Get your business started: the value of market research

One of the first questions that we often get asked from aspiring entrepreneurs is how to

Market research

Market research

take the first step in developing an interesting business idea into a fully functioning business. While there are a series of important steps that need to be taken when planning out a business, a critical first step is to do market research.

Market research is an important starting point because it can help a prospective business owner gain a larger understanding of the marketplace and helping educate an entrepreneur on the viability and reality of starting a particular business venture.

So where does one start with market research? First we must identify the two basic types of market research: Primary Research and Secondary Research.

Primary market research methods can use financial resources and take a great deal of effort to complete.  Secondary market research methods are generally available free of charge and are readily available either online or in print form.   As a general rule, it is recommended to start with the Secondary resources to gain an understanding of the industry or model.  If one has a strong understanding of the industry as a whole then starting with primary market research would be appropriate.

Primary market research methods include:

  • Personal interviews with potential customers
  • Individual surveys that you develop and administer to gain information
  • Information meetings with industry stakeholders
  • Test marketing of a product or service
  • Mystery shopping the competition

Secondary market research methods include:

  • Published and paid for studies
  • Newspaper and periodicals
  • Statistics – industry based
  • Trade associations, industry associations
  • Trade journals
  • Industry suppliers
  • Industry regulators if applicable

Market Research can be time consuming and costly, but if conducted with focus and determination can provide valuable insight to help new entrepreneurs with a sound foundation.

The Halton Small Business Centre has market research tools and information available.  One of the goals of the Centre is to empower small and medium-sized enterprises and give you the tools to achieve success. For more information about any of Halton Region’s Small Business Centre resources and services, and how we can help direct you to the right resources, contact us at 1-866-4HALTON (42-5866), www.haltonsmallbusiness.ca, smallbusinesss@halton.ca or visit us at 1151 Bronte Road, Oakville. Don’t forget to follow us on Twitter @haltonecdev and Facebook at www.facebook.com/HaltonSBEC.

 

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5 quick tips to Succession Planning

It is never too early to start making plans for the future. Succession Planning is a key

speed in tunnel

speed in tunnel

process that any business owner must consider to ensure a smooth transition when key leadership positions become available. This is particularly true with small business owners who plan to exit their business at some point in the near future.

The Canadian Federation of Independent Business conducted a Succession Planning Survey in 2011 and had over 3,389 responses.  When respondents were asked about how they would like to exit their business, the top responses were as follows:

  • Sell to buyer(s) unrelated to my family – 45.1%
  • Sell to family member(s) – 19.2%
  • Transfer to family member(s) (e.g. inheritance) – 21.2%
  • Wind down (close) the business – 6.0%
  • Other – 4.3%

Continue reading

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Business Planning – Where to Start

Writing a formal business plan can seem daunting, especially when using a template

Business plan

Business plan

that asks questions spanning 8 to 10 separate sections. To help ease into a larger template, it can be helpful to write down some key notes in advance so that you are ready to go when writing a larger plan.

Try writing down some ideas by breaking your thought process into these three modules before picking a template and get a head start on your plan.

  1. Write a short and specific working description of your business.
  • How will you describe your business in a way that will get your readers on board with your idea? The language you use to tell your story in this description will be valuable throughout the entire written plan. Writing this once and reusing the key sound bites in other sections when appropriate will help to keep the rest of your plan sounding consistent.
  1. Create a financial model that works – specifically one that is realistic, affordable, and eventually profitable.
  • The written plan will in various sections refer to your expectations of the financial performance for the business. How much does this idea cost to start? What are the margins on the products or services? What are sales and profit expectations? When will loans be repaid? Building the model in Excel using a cash-flow projection worksheet will help to make you and expert in your business model. Business plans that are consistent and confident while describing potential financial performance are generally well received by readers.
  1. Determine a well-defined target market.
  • An understanding of your specific customers will be a key to success in business and is crucial when writing an effective business plan. A profile of you target customer will help inform how you describe your product, including its design, your marketing messages and tactics, your market size, and your sales projections. Defining who they are, what they care about, and why they will buy is an effective way to make your business plan more specific. A business that tries to sell to a few specific customers will be more effective than one that tries to appeal to everyone at the same time in a more general way.

Planning these three items before starting the larger plan will help to make you an expert in your business. You will quickly have more of the answers during writing, and in turn develop a better momentum for the writing.

The Halton Region Small Business Centre provides consultations and seminars on business planning, financial projections and target markets. See your seminar schedule at halton.ca or call 905-825-6000 x 7900 to book a free one-on-one consultation.

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How to launch a new service or product

Launching a new service or product can be a monumental task for a small business. To help your small business succeed and to keep yourself organized during a launch,  break-up your planning into these three key phases to help ensure you launch goes according to plan.

Business Notes Product Launch

Business Notes Product Launch

Phase 1 – Pre-Launch

  • Set a date and time: Choose a date that works for your customers. Ensure your service/product is ready and pick a date when you anticipate sales to be at their highest.
  • Prepare marketing materials: Choose your promotional materials based on your audience and your budget. This could include advertisements, product information and instruction sheets, infographics, videos, testimonials, announcements, teasers, and entries for various social media platforms if applicable.
  • Create a pre-launch buzz: Track down some key influencers, affiliates (businesses that promote your product in return for financial compensation) or customers who can test your product and start talking about it.
  • Distribution: Confirm that adequate inventory is available and distribution methods are established.
  • Update your website: Make sure your product will be displayed prominently with up-to-date information.
  • Verify your payment systems: Check that your site can handle increased traffic.
  • Test your product and marketing material: Reach out to staff, friends and family for feedback on your product and messaging.
  • Train your staff: Ensure that staff are knowledgeable about the new product or service.

