If we all had a crystal ball, we could have a sneaky look into the future to see whether the idea is a winner or not. In the absence of this, the next best thing is to make sure that you have thoroughly thought through your proposition and established whether there REALLY is a market for it.
If you are doing this for the first time, it may feel like you are staggering around in the dark, but you will be relieved to hear that there are tried and tested ways of undertaking this task. These are explained below.
A major part of your initial and ongoing planning should focus on finding out as much as you can about your potential customers and competitors. Ultimately they will determine whether you just have an idea or a profitable business!
Although I hate to be the one to break it to you, in terms of running a business, this is rarely true.
The fact that you are able to provide a particular product or service doesn’t automatically mean that the big wide world is waiting for you to set up in business. Before you start, you really need to see if there is a ‘gap in the market ‘or more importantly is there a ‘market in the gap’?
Years of experience in a particular field and proven expertise will certainly give you a head start but there is still no guarantee that you will be able to convert this into sustainable income. Whether you are a seasoned fish bait digger, stuntman or chicken shed manufacturer (and I have dealt with all three!), you still need to identify, with some level of confidence, that there is sufficient demand for whatever you plan to offer.
“Three quarters of all entrepreneurs start up without doing any market testing to establish whether there is a demand for their service.
Only three in ten carry out market research to determine whether a market exists for their business in the first place. Fewer still – one in five – draw up a customer profile to build up knowledge about their prospective customers and their buying habits.
Knowing who your customers are and why they should buy from you, rather than from your competitors, should be a crucial part in deciding how a business will fit into the market and whether it is likely to succeed. Those that do not assess their long-term market potential and overall competitive stance may risk early closure or failure.”
Mention ‘market research’ to most people and a vision of clipboards, questionnaires and being pestered walking down the high street might well spring to mind. Although it is absolutely vital that you find out what your potential customer wants or needs, you will be relieved to hear that, in most cases, you won’t need to put yourself through that particular ordeal.
I hope by the end of this section, you will understand why it is so important, what questions you need to ask and how you can find the answers.
Top tip! Do not be afraid of obtaining quotes from potential competitors. You can do this yourself or get someone else to do it for you. I only include this because it has become common practice and your competition is quite likely to do the same to you once you start trading!
You need to find out whether there is a market
- To get an idea of the size of the market
- To identify your potential customer base
- To find out what they buy and what they are likely to buy in the future
- To discover who they buy from now
- To learn how much they are willing to pay and how often
- To identify the strengths and weaknesses of your competition
Ultimately, the answers to these questions will help you decide what you should offer, how much you can charge and how you can reach your target market.
Imagine if you knew the name, address, and phone number of every potential client who needed to buy your product or service – wouldn’t this save you a fortune in advertising? It may sound like a pipe-dream, but you can certainly narrow your search if you analyse who they are likely to be. Are they domestic or commercial? Large or small? Local or national? Male, female or both? Age range? Do they buy on quality or cost? What is an acceptable price range? But also add as many other criteria that apply to your own trade (i.e. if you fix Ford cars – just target people who drive Fords.)
“Find the revenue stream and then direct it towards your business”. If you know what customers are already buying, it makes it far easier to know what to offer them. This could be a better/cheaper/more reliable version of their current purchase or something completely new. Find out what they buy most of, what they are prepared to spend, the advantages and disadvantages of their current provider.
Then use this information to shape your alternative.
You can learn an enormous amount from your direct and indirect competition. As well as looking at similar operations locally, find out what happens in other areas, both home and abroad. If they do something well, incorporate it into your thinking – if you spot a weakness, make sure that you do not make the same mistake. Make a note of everything that you find, you will be surprised at how all these little golden nuggets can come in useful, sometimes when you least expect it.
This includes going out, observing and talking to your customers and competitors ‘in the flesh’. Find out what is happening in the real world and be open minded about what you discover – it is far better to learn the truth, be it good or bad, at the earliest possible opportunity.
You can glean important information either by conducting formal ‘interviews’ (the clipboard!!) or through informal conversations with potential customers, members of the general public, or focus groups but bear these points in mind.
Much can be learned from observing your competitors or similar businesses in other parts of the country (stalking, spying, being nosy?). If they have premises, why not spend time counting their customers and working out how much money they are likely to be taking over the counter?
A good way of deciding where to search is to put yourself in your prospective customer’s shoes. Where do they go? How would they find information? What do they read? Who do they trust? How will they get to hear about you or your competitors?
Without doubt, the internet will feature strongly in the answers to those questions and the abundance of useful information online has completely transformed the task but there are plenty of other sources.
Places to visit could include: business support organisations; libraries; local government offices; Advice Bureaux; community centres; your local chamber of commerce; anywhere that has notice boards; trade exhibitions; trade organisations; business conferences; local networking groups.
Reference materials that may unearth useful data: Business magazines; trade journals; local newspapers; national newspapers; local directories; parish magazines; competitor’s brochures and price lists.
The importance of this stage of your business planning cannot be over-stated. The time and effort that you put in will have a direct impact on your future success and I sincerely hope that this introduction will help point you in the right direction.