Having hopes, dreams and aspirations is fantastic, commendable and significant. Equally essential are the facts about your proposed customers. As you begin to develop your product or service and before you risk greater sums of money bringing this to the market it is vital that you identify where your potential customers are located.
It seems so logical and yet each year thousands of people launch businesses and locate them in the wrong place. Budding entrepreneurs find themselves taking retail premises at the wrong end of town or where there is poor parking because they have not researched the footfall for their chosen market. I see manufacturers setting up in locations far from their customer base because of apparently cheaper rents elsewhere. I see internet companies that need to send out physical stock in locations that add cost and inconvenience to their couriers thus raising their cost base.
At this early stage in preparing to launch your new business it is essential that you are rigorous in researching exactly where your customers are located. Please don’t simply follow the herd and set up where other similar businesses are already located because this results in;
• Increased competition on your specific customer footfall
• Pushes down the unit sales price for you and the competition
• Risks the failure of your venture when the existing competition has deeper pockets than you and embarks on a discount selling format to retain their market share.
You can never be certain why the competition has settled in their location.
You can be certain why you have chosen your location.
Before you research your potential customer base clarify in a few words what you want to sell. In this way you can ask potential customers very simple questions to which the answer you seek should be either YES ‘would you buy this product in this location‘ or NO.
My advice is to get wise about your potential customers and not rely on a single pathway to get your information. Do not get carried away with vague or generic numbers, such as the number of residents in a given area, or the number of members of a trade group or association. There is always an exceedingly high rate of attrition when using such data.
1. If you plan a local retail type of business try on-street canvassing in various locations around your preferred town. Vary the times and days of the week in order to gain a picture about the ebb and flow of customers in the different location. It will be too late if you sign a lease on premises in the wrong location and the rate of customer footfall doesn’t meet your needs.
2. Remember to use several different search engines when conduction internet searches and do not simply add the total numbers for each search to one another. Remember there will be a high rate of customer overlap on all searches. For example if you are looking for the number of plumbers in a given area to sell your new widget to, don’t simply add the number of plumbers in one trade association to the number of plumbers registered with the local authority. Far better to gather a specific list in say an Excel spread sheet and then drop each successive search into the same software so that you can eliminate duplications. MailChimp is a good route if you are going to canvas a wide market and eliminate duplications. There are many such products that are phone and tablet based for such work.
3. Do not ignore paper records. Yellow Pages, local authority records, libraries, magazines covering your interest areas from solar electrical engineering to cuddly pet ownership, all sectors have magazines where readership levels can be trawled for information on customers and competitors.
Most importantly do not fall into the trap of asking such vague questions that the answers have no value. Too often budding entrepreneurs want their hopes and aspirations massaged. This is not the function of writing a Business Plan and conducting Market Research.
You should be seeking the truth about the market potential for your business idea. Find the flaws in your ideas here and you can vary your offering to meet actual market needs.
This extract is taken from my weekly blog on how to research and construct a meaningful Business Plan. All the information is FREE and will be FREE to download from www.JGID.com shortly.
I believe that all knowledge that helps businesses progress should be available to all, FREE at the point of need.
Thank you for reading this blog and please feel free to add any comments to the discussion.