Continue reading

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What’s your personal financial goal?

Diagram of financial plan

Diagram of financial plan

Our April 27th blog – Key questions to consider when planning your business – introduced four questions. Previous weeks have covered “Who’s your customer?”, “How will you reach your customer?” and “How do you get paid?” Today’s final installment tackles the final question “What’s your personal financial goal?”

Money is the most important factor for driving business. No matter what other ambitions you have for prestige, flexibility, philanthropy or control; money is what enables the business to start, continue and grow.

Every entrepreneur needs to identify two specific numbers during the planning phase for a new business. What amount of money do you need to survive and what salary or drawing do you deserve?

The technical process of paying the owner will vary depending on the legal structure of the business, but from a practical perspective, setting the budget is important for every type of business structure.

What amount of money do you need to survive?

Too often entrepreneurs ignore their personal needs in their business plan. They focus on making the projections look as affordable as possible and don’t always consider themselves an expense. Entrepreneurs have households to run and personal needs for food and basic entertainment just the same as a person working in more traditional employment.

Set a realistic minimum budget, and then use this ‘draw’ in the calculation of your business’ break-even point.

What salary or ‘drawing’ do you deserve?

You are allowed to want to make money. You have put in money and effort and taken risk. When the business is profitable you deserve to be compensated for your efforts. You should identify how much money you would want to draw should the business be able to afford to pay you what you’re worth.

Start by identifying how much you would earn as a salary if you were to do a similar management job for an employer, then declare the amount you would want to be able to draw. Compare this target with the business’ capacity; specifically identifying if it is possible to reach the right combination of high sales and low expenses to eventually allow this draw.

Why not just start with what I deserve?

A cash-flow projection worksheet is an important tool for assessing the potential in a business model. By providing the projected sales by month, direct costs of goods and general overhead expenses, the worksheet’s cumulative cash flow line shows if the business can grow financially, or if it is going to struggle and decline until there isn’t any cash remaining.

The risk to skipping the “need” amount and using the “deserve” amount in a projection worksheet is that the projection could be crippled by only the owner’s salary expense. You may appear to be planning a business that will lose money, when really it could be capable of performing well enough to pay your minimum, and grow from there.

Money enables a business to survive and grow, and allow an entrepreneur to live safely and then live well. Defining these numbers is a key to business planning success.

Consultants at the Halton Region Small Business Centre are available to meet with current and perspective entrepreneurs for free. Topics identified in this article, including break-even point, capacity, cash-flow projections and legal structures of businesses can all be discussed. Book your appointment by contacting our centre.

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Planning your business – How will you get paid?

Our blog from April 27 – Key questions to consider when planning your business

paid red square stamp

paid red square stamp

outlined some key questions to consider while planning to open a new business.  This week’s post will focus on the financial question, how will you and your business get paid?

This question includes important factors such as method of payment and related costs, and terms and conditions of payments, such as deposits and advanced payments.

There are many payment options available to business owners. Before signing up for one, it is important to consider the target market customers and determine how that specific market would want to pay?

There are various methods of accepting payment. These include:

Cash

  • Generally considered the best method as there are no additional costs to accept payment.

Credit/debit

  • Very popular with consumers
  • There are variable costs associated with accepting debit/credit cards depending on if the payment is made in person or over the phone/internet.
  • If the card is a premium/affiliate credit card then the costs could increase depending on the service provider.
  • Be sure to investigate before signing up to a merchant account.

Cheque

  • Very common in business to business transactions.
  • Some businesses may request a “certified” cheque to ensure payment, however, the term “certified” really means that the institution “certifies” that the funds were in the account when the cheque was written.
  • It does not certify that the funds are guaranteed to be available when endorsed.  Be sure to understand the risks before accepting cheques.
  • Credit/debit card
  • Electronic funds transfer
  • Money order/Bank draft

Electronic funds transfer (EFT)

  • EFT are also a business to business financial instrument and are useful for international/third party managed transactions.
  • They reduce risk of non-payment.
  • This type of transaction does have costs associated to the third party service provider such as a financial institution or broker.

Bank drafts/money orders

  • These methods are as liquid as cash and guarantee payment will be made.

Payment terms and conditions should also be addressed to avoid any misunderstanding with customers.  These should be visible and available to all customers.

To discuss these and other topics for business start-ups The Halton Region Small Business Centre has resources to help.  One of the goals of the Centre is to empower small and medium-sized enterprises and give you the tools to achieve success.  For more information about resources, services, business events and seminars, contact us by dialing 311, 1-866-442-5866, online at halton.ca/smallbusiness, by email at smallbusiness@halton.ca or

 

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How will you reach your customer?

Our blog on April 27, 2015 – Key questions to consider when planning your

Team target

business – introduced four specific questions that an entrepreneur can ask to help get a head start on a business plan. This week’s post will focus on key question number two – “How will you reach your customer?”

How you reach your customer depends largely on who your customer is and what the product or service is that you are offering. Once you determine who you are targeting you will need to determine a realistic budget then decide on a schedule. When starting out, it is typically easier to manage your marketing if you concentrate on a couple of marketing channels. Select a few marketing tactics that fit your audience and your budget and focus on making them the best that they can be.

Track your progress – make sure you are measuring the results of each tactic and continue to use the ones that are giving you the best results. Reaching your customer really is all about having the right product, in the right place, at the right time for the right price.

To help get you started, here are a few ways to reach out to potential customers: Continue reading

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