It depends -
Some people are really successful doing no research at all. I don't subscribe to that point of view, but it certainly does happen.
You should know what type of customer you want to attract, but then find out where those types live. You can do that by driving around and looking, you can go the library and get census data (which is a slow, ineffective way to go).
You can check out some online resources:
http://www.connect.claritas.com/tryit/tryit_login.htm
They used to have this great zip code lookup site called Prizm that would describe the top demos in that zip code and the things that they like. They may still.
Make sure there are enough of the kind of customers you want to keep you going. Once you know that, you need to know or find out how to market to these people. Not every demographic searches the Net for info. Not every demo reads the paper. And on and on. You have to put your company in places where your desired customers will see you.
But the important thing is, don't get too bogged down in all this. Get a rough idea of all of the above, spend a day or two on it, then get started. I think it was MacArthur that said "A good plan executed now is better than a perfect plan executed next week." You can hone your approach as things progress. You'll make mistakes (even when you're trying not to). Learn from them and move on.