Thinking of starting your own business - but too scared to take the big leap? Part 1
How do you know if you have what it takes to start a business and is it really the right thing for you?
Well, I've been there and maybe I can help you streamline your thoughts a bit and bring you one step further towards deciding whether you should go ahead and follow your dream.
You might have been thinking about taking this step for years but never had the time or courage to actual sit down and work out whether there really is something in it. Or maybe this past couple of years of living during a world spread pandemic has given you the time to think about whether the job you're currently doing is still challenging you - are you waking up feeling excited about your day at work?
Or, perhaps you've had a career break for some years and you're looking to get your teeth into something that really inspires and excites you?
FIRST THINGS FIRST...
Do You Have Passion, Drive and Stamina?
Is there a burning dream inside you that makes you feel almost revitalised when you think about going ahead and following it?
Starting your own business is incredibly exciting but it also takes a lot of very hard work, long hours and constantly thinking about how to reach your goals. It's important to set yourself some goals as they will help your drive and determination to keep going. Your goals may alter slightly in your first years of trading but that is quite normal and is often part of adjusting to parameters that you have little or no control over such as competition and change in variable overheads or consumer habits (anyway this is an ongoing journey when running your own business)
Where there is a will there is a way.
What's Your Idea?
If you were to start your own business, do you know what kind of business you want to set up?
Do you want to offer a service or produce/craft or import a product?
Grab a pen and paper and start to write down your ideas and don't be afraid to 'go large' and write anything down that comes to mind as this will help your creative thinking. A good place to start is to think about solving a problem that you are encountering yourself - for instance;
There is nowhere to buy decent quality teenage clothes at reasonable prices in my town.
Our town is missing shops that sell handcrafted and homemade goods.
Are there some services missing in your town?
Can you find a way of saving people money?
Try to get in the mindset of noticing the things that frustrate you as you do your daily tasks, be they at home or work - is there a gap for something you need yourself?
Remember: Every problem is an opportunity for a new product, service or business.
Coming up with business ideas doesn’t always mean you have to focus on inventing new products or services. You could just as easily adapt an existing service and introduce new benefits that makes peoples’ lives easier. Start looking at the things around you and ask yourself -
How could this be easier?
How could it be more intuitive
Could I make it less stressful and in general more pleasant to use?
After you have listed your ideas go through them all again and be more critical about whether they are realistic.
It's also important that you choose something that feels natural to you and your personality, that way you have more chances of succeeding and creating a work life balance that will work longterm.
You will have to do some research to find out if there is already someone out there doing what you're planning to do and chances are that there will be several already. So, you need to do your research properly to find out how you can bring something unique to the market, why would people choose your product or service over others?
The goal of market research is to better understand your target market and competitors in order to craft an effective business plan. Whilst you can conduct a lot of market research online I personally feel it's important to take a walk around the area you want to base your business in, visit the shops and amenities to get a 'feel' for the area and the people. If you're basing your business in your hometown, do the same thing but with your 'business mind' switched on and really notice how things are done - what's good, what could be improved, what's missing?
Things to include in your market research:
1. Who are your competitors?
If there are a lot of competitors it means the market is well established and in some cases in can mean it is quite saturated and in this case you'll have to be very clever about how you can differentiate yourself so you can attract customers and get a share of the market.
If there are few competitors you might be looking at a niche market. A niche market is a segment of a larger market that has its own demands and preferences. You can focus on niche markets to better cater to a specific consumer than competitors who target a broad audience. Catering to the unique demands that mainstream providers aren't addressing can build loyalty and revenue with a largely-overlooked audience.
As an example sustainability has become a hot topic among consumers in the recents years. According to a survey by IBM, nearly 6 in 10 consumers were willing to change their shopping habits to reduce environmental impact. The rise of the conscious consumer has paved the way for vegan, eco-friendly, and cruelty-free variations of conventional products. If there is a product that is frequently purchased by the mass market, there is likely a niche of conscious consumers that will embrace a greener alternative.
2. What is the market size?
Determining the market size is critical. It will tell you how much potential business is really out there. It helps calculate how much value there is for your individual venture. This is critical to know, even if you never plan raise funding for your business through banks or investors.
A top-down analysis: A top-down analysis is completed by calculating the entire total market you’ll be entering and then estimating your share of that market.
For example, if the UK clothing market is worth £51.2bn. Even if your business is targeting a market share of just 0.5%, that’s still £256,000,000. Naturally, a top-down analysis is often widely optimistic.
