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Posts Tagged ‘what business startups need to know’

Market research is an essential part of any business plan, whether a fledgling business or a multinational organisation. Knowing that there is a sustainable market for your product and understanding what your audience expects from you is vital to a successful business launch. Market research can generally be split into two categories; primary and secondary, and during this article I will explain both and discuss their respective merits and appropriate uses.

Secondary Research

Secondary research makes use of existing data from whatever sources are available. There are government censuses, Mintel surveys, and many private market research agencies that allow access to their data; some of it for free. It can be hugely advantageous, especially as a place to begin. Secondary research more often than not, proves to be a solid base on which to develop your own primary research. It plays the same role as research in general does to your product launch, and should be seen as just as vital. Also, this is of course far cheaper and generally quicker than creating your own research from scratch.

The negatives

The other side of that coin is that you have neither picked the panel to suit your exact needs, nor the questions. It is feasible that you can find some research somewhere that corresponds to what you are trying to achieve but it will almost certainly require some tweaking, and will not necessarily be the people you wish to interrogate; the use of qualitative research designed by someone else will almost certainly make the target specialised away from your goals. Another main issue with secondary research is that by the time it reaches you it’s often outdated; markets change so quickly in business that the only way to be truly current is through new research. This is not to rubbish the quality of secondary research.

Primary Research

Primary research is, essentially, the creation of your own research, whether a question that you ask to your friends and family or a survey put together alongside an agency and administered to a wide panel. Primary research will instantly let you feel more in control of your project; and that is the exact position you will find yourself in. You choose the questions and select your panel through qualitative research, allowing you detailed responses from individuals. You decide how, when and where your research is administered. You can ensure that your research is focussed: the number of participants and their backgrounds, the number and nature of the questions, the amount of time that your survey is available. This is the most accurate way to research a market sector that is specific to you and your product.

The down side

It is of course, more expensive, whether financially or on your time. If performing primary research alone it will take a lot of time, refining and will need some experience in producing quality questionnaires. It will also take time for your questionnaire to be completed if you don’t have direct access to a ready panel. Most of this can be avoided by using an agency, but at a cost higher than performing your research alone.

So what’s the best option?

Neither type of research will take you to your goal alone; however, a combination of the two will give you all the information you need. Using primary research alone, without first seeing what has or has not worked for other companies and possibly missing out on important data from research that you couldn’t afford to perform yourself, is likely to lead to irrelevant questions or missed opportunities. At the same time, relying solely on secondary research is likely to leave you with answers that are vague or inappropriate to your specific audience. The two compliment each other well, and when used in conjunction will give you a well rounded and accurate portrayal of the needs and opinions of your market sector.

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Issue 1 “We have those sales figures Steve, I just need to go through the paperwork and tally them up…”

How can you boost sales? There are many options, however two obvious ways are: review your current sales process, and develop your sales staff.

The issue

So I arrive at my new clients premises to do the exploratory meeting and see if I can help them boost their sales. First step? Review the process.

In response to a question like “So how are sales going at the minute?” I often get wordy answers which talk about results in a very general way. I enjoy hearing the owners’ perspective on it; it’s good to get a feel for their industry & business from their point of view.

However it’s when I start asking for specifics, “What volume of enquiries are you getting?” that I regularly get a response along the lines of: “We have that figure Steve; I just need to go through the paperwork and work it out…”

The response

It’s been said before, but I’ll say it again “if you can’t (or in this case don’t) measure it, you can’t manage it”

If you’re already tracking your enquiries – great! Be mindful here; are you only tracking this in terms of knowing where your valuable marketing budget should be spent? This is crucial of course, but it would be useful to know how effective you are with each of those leads wouldn’t it?

There are many ways to measure sales effectiveness, but here are some basic measurements that can help build a picture of your current business performance:

  1. Sales
    • a. Sales by number (volume of sales)
    • b. Sales in good old pounds sterling (value of sales)
    • c. Sales Conversion rate = ‘Total Sales’ divided by ‘Total Enquiries’
  2. Sales’ Cost
    • Cost of an Enquiry = ‘Total Marketing Spend’ divided by ‘Total Enquiries’
    • Cost of a Customer = ‘Total Marketing Spend’ divided by ‘Total New Customers’
    • Total Cost of a Customer = ‘Total Costs’ divided by ‘Total New Customers’
  3. Sales’ Value
    • ‘Average Worth’ of a customer = ‘Total Revenue’ divided by ‘Number of Customers’
    • …it’s also worth looking at the average lifetime of a customer.
    • ..and the most popular product choice.

