Starting your own business is never easy. The hardest thing is to come up with a completely new idea and find a market for it. As a follow-up to our business plan writing guidelines from last week, here are a few more steps we recommend you to take before starting the actual work on your business idea.
Step 4: Marketing strategies
When starting a business, you need to appeal to customers in every possible way in order to make more sales. The four basic things you need to look at, are the price, the product, the promotion and the place (location) of the business. This is called the marketing mix.
- Place - If you are intending to sell your products from a store and not online, you need make sure that you are situated in an area, where potential customers can easily get to you. The more convenient it is for them, the more they will visit your shop. You could buy or rent a property and usually the more central the area, the higher the buying or renting price. You need to decide whether it will be worthwhile to invest a lot of money into finding the perfect spot or you can find a less attractive but cheaper place and increase for example your advertising in order to make people aware of your business. Furthermore, if your product is aimed at the middle and low income classes, then perhaps it is better to situate your shop around the outskirts of town rather than in the centre, as it will be easier for your target segment to visit it.
- Price - As already mentioned, it’s important to have the right price for your product. Make a research and find out the perfect price for your product, based on how many are willing to buy at the given price. That can be done again, by conducting surveys both online and on-the-field. You have to explain the product and maybe show a prototype and ask how much people will be willing to pay for it. For an accurate result that a strategy can be based on, at least 200 people need to be asked. Then you can graph the results and if there is an obvious winner, that would be the price you shoud go for. Of course, you need to make sure that the price is higher than the cost-per-product in order to make profit. There are some marketing techniques, such as penetration pricing, where the price is set below the cost of the product, for a short time, in order to attract customers, when entering a new market. You might also consider some alternative pricing strategies.
- Product - You need to make sure there is a potential demand for your product, before investing all your money into making it a business. You need to do a research of your own, asking people whether they would buy your product or not, maybe create a webpage to advertise it and make online sales, create an online survey etc. It is important to give a boost to your product and make it more ‘attractive’. You can use strategies such as, appealing packaging, health factor, diversification of the product - different colours, different flavours (food and beverage), part of a diet etc.
- Promotion - Also known as advertising, promotion is very important in order to popularize your business. Positive advertising is crucial for any business, as it is the way to gain customers’ favor. Combine the adverts with themes that are well received around the world, such as, contributing to a charity, supporting green energy and saving the environment, clean water, healthy diet, reducing risk of diseases etc. Advertising could be from a simple ad on a website, to a whole commercial on the TV, leaflets, word-of-mouth(you need to make good impression on customers in order for that to happen or tell friends and family to promote it via communication), etc. The saying ‘any kind of PR is good PR’ is not necessarily true, even though it will get you ‘on the map’, it may affect your business adversely, depending on how personally the customers take it. For example, negative PR which can be beneficial is one that creates controversy, like saying your product contributes to global warming. Even though that’s a bad thing, you connect your product with a very widely known issue and therefore, give it that little bit more of publicity. An example of bad, negative PR would be if your product is advertised to increase the chance of heart-attacks or strokes or other diseases or if it is affecting the environment in a negative way (increasingly important issue these days)
Step 5: Establish connections
Depending on the type of business, you need to find a good deal on your supplies (either supplying or being supplied) before starting your business. Establish connections and negotiate a working relationship (price and terms of delivery, draw up a contract, payment period a.k.a period in which you will payback your supplier for example a reasonable period for a small to medium business is 15 days. The more the business grows and the better relationship with the supplier you have, the better terms of agreement can be negotiated for example payback period can be increased to 30 days) It is advisory to check the quality and the social status of the company you are dealing with. Bad publicity on a business you are dealing with, can affect the image of YOUR company and thus lead to the loss of clients. Bad image is very hard to ‘wash off’ so be aware of that.
- Online presence - Having a good website is a major advantage to any business (especially for an online business), since most people now use the internet as the main source of information. If you can’t afford a good website or you decide your business does not need one, make sure to have a good social network presence. Facebook, Twitter, Tumblr, Google +, LinkedIn and others are a good place to advertise and make connections with potential business partners and customers.
- Team and organizational structure - Make sure to know what your partners’ expertise is and make good use of them. This way, the business can be split and the team can work on their field of expertise and so can you. That should boost the productivity and efficiency inside the company. It is important to have a good organizational structure as well, especially in a company with a lot of employees, as that would allow communication to flow smoothly through the levels of management. A flat structure suggests that there is only one level of hierarchy and all the employees are equal. It is useful for smaller businesses, where the number of the employees is low. The tall structure is based on hierarchical levels, which includes different types of managers who are in charge of groups of workers. It includes regional managers for example a manager of sales, cleaning staff manager, financial manager, operational manager etc. It is better for a company with a high number of employees, where it is hard for the owner/s to look after every single one.
Step 6: The final detail
It is important to set goals and aim to achieve them within a certain period of time. The milestones should be neither too optimistic, nor too pessimistic, but rather realistic.
- You can set а profit target - A number that is well planned, after calculating all the estimated costs and revenues and it is possible to be achieved. You can do that by using the balance sheet and calculating the possible profit, by adding all the costs and subtracting them from the revenue gained from the estimated sales. Perhaps, in the first years of business, survival should be the main concern, but nevertheless, set milestones that can be achieved over a few years.
- You can create a GANTT chart, which is important for keeping track of the tasks over period of time. It is crucial to keep track of things, otherwise your business may plummet, before it even takes off.
Image courtesy: Daniel Foster, Flickr CC.