Contents of the free course
INTRODUCTION
THE TEN MAIN REASONS WHY NEW BUSINESSES FAIL
RESEARCHING THE MARKET
DESIGNING A QUESTIONNAIRE
ANALYSING INFORMATION
Have you also considered these aspects of the course?
- Defining Marketing
- Knowing Your Market
- Carrying out Market Research
- The Product or Service
- Defining your Product or Service
- Protecting Your Idea
- The Marketing Strategy
- Marketing Objectives
- Target Customers
- The Marketing Mix
- Advertising
- Writing a Press Release
- Writing a Sales Letter
- Sales Promotions
- Future Developments
- Selling Yourself and Your Business
- Management and Organisation
- Legal Structure
- Key Tasks
- Premises and Location
- Equipment
- Consumer Laws
- Health and Safety
- The Single European Market
- Insurance
- Project Planning
- Time Management
- Financial Information
- Planning for Profit
- Calculation of Personal Expenses
- Business Costs
- Costing and Pricing
- Break-even Point
- Cash Flow Forecast
- Profit and Loss Accounts
- Balance Sheets
- Tax, NI and VAT
- Funds for New Businesses
- Book-Keeping
- Completing the Business Plan
- Information Requirements
- Presentation of the Plan
Take a complete business course and receive nationally recognised qualification or call us free at 08000-75-8000 for further information
INTRODUCTION
This course is intended for use by those who are seeking to start their own business.
By the time you have worked through all sections, you will have a basic guideline on how to produce a Business Plan.
Business Plans are essential, not only to help you obtain funding in order to start your own business but also to demonstrate the viability of the business. It should contain a full description of how you intend your business to start, how it is to operate, and how you see its future development
As well as using the plan as a tool to seek financial support, it will also be used as a planning document, to monitor the progression of your business in its first few years of trading.
The contents of the chapters may appear daunting to you at this stage. Setting up your own business is a difficult task, without doubt!
However, you will be offered as much help as possible by your course tutors. It is their aim to enable you to find out whether self- employment is right for you. You may discover that your idea will not support you financially, or that you would prefer to try and obtain employment elsewhere. At least you will have had the chance to find out!
The beginning of each chapter lists training objectives. The chapters all contain examples taken from actual business plans of people who are now working for themselves. They needed similar training and advice and are proof that, with commitment, running a business is possible for many people.
Take a complete business course and receive nationally recognised qualification or call us free at 08000-75-8000 for further information
 THE TEN MAIN REASONS WHY NEW BUSINESSES FAIL
This course is designed to help you put together your business plan. Before going further, it may be helpful to think about the most common reasons why businesses fail - and how to ensure this does not happen to you.
40% of business failures occur within three years. The main reasons are:
1. Lack of Experience. Small business owners have to learn how to carryout all of the tasks required to run a business. This not only includes providing the product or service, but managing finances, selling, advertising and promotion, cleaning and so on. There is a lot of help and advice available. Do not be afraid to ask.
2. Lack of Capital. It takes a long time to establish a new business. Market size is frequently overestimated; running costs are under-estimated. Try to be as accurate as possible and then seek a grant or loan which allows for a contingency amount.
3. Unplanned Expansion. The business may take off quickly; this too can cause problems. If you are providing a service, you may have to keep customers waiting for too long, and they may find alternative suppliers. If a product is being assembled and is in demand, more raw materials will need to be purchased.
More credit may have to be obtained from suppliers, as time will elapse between supplying the product and receiving payment
4. Slack Management. Poor time management and paying too little attention to routine but necessary tasks can cause the downfall of many new businesses. Self-discipline and effective use of time will hopefully avoid this.
5. Credit Problems. Always keep your Bank Manager informed of your financial position. If you know that a cash flow problem is likely in the near future, talk to him/her. It is better to do this early, thus demonstrating that you have control of your business. They will then be able to arrange further overdraft facilities.