N.B. The above calculations should have specific timeframes. To use the most obvious examples: Weekly, Monthly, Quarterly & Annual.

Interesting to note, often well established companies struggle to provide these figures, though the reasons be different from a start up business: perhaps they have too many measurements (can’t see the wood for the trees) or simply with the passage of time their ‘Key Performance Indicators’ are no longer ‘Key’ anymore!

So you want to boost your sales? You need to lead your salespeople! Current frontline sales-relevant figures are the first step!

Action: Does this relate to you & your business? If so, based on the above, what will you STOP doing, START doing and CONTINUE doing today?

Related Articles: This is the first in the series: “Boosting sales: Things my new business clients say to me” which follows this introductory piece ‘Your new business is exciting isn’t it!? DON’T talk about it!’ See it here: Part 1 Part 2

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One of the first things you need to do when you set up your own business is to find yourself a good accountant. However simple or complicated your business’ finances are, you are going to get yourself in a muddle if you don’t know exactly what you need to record, how to fill in your tax returns or when to file your accounts.

Speaking to the Institute of Chartered Accountants in England and Wales (ICAEW)’s Clive Lewis the other day, I learned that many start-ups don’t use their accountant as much as they could or should.

You should be able to rely on your accountant to be there for you if you call up with a query about your book-keeping, however trivial it may seem, or if you have a sudden change of circumstances – for example if a client suddenly puts in a big order and your cashflow is thrown off-balance. They should also be reminding you of deadlines for self-assessment or, if you’re a limited company, when your accounts are due to be filed.

There is certain information your accountant will need from you in order for him or her to understand your business and do your accounts for you, too, but again, a good accountant will tell you what they need. According to Lewis, your relationship with your accountant should be a long-term one with regular contact.

Ask other business owners you know who they use, or visit one of the accountancy associations’ websites to do a search for your local accountants. Even if you have a good brain for maths, you still might need somebody to hold your hand while you work out how to use your new accountancy software. Ideally, you will choose an accountant who has previously worked with other businesses of your size and in your industry.

So, don’t be shy; pick up the phone and ask away. And if the person at the other end doesn’t want to help you out, take your fees elsewhere and find an accountant who will make life easier for you.

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It’s official 2009 could be one of the hardest years ever for any business.

Business will be tough and attracting customers will be a challenge. Whilst you may not be able to influence how much customers spend with you, one thing you can do is to CONTROL YOUR COSTS.

So lets get back to some basics about costs. There are two types of costs

VARIABLE and FIXED.

Variable costs change in relation to the amount you sell or supply. Examples would be the stock for the business, packaging, postage or delivery costs etc.

Fixed costs remain constant and do not change regardless of your level of sales. Examples would be the rent you pay on your premises, electricity bills, your accountants fees, bank charges and so on.

So how can you control your costs?

The very first thing to do is to write down all of your costs and to decide if they are fixed or variable.

This is a good exercise as it will establish exactly how much you are spending each day / week / month.

Once you have established all of your costs the next task is to reduce them – yes it can be done and it would not be unrealistic to set a target of between 10% to 20%.

Remember, anything saved on costs immediately means more profit for your business.

Reducing Variable Costs

Lets start with the variable ones first as these can be changed quickly and so should have an immediate benefit on your profit.

Have a look at the list.

  • What can you reduce or eliminate?
  • What can you re-negotiate, put out to tender or shop around for a better deal. It is a buyers market at the moment so don’t be afraid to ask. Barter and negotiate hard.
  • Can you get discounts by buying in bulk?

If a supplier does not offer a discount – ask for one! You will be surprised at what you can achieve if you ask. So be ruthless and say you will go elsewhere if the price is not reduced.

Examples of where savings can be made are:

  • send invoices and delivery notes by email instead of printing them or only provide them if requested. This saves on paper, printing and postage costs.
  • use less packaging for products or charge for none essential items eg carrier bags.

Reducing Fixed Costs

These may take a little more time to alter but can actually result in higher savings. So they should not be ignored.

The target here should be to reduce all costs. So challenge everything you are spending. You may have to put some effort in but your hard work will result in huge savings.

Examples of where you can make savings:

  • on rent, ask your landlord for a rent reduction or a rent holiday
  • shop around for cheap utilities such as electricity and gas
  • change banks regularly to take advantage of free banking periods
  • shop around for savings on professional fees eg. accounting fees. By paying these monthly some accountants will provide a fixed fee service.
  • change your business telephone, internet or broadband packages to take advantage of special deals.

