Starting a Business in 7 simple steps. Alex Ritchie

their characteristics as closely as possible. You must analyse each sub-group of your target market and develop a different marketing plan to reach each of them. (See Step 3.)

      Include the size of your target market and what the purchase potential might be (gathered from your market research and analysis – see here). Have you identified any key purchasing motivations that a particular group has? Do they need your product or service or is there a problem that it will alleviate? If so, include it. Where statistics or graphs are available, include them and reference where they came from. Trade associations and industry bodies can be useful here; they represent particular industries and trades, and it’s likely that there’ll be one for your industry or trade too.

      Lastly, you need to provide information on how you expect to reach the market – your marketing strategy. Information later on in this step and in Step 3 will help you to define this.

       Market research

      It’s important that you carry out market research on your business idea, products or services so that you get a good idea of how well they’ll be received by your potential customers.

      There are two basic kinds of market research, quantitative and qualitative, and there are a number of different methods within each of the two categories. Both types can provide useful information and you might decide on a mixture of both, depending on your budget or time frame. Generally, qualitative research provides more detailed results from fewer people and can take more time, money or resources per person to conduct, whereas quantitative research usually provides less detailed information from much larger numbers of people within a shorter time frame and often at a cheaper rate. You should aim to use a mixture of both types to ensure you achieve reliable results from your research.

       Qualitative

       Focus groupsGather a group of potential customers together to garner their opinions on any aspect of your business. Questions should be structured according to what information you wish to learn. For example, if you need to understand what will make your customers buy your product, ask them what they currently buy that’s similar and why they buy it. Include questions about convenience, price, brand allegiance, customer service, etc. Then ask them what they like and don’t like about your particular product.

       In-depth interviewsOne-to-one interviews can provide more detailed results but will require a longer time frame or a larger team of interviewers.

       Field trialsThese involve placing your product with a group of customers or stores and allowing them to test it for a specified period of time. This can be very effective but ensure you obtain agreement beforehand that customers or stores will be willing to feed back results in a structured way. This could involve contacting a group of potential or existing customers and asking them if they’d like to trial your product for free for a period of time in return for completing a short survey on their findings.

       Quantitative

       SurveysSurveys can reach a larger number of people. Distribution might be in hard copy or online or conducted via telephone or in person. You should be prepared for fairly low response rates (5% would be considered a good response rate if you’re not offering an incentive for completing the survey) and less detailed responses.

       Data collection and analysis

      Data collection and analysis is also known as a situational analysis and is a vital part of business planning, involving the collection and evaluation of data about your own business, those of your competitors and the wider sector. Completing this particular element of the business plan will:

       provide you with the evidence you need on which to base your forecasts.

       help you to decide which opportunities to pursue, along with the strengths and weaknesses of your business or products.

       enable you to identify any competitive advantage you have.

      The situational analysis enables you to evaluate the position of your business, idea or products. There are various tools that can be used but the following are the four key tools.

       PEST analysis

      PEST is an acronym for political, economic, social and technological factors. A PEST analysis generally looks at external factors and can help you to understand changes or developments in the market and the position of your business in it by looking at the ‘bigger picture’. It’ll help you to identify external opportunities or threats and take proactive action. We look at each factor in turn here.

       Political factors

      Political factors relate to Government and include anything related to the law or legislation, for example, employment law and health and safety. Each country has its own set of legislation. Information on UK legislative acts can be found at: www.legislation.gov.uk. How might these affect your business?

       Economic factors

      Economic factors relate to things like interest rates or changes in inflation. How might the way the economy is performing affect your business?

       Social factors

      Social factors relate to consumer spending habits and trends. These are, of course, linked to economic factors as you’re likely to find that people’s spending habits go down in a recession and up in a boom. How might they affect your business?