6. Wrong Location. The right location is vital for retailers, restaurants and the like. If the customer has to visit you, make sure the premises are accessible. Thorough research and planning should be carried out before deciding upon a location.
7. Too much expenditure on capital assets. Think thin! If there are certain items which could really be sacrificed, then do so. It is not always necessary to buy brand new equipment to start your business. Second-hand goods are (usually)easily obtained and cost a good deal less.
8. Paying yourself too much.
9. Staff Problems. This is a major stumbling-block in both large and small businesses. Employees can be inefficient, disruptive, and can cause other problems. A sound awareness of the techniques involved in hiring staff is necessary.
10. Red Tape. Keep administrative procedures as simple as possible. So much time can be spent upon designing procedures, that productive hours can be lost Decide up on your priorities and stick to them.
 RESEARCHING THE MARKET
It is essential to research the market for any product or service very carefully. If others are already offering something similar, it is no guarantee that you will be successful. Conversely, gaps may exist because of lack of demand rather than lack of supply.
After completing this chapter, you should be able to:
1. Define the term ‘Marketing’.
2. Provide evidence from published materials, including market research reports and trade magazines about the total market size.
3. Provide evidence from published materials including Government reports, about total numbers of potential customers.
4. Provide evidence of demand for your products or service through the use of questionnaires, focus groups, and soon.
5. Specify the type of potential customer, according to age, sex, location, occupation, income, purchasing characteristics.
6. Demonstrate that potential customers are interested in your product or service by providing letters indicating interest.
7. Prepare a list of competitors through the use of directories, Yellow Pages and observation.
8. Provide evidence of demand by observing competition.
DEFINING MARKETING
Marketing to most people just means selling. But it is far more than that!
Marketing is a business discipline, creating and identifying the need for a product or service, at the right time, in the right place, at the right price. It is all about finding and satisfying customers.
’needs.
A new firm has to find a special niche, cultivate and eventually dominate it.
Understanding the market you are really in can also ensure that you are alive to changes in technology or customer preferences. Conversely, if you do not understand what you are really providing you can be overtaken by events.
Positioning in the market place think of the biro and a Parker Pen. Both have the same function, but they are targeted at different markets. Biros are cheap and sold loose. Parker Pens are expensive, attractively presented and are usually sold to those looking for a present Parker Pen see themselves in the gift market, not the pen market, and may therefore regard Ronson lighters, also in the gift market, as their biggest competitor.
Take a complete business course and receive nationally recognised qualification or call us free at 08000-75-8000 for further information
2.2 KNOWING YOUR MARKET
Most businesses are product-led rather than market-led. That means they think about things from their own viewpoint. They think of the product or service they are providing. Instead, they should be market-led: that means looking and planning everything from the viewpoint of the customer- identifying what they are looking for when they buy a particular produce or service.
I. WHAT IS THE PRODUCT OR SERVICE YOU ARE OFFERING?
Define your product/market strategy. A business needs a purpose to keep it heading in the right direction. That purpose should explain as simply as possible what the business does and who it does it for.
For example, one firm called “Blooming Marvelous”, defines itself as follows. “We design, make, and market clothes for the fashion conscious mother-to-be”. This statement is proof that it has defined its product/market strategy.
Take something like a slide-rule. A good product, established market, well made. What business were they in?
You will probably respond: slide-rule manufacturing. Was this really their business? Their decline was due to the advent of the pocket calculator.
Slide-rule manufacturers were really in the “calculating” business. If they had recognised this rather than thinking of themselves as slide-rule manufacturers, they might have been able to switch products more easily.
II. WHERE IS YOUR MARKET?
The staring pointing any market appreciation has to be a definition of the scope of the market you are aiming for. A small of license may only service the needs of a few dozen streets. A specialist restaurant may have to call on a much larger catchment area to be viable.
You may eventually decide to sell to different markets. For example, a retail business can service a local area through the shop and a national area by mail order. A small manufacturing business could branch out into exporting.
