can be "zoned out".  Owners can be retiring and feel the business is not worth enough to seek a purchaser.  By the way, you don't have to wait until the business closes to know about it.  If you're looking for a food business, ask the bread man to keep an eye out for you.  He often knows months in advance of a business that needs a new owner.