Your business plan health check
Assessment of demand
Establish if there’s a demand for your business as early as possible to reduce the chances of investing time and money in an idea that won’t take off.
Without demand for your product or service, you just don’t have a business. Even if you’ve already attracted interest and a few contracts, you need to establish sustainable demand so you and your investors can move forward with peace of mind.
Do the math
First, set a benchmark of income your business must provide. If your target market can’t reach your benchmark, see if you can reposition your business idea to a more sustainable target market or take another look at your costs and financial needs.
Define your target market
Successful businesses thrive on targeting the customer types most likely to respond to their product or service offering. It’s all about focusing on your best customers to the maximum your return on investment. In most businesses, 20% of the customers provide 80% of the income, so there’s no point investing equal amounts of time and money marketing your business to all your customers when you’ll receive a much higher return from the top 20%.
If you’ve identified a gap in the market, you’ll already have some idea of who you need to target, so the next task is to find out their quantity and spending habits.
Research your target markets and build customer-type profiles. You can use them to establish demand and help you tailor your business to your target markets’ needs.
Researching and profiling target markets
Carry out online research
Desk research is the most efficient way to start researching your target market. This way, if you spot any early red flags, you haven’t wasted much time or money.
- Build a picture of your potential target market’s demographics by using statistical information and reports you find online. Are they 20-somethingmales, for example, or senior citizens with grandchildren? Both government and private organizations commission and publish reports and assessments online that could help you identify growing markets.
- Consult your local chamber of commerce or industry and business groups. They may have valuable insight into the markets you’re profiling.
- Look at the peaks and troughs in demand in your target market to establish their pattern.
Carry out in-market research
Online research will only take you so far. If the statistics on your target market demographics add up, go talk to your target customers directly.
- Meet with a selection of your target market. Conduct surveys face-to-face or set up a focus group to gather information on their preferences and spending habits.
- Meet with other businesses in your industry, from suppliers to business associations. They may be able to give you valuable insights
- Consider trial marketing a sample of your product or service on a limited scale to gain direct feedback on the customer experience and how you can further target your offering. Advance orders may indicate real market demand
- Experience the customer service offered by your competitors to truly weigh up their strengths and weaknesses.
To set your business apart from the competition, you’ll need some competitive advantages that together form a potent value proposition to help you compete for customers and take market share.
Your first step needs to be competitor research, then rather than directly compete with established and powerful competitors, find your own niche.
- Who your competitors are and where they’re located.
- How and where they sell.
- The power they have in the market.
- How they’ll likely respond to your market
Conduct a SWOT analysis to form a positioning strategy by evaluating your competitors’:
- Strengths (internal competitive advantages).
- Weaknesses (areas where you’re more likely to take market share).
- Opportunities (external market trends they could target with their strengths).
- Threats (external market trends such as a new competitor like you that will cause them some headaches).
Competitor research tips
- Carry out online research by searching for information about your competitors and similar businesses.
- Be a customer and try to identify any strengths or weaknesses.
- Check out their pricing strategy. Can you compete or differentiate enough to charge more?
- Most industries have consumer websites containing reviews and forums where customers go online to vent about or recommend businesses. Check them out and ask some questions.
Choose your competitive advantages
Once you find an available or badly defended position in the marketplace, you need to choose strong competitive advantages that’ll make up your value proposition, so you can fill that gap effectively.
Remember, if you have any success, new market entrants may try to ride on your coat tails and established competitors may react by repositioning to push you out.
If you’re targeting other businesses rather than consumers, they may be locked into long-term supplier contracts. If so, find out when they’ll be up for tender again and keep your business top-of-mind with the customer in the meantime.
Market and defend your value proposition
- Create marketing messages around your value proposition. Make it central on all your marketing material by building your brand around it, identifying keywords you can consistently use, and developing a slogan that ties in with it.
- Use sales techniques and promotions that align with your value proposition and avoid those that don’t.
- Protect your value proposition by using intellectual property protection on the competitive advantages you can patent or trademark.
- Consider the longevity of your competitive advantages. Are they based on any technology that could become outdated or be threatened by a forthcoming innovation, development or change in government policy?
- Refer to your value proposition and competitive advantages throughout your business plan to help you develop or change them as part of a business-wide strategy.
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