People often flounder in initial market research by describing their markets too broadly. For example, saying that they are in the motor industry when they really mean secondhand car sales in Gateshead.
W. WHO ARE YOUR CUSTOMERS?
You need some idea of the market size in order to work out how much you can realistically expect to sell If you were in the home improvement market your calculations may run as follows: On average, people spend £11 per year on home improvements products; if the catchment population for a retail outlet is 25,000 people the total market potential for that area is (Eli x 25,000) = £275,000. Using the same data for previous years, you can work out how fast the market is expanding or contracting.
You should also be able to identify whether your market is static or changing fast-whether what you are offering has a stable demand or is just a craze. Is the market seasonal? Will demand be the same throughout the year, or will there be peaks and troughs?
If you know in advance that the market is seasonal, you can better prepare for the troughs: do you concentrate some advertising here to flatten out the troughs? Can this time be used for building up stock or finding new customers for later on?
You should also aim to understand the outside factors affecting your market.
For example, a young person starting off as a jobbing builder specialising in house improvements and extensions will be affected.
by:
Mortgage rates: if they are high, more people may prefer to keep their current house and improve that rather than move;
DIY popularity
Unemployment levels: if they are high in the area, it means that there is more free time for people to do their own repairs, that they have less money to pay others to do the work, and that there may be more competitors in the uniform economy”.
can get off the ground, let alone survive. Some people believe that customers arrive after the firm “opens its doors”. This is nonsense. You need to find them before you even think of launching. If you cannot name with absolute certainty the first 20 people who are going to buy from you, then you are not ready to start.
But even naming names is not enough. You have to organise the rest of the potential customers into clusters or groups of “similar” types. For example, a shop or restaurant has regular and passing trade. The balance between the two is a fundamental issue that affects everything else that the business does.
Define your target audience as accurately as possible.
Characteristics that you should be aware of include:
Type of Customer - Individuals, companies.
Location - Where do individuals live? Where are companies situated?
Occupation What do individuals do? What type of companies could use your product?
Income - What is your customers’ spending power? What are the turnover figures of companies?
Sex - Do males or females use your product/service?
Spare time - What do individuals like doing in their spare time?
Lifestyle Do your customers belong to a known lifestyle group eg. yuppie, hippie and so on.
The information you collect about your customers can be used in designing effective advertising, deciding on a suitable pricing structure, providing the right products, knowing the best location.
Remember that your product/service may appeal to more than one type of customer, for example, individuals or companies. You must therefore be aware of their differing characteristics and needs/wants. This is called customer segmentation.
Take a complete business course and receive nationally recognised qualification or call us free at 08000-75-8000 for further information
CARRYING OUT MARKET RESEARCH
Market research aims to assist you to make accurate business decisions. Market research can provide you with information covering a range of business related topics such as:
Recent and forecasted trends
The potential size of your market
Level of demand for your product!
service
Customer characteristics
Effective methods of advertising
A suitable pricing structure
Collecting information about your potential customers is achieved through:
Secondary information sources. Primary research
Talking to and observing your customers and others’ customers, both before and after you start your business. Do not underestimate the importance of doing this.
I. DESK RESEARCH
Desk research covers published sources that contain information and data related to your proposed business idea. This is known as “secondary” research.
These sources are useful in providing you with background information quickly and cheaply. They will help you in directing further in-depth research. Many sources can be found in your nearest central library.
Useful sources for you will include government reports and statistics, market research reports, technical press, business directories (local and national), press articles, telephone directories, company brochures, local ward profiles, and the electoral register.
Information which can be acquired from these sources includes:
Market Information: Size, market location, types of product/service, overall market, and main market trends.
Competition: How many competitors locally and nationally, turnover, product group, services, branches.
EXAMPLE 1:
KNOWING YOUR MARKET
1 . What is the product or service being offered?
