starting and growing small business suffolk 06 12 11

Researching your marketAll successful businesses need to have a comprehensive understanding of their existing and potentialcustomers and the marketplace they work in. This is crucially important when you are starting up anew business.Developing your business idea into a viable product or service is a critical part of building a business. Thorough assessment andmarket research at an early stage will help you to establish whether there is a market for your product or service and therefore whetherthere is a potential for success or failure. This section explains the fundamentals of market research, how to conduct your marketresearch, why it is important to understand your market, and how it changes.Understanding your marketMarket research forms the bedrock of your whole business planand involves understanding how your industry or product willwork and where it will fit into the marketplace. To base all yourstrategic decisions or financial forecasts on guesswork and notfact is a recipe for disaster and many businesses arehandicapped by a lack of up-to-date research at the planningstage. The more information you have, the better equipped youwill be to understand your potential customers, the marketplaceand how your product fits in.Consider whether your idea satisfies or creates a market needand whether there are any potential customers. If there iscompetition, is your idea unique, distinct or superior to theirs,and is the competition local, national or global? Is your productsafe for public use, complying with relevant regulations andlegislation? Market research can play an important role inanswering many of these questions and increasing your chancesof success.There are two types of market research, as follows:1. Desk research(secondary data or second-hand information)There are many sources of available information but at first theobvious route is to search the internet. Libraries, specialistdirectories and market survey reports (such as EconomicIntelligence Unit, Mintel or Keynote reports), local authorities andgovernment departments, trade associations, trade press andtrade exhibitions can also provide a wealth of information.2. Field research(primary data or first-hand information)There is no substitute for speaking to people directly by telephoneor face to face but carefully plan what you are going to ask.The easiest way to get the information you want is to compile aquestionnaire, with a limited number of short and simplequestions that are easily answered, - and easily analysed.Understanding the business environmentBut researching your customer market is not enough - you needto assess the business environment as well so you canunderstand how this will influence the success of your product.This can be done in two ways, the first being via a PEST analysis.• Politics: understanding the rules and regulations applying toyour business;• Economics: gaining a knowledge and understanding of howthis impacts on your business via disposable income andinterest rates;• Society: understanding how culture, fashion and evenpopulation changes can affect your business; and• Technology: understanding how developments in equipment,techniques and method can impact on your business.The second method is to use a SWOT analysis which producesan overview of a business idea by looking at its Strengths,Weaknesses, Opportunities and Threats.Strengths and Weaknesses are issues within your own control.For example strengths in a business might include high levels oftechnical skills, a strong financial position, good customerrelations, high gross profit margins and low fixed costs. These arethe things that the business should utilise and build on.Weaknesses require actions to address them. For many smallbusinesses the lack of formal business skills within themanagement team can be a weakness and should be addressedthrough training or, if the business can afford it, perhaps bybuying in the skills required. Insufficient working capital isanother common weakness in small businesses and might beaddressed by better credit control or by securing an overdraftfacility depending on the underlying cause.Opportunities and Threats reflect the external environment inwhich you operate and identifying and understanding them willhelp you develop your risk strategy and also keep you aware ofany opportunities that might present themselves. This sectionshould include things like potential legislation, new technologyand your competitors.Your customersOnce you have done this analysis you need to build up a profileof your customers - after all, they are whom you will rely on tomake your business or product successful. You’ll need to focusyour efforts on finding out as much as you can about existing andpotential customers. Who are they? What are they looking for?Where do they currently buy the product or services from andwhen? Why do they choose one shop/supplier over another?2