15 Sep Setting up a Small Business (Part 2)
In our previous article, we covered aspects related to how you can turn your idea into a business, and also discussed funding sources that you could use. This article will show you how to research your market, develop a business plan that actually works, and how to find the most suitable partners, suppliers, and, of course, premises.
- Market Research
The best way to test your business idea is with real potential customers. Check whether there is indeed demand for the product or service you are planning to sell. That way, you will be able to reveal any issues that might have been overlooked and fix them, before you have consumed too much money, effort, and time.
To do that, you need to:
- Identify your Unique Selling Point. What makes you different and better than your competitor(s) (if any).
- Ask existing customers of their opinion (what are their needs?). If you don’t have customers yet, you need to have an idea of your target market. Ideally, you should aim for a group of customers (market niche) not being targeted already by other businesses.
- If possible, make a prototype (basic version) of your service or product and work out the fastest and most cost-effective way of making something that will allow you to realise whether you are meeting a real customer need or not. If you manage to solve a problem others didn’t, then you will find a success recipe.
- Test this prototype with customers and collect feedback. Are they willing to pay for it? What will they REALLY pay? Does that leave you with enough profit?
- Develop your Idea
Based on the results of your research, you need to develop your idea (and change it, if necessary). At this stage, cope with any issues related to your service or product, including how you will sell it. It is critical you go back and check with your clients. Test the idea over and over again, until you are fully confident that your customers are willing to pay the price you have in mind and that your product/service meets their needs. If you hit a concrete wall, consider changing your idea completely. Look around. Is there another market, service or product that uses your resources and skills differently?
- Write a Business Plan
A business plan is crucial to your business success as it covers marketing forecasts, objectives, sales, financial forecasts, and strategies, all necessary to allow your business to grow. Besides helping you to clarify your business idea, set out your goals, identify potential problems, and measure your progress, a business plan is required if you want a loan from a bank (or secure investment).
Note that it should clearly demonstrate the results of your research and show that you know how to turn an idea into a viable business. All this has to take place before you invest lots of money and time. That said, a business plan is also a valuable tool to convince potential funding sources, clients, and partners of your business’ value.
- Find Partners
Many start-ups are a sole trader business, meaning they start with just one person (self-employed). However, finding a partner (co-founder) with knowledge and skills relevant yet different to yours will allow you to focus on what you can do best. For instance, you might be selling a service or product that uses a talent or skill you possess but you have absolutely no knowledge as to how to run a business (hands-on experience). If so, working with a person with particular management skills might be a good idea.
Tip: Consider working with a team so that you can share responsibilities, risks, and expertise.
- Find Suppliers
Most businesses have to rely on a supplier (or more) to get the raw materials or equipment necessary to run their service.
Talk to other SMEs, conduct a detailed online search, and draw up a list of suppliers you could work with. Then, get estimates and talk to potential suppliers so that you start establishing relationships, negotiate prices, and agree on payment terms, including your trade credit period, discounts (if, for example, you make a quick payment or make bulk orders).
Important Note: Always get those in writing.
Finally, don’t forget your IT systems. You need to find trusted suppliers for your business’ equipment, as well.
Note: A distributor may also be necessary if you are planning to sell your product to shops in and outside of your local area.
The majority of start-ups don’t need a physical location. They just set up a website and sell their service or product directly through the website. Others, have to have a business property to run their operations. In this case, you can find some particularly helpful guides at the Royal Institute of Chartered Surveyors with information about leasing, buying, extending or maintaining business premises.
Part 3 of this guide will discuss the Proper legal structure your business should have and other responsibilities of SMEs.