2. What is the market?
3. What are the market trends?
4. Who are your customers? Name names.
5. What are your customers looking for?
6. Does your product or service match your customers’ needs?
7. Who are the competition?
8. Why will your customers buy your product or service rather than that provided by your competition?
9. What price should you charge?
10. What is the best way of communicating with potential customers?
Customers: Customer type for various products/services, spending habits, customer preferences.
Future Trends: Influenced by forecasted population changes, technological developments, changing customer trends, political and economic forecasts.
II. PRIMARY RESEARCH
One problem with secondary information sources is that information and data may be too general for your particular needs. This is especially so if your market is very local.
Field or “primary” research covers that work which you prepare and conduct in order to find out the specific information and data that you require.
Before embarking on your own research it is important to identify exactly what you already know and therefore what it is that you are aiming to find out, for example, customer reaction to product, where customers are situated, best way to reach them, demand for product/service etc. Make a list of the information you want to acquire.
Identify exactly who it is that needs to answer your research questions.
You will need to decide which research method is best for your needs. There are three basic types: face to face interviewing, telephone interviewing and postal questionnaires.
Face to Face: It is easy to identify the type of person you are interested in questioning. You will get a high response rate with this type of research. However, it is time consuming and difficult to get a high geographical coverage.
Telephone: A quick method of researching a large number of people over a wide geographic area. However, it is costly and you may not be able to speak to the person you need to.
Postal: Post a questionnaires give people time to think. However, they traditionally give a low response rate.
If you are conducting a large survey it is essential to use a questionnaire as analysis of the results will be easier.
A specialised type of research to find out in- depth feelings about a product or service is to conduct a focus or group interview. These allow for an in-depth discussion about your product/service (amongst your target customers). Again it is important to have decided previously what it is that you want to find out and to be properly prepared.
DESIGNING A QUESTIONNAIRE 
Before designing a questionnaire, decide exactly what information you are using it to identify.
Additionally, it is important to consider who it is that you require to complete the questionnaire. This will ensure that you use language that they will understand.
You must decide on the number of respondents that you require. This depends on the size of the potential market. For example, a very specialised product with a small market may only require a small number of respondents to give in-depth responses to indicate potential demands.
DO’S:
Do have a logical order.
Do put easy or interesting questions first.
Do test out the questionnaire on friends so that any ambiguous questions can be rectified.
Do keep wording simple.
Do be precise.
Do phrase personal questions carefully and keep them towards the end.
DON’TS:
Do not ask questions the respondent cannot answer.
Do not ask questions that overtax the respondent’s memory.
Do not ask questions that make the respondent look stupid or involve a loss of status - eg. how much do you earn? Instead, bracket together in groups, eg, age 25-40; salary £10,000-20,000.
Do not ask leading questions eg, ‘You prefer chocolate biscuits don’t you?’
Do not ask two questions in one sentence.
Take a complete business course and receive nationally recognised qualification or call us free at 08000-75-8000 for further information
ANALYSING INFORMATION
Remember that your questionnaire was designed to give you information and answers on specific matters related to your business. You must ensure that your analysis of results gives you this information.
An easy way of analysing results is to work out answers on a percentage basis, for example, 38% of respondents said they ate chocolate bars twice a week.
Use and take note carefully of the results that your questionnaire provides you with. Remember that there is no point in pursuing a business idea if your research has shown that there will be little demand for it.
Finally, remember that market research is an on-going process to assimilate information continually to help you make good business decisions.
WHO/WHAT IS MY COMPETITION?
Who are your competitors and what are their strengths and weaknesses? Most businesses have competitors. To some extent this is reassuring because you know in advance that customers need what you have to offer. But you have to identify who they are and how they can affect your business. You have to know everything about them: their product range, prices, discount structure, delivery arrangements, specifications, minimum word& quantities, terms of trade and the kind of advertising that competitors use, where they advertise and with what success.
Informal conversations, for example with a small group of people over coffee can often give as much information and leads to a small business as an expensive and formal survey. These informal sessions will also tell you the language-vocabulary-which customers use when talking about your product or service.
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