An idea, however exciting, unique, revolutionary, and necessary is not a business. It’s a great starting point, and an essential one, but there is a good deal more work to be done before you can sidle up to your boss and tell him or her exactly what you think of them.
The following explore the steps you need to take so that you won’t have to go back to your boss in six months and plead for your old job back (and possibly eat a large piece of humble pie at the same time).
Researching the market
However passionate you are about your business idea, it is unlikely that you already have the answers to all the important questions concerning your market place. Before you can develop a successful business strategy, you have to understand as much as possible about your market and the competitors you are likely to face. The main way to get to understand new business areas, or areas that are new to you at any rate, is to conduct market research. The purpose of that research is to ensure that you have sufficient information on customers, competitors, and markets so that your market entry strategy or expansion strategy is at least on the target, if not on the bull’s-eye itself. In other words, you need to explore whether enough people are attracted to buy what you want to sell at a price that will give you a viable business. If you miss the target altogether, which you could well do without research, you may not have the necessary resources for a second shot.
The areas to research include:
Your customers: Who will buy more of your existing goods and services and who will buy your new goods and services? How many such customers are there? What particular customer needs will you meet?
Your competitors: Who will you be competing with in your product/market areas? What are those firms’ strengths and weaknesses?
Your product or service: How should you tailor your product or service to meet customer needs and to give you an edge in the market?
The price: What would be seen as giving value for money and so encourages both customer loyalty and referral?
The advertising and promotional material: What newspapers, journals, and so forth do your potential customers read and what Web sites do they visit? Unglamorous as it is, analysing data on what messages actually influence people to buy, rather than just to click, holds the key to identifying where and how to promote your products and service.
Inflated numbers on the Internet If you plan to advertise on an Internet site it makes sense to check out the sites you’re considering. Be aware that some sites publish a fair amount of gobbledygook about the high number of ‘hits’ (often millions) the site scores. Millions of hits doesn’t mean the site has millions of visitors. Some Internet sites increase their hit rate by the simple expedient of adding the number of pages each viewer must download to view the page.
Another mildly meaningless measure of the advertising value of a site is the notion of a ‘subscriber’. In Internet parlance anyone visiting a Web site and passing over their e-mail address becomes part of that company’s share price! It is rather like suggesting that anyone passing a shop and glancing in the window will turn into hard cash tomorrow. Any real analysis of Web site use starts with ‘page impression’, which is a measure of how many times an individual page has been viewed.
Channels of distribution: How will you get to your customers and who do you need to distribute your products or services? You may need to use retailers, wholesalers, mail order, or the Internet. They all have different costs and if you use one or more they all want a slice of the margin.
Your location: Where do you need to be to reach your customers most easily at minimum cost? Sometimes you don’t actually need to be anywhere near your market, particularly if you anticipate most of your sales will come from the Internet. If this is the case you need to have strategy to make sure potential customers can find your Web site. Try to spend your advertising money wisely. Nationwide advertisements or blanketing the market with free disks may create huge short-term growth, but there is little evidence that the clients won by indiscriminate blunderbuss advertising works well. Certainly few people using such techniques made any money.