Remember:

  • be harsh
  • be ruthless
  • negotiate hard
  • challenge all fixed costs
  • do not be complacent

Control your costs and Beat the Credit Crunch

 
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In the last post I raised the idea that hearing about random aspects of your new business start-up is not necessarily what the customer wants.

Which depot the product has come from, or indeed difficulties in setting the service up, are unlikely to be helpful features! Giving unnecessary background info could even be detrimental to selling your fantastic product/service – loose lips sink ships, as they say.

The worst examples of this type tend to be around those features that aren’t developed. You know the ones: “our delivery service isn’t quite set up currently”, or “24hr functionality wasn’t ready for the launch date” etc. As a customer, isn’t it great to hear about something that you want, but can’t have yet? Of course not!

Simple steps to fix

  1. Ask questions about them, their use & their situation
  2. Then talk about what they can have (not what they can’t)
  3. Get to the sales decision, and regardless of the outcome
  4. NOW you can let them know about upcoming developments.

If they’ve already purchased, great! If not, you’ve made them aware for future reference. As a brief aside it’s probably a good idea in this case to get the customers details and contact him when the service he wants is up and running!

Okay so in truth, I’m not really saying don’t talk about your business at all. Local people are often interested in local businesses, especially new ones, and it IS a good way to build your relationship with your customers. Chatting enthusiastically about yourself and your business is great for developing that rapport.

The real point I’m trying to make here is to differentiate between background chit chat (optional) and the sales process that you will need to walk your customer through to solve their problem (obligatory!)

ACTION: Does this relate to you & your business? Based on the above, what will you STOP doing, START doing and CONTINUE doing today?

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So your new venture is probably consuming each and every day at the minute. It’s probably also a fair bet to say that you’re pretty passionate about this exhilarating step in your life to date. I’m no psychologist, but in these circumstances it would seem fairly natural to want to share some of the details with interested parties – right? No-one can fault you for that, can they? Of course not…unless they’re not human…

…hmm…or a stakeholder in this business…or a customer!!

All too often I have seen SMEs fall into this trap. The owner is so impassioned that he will talk more to his clientele about the business and its merits (or worse – it’s difficulties!) than about them (the customer) and their need.

Take the example of buying a radio. Do you want the audiophile salesperson to tell about every radio in the shop? No! Do you want to hear about where they came from?  Probably not. Do you want to hear about the latest & greatest radio? Maybe. What about the difficult morning they’ve just had? Gotta be a no, right?

How about if the clearly knowledgeable salesperson showed an interest in what you want the radio for, checked your planned/current use, thought for a moment and said:

“I have just the thing for you…you mentioned (X) well this radio is great because it (insert feature that delivers/improves X)…and something that I think will be really useful in your particular situation is (Y) because…”

…a resounding YES! I hope!

More to come in Pt 2!

ACTION: Does this relate to you & your business? Based on the above, what will you STOP doing, START doing and CONTINUE doing today?

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In a world of increasing complexity and one with growing demands on our time, it can be challenging to create a business plan. In recent years, however, there has been a growing trend  in the production of ‘simple business plans‘.

What is a simple business plan?

A simple business plan is a business plan typically produced by start-ups. You write your business plan as normal but you reduce the breadth of content in certain sections of your business plan.

Why would I write a simple business plan?

Simple business plans are appropriate when there are a lot of unknowns or when you are simply at the idea creation stage. At this point you do not want to invest significant time and resources in a full blown business plan, but are looking to produce a business plan that will enable you to forward it to interested parties for further consideration. Once you have received feedback you can then proceed with a full blown business plan.

What does a simple business plan contain?

The simple business plan contains much of the same content of a standard business plan but certain sections can be put on hold at this point e.g. cash flow statement, balance sheet etc. Sections can be skipped and a greater emphasis can be placed on the idea, the market opportunity, the likely demand, the routes to market etc

What is the point of a simple business plan?

One frequent problem entrepreneurs have is that they can keep ideas ‘in their head‘ rather than commit them to paper (or to a PC). However, ideas are practically worthless when they relate to a product or service in isolation (or without providing a market and commercial context). By producing a simple business plan, the entrepreneur is taking the next step towards their idea reaching fruition.  A simple business plan will ensure that there is a holistic view of the business opportunity and an assessment of whether it is commercially viable or not.

How do I create a simple business plan?

Business Plan Pro has the option of a simple business plan built -in. By selecting the option within Business Plan Pro, the number of tasks you need to undertake is reduced from the number needed to produce a standard business plan.

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