A bottom-up analysis: A bottom-down analysis is completed by estimating potential sales in order to calculate an overall sales figure. It takes into account where products can be sold, the sales of comparable products and the slice of current sales you can carve out. While it is a lot more work than a top-down analysis, the final figure will often be much more accurate.
Colin Barrow, author of Business Plans for Small Businesses, gives the following example of how entrepreneurs should start to think more precisely when working out who they’ll be selling to.
“If bread is your business you will be able to discover rapidly that the consumption of bread in Europe is £10bn a year. But bread is a very broad industry. The industry-wide definition of bread includes sliced and unsliced bread, rolls, bakery snacks and speciality breads. It covers plant-baked products, those that are baked by in-store bakers, and products sold through craft bakers.
Assessing the relevant market, then, involves refining global statistics to provide the real scope of your market. If your business only operates in the UK the market is worth over £2.7bn, equivalent to 12 million loaves a day, one of the largest sectors in food. If you are only operating in the craft bakery segment, the relevant market shrinks down to £13.5m; this in turn contracts still further to £9.7m if you are, say, only operating within the M25.
This is the hurdle that nine out of every 10 business plans fail to cross. Entrepreneurs like to think big, but a business plan based on attacking the £10bn European bread market, rather than the much smaller near £10m market for craft bread products they are really going into, will lack all credibility.”
Often a quick search on the internet will reveal information published by trade bodies, researchers or bloggers on trends and figures in identified market places.
3. What is happening in the sector you're about to enter?
Research your sector thoroughly.
Who are the big players?
Who would be your competitors?
What are they doing to attract business? - Sales channels? Check out their websites and social media platforms, reviews
How do you perceive their brand?
Visit trade and consumer exhibitions, talk to people, find out where things are produced, prices, quality levels, best sellers, packaging, point of sale, range hierarchy - are they offering a 'good-better-best pricing strategy'?
If you're planning to start a service business look for events, forums, seminars, webinars to attend, visit places that offer a similar service to yours.
Who is your target audience?
Your target audience is the group of people you plan to sell your products or service to. It is really important to identify this so you can tailor your product or service to your audience. The best way to find your target audience is by first thinking about the specific needs your product or service fulfil. You should identify the pain points and then determine who has those pain points.
Target audiences share similar demographic traits such as:
Socio economic status
Identifying your audience will help you tailor your product or service, it will help you advertise more efficiently as you know who your target audience is and how to reach them. While it can seem like focusing only on specific segments of the population is limiting and you feel like you should reach as many people as possible, what you really need to do is 'reach potential consumers directly'.
Directly reaching those interested in your product or service will ultimately put more money in your pocket. Therefore, before you decide what your message is and how to deliver it, you need to understand who will be receiving it.
What About Skill Set?
Do you already have the skills it would take or do you need to enrol on a course or a new degree?
If you need a new qualification research where this could take place in practical distance to your home. How long will it take you and consider whether you might be able to carry on doing your existing job whilst studying. There are of course costs to take into consideration and deciding whether it will be feasible to complete the course/degree and still earn enough money in the meantime.
Depending on which stage you're at in your life, this is really important to think SERIOUSLY about. If you have a family and young children (like I had when I decided to start my second full time degree) you need to have a plan in place of how you are going to cope with it all. I'm not going to lie and say it's going to be easy as it's DEFINITELY not, BUT your passion is the drive that will help you through it - and it opens up a whole new exciting for you.
Investing in yourself is a good thing and I also believe that whilst it's hard to do when you have children to look after, it's not a bad thing for them to experience that you like to improve or add to your skill set to reach your goal - quite the opposite - I would like to believe that my children have learned that you should follow your dream and if you work hard you will achieve what you set out to do.
What is you financial situation like? Should you keep your current job whilst trying to set up your business to keep money coming in until you reach break even - and is this physically possible? Do you have savings you're planning to use or do you need to speak to your bank about potentially borrowing money? Are there any grants available? Some of the banks have kick starter schemes where they support start ups and it is worth looking into.
It's important to be realistic about how you're going to manage financially until you're fully up and running with the business.
Before you can decide whether starting your business is a viable idea you need to make a budget with sales forecast, variable and fixed costs so you can work out how much you can charge for your product or service and whether there will be room for paying yourself a salary and earn a profit.
Still Feeling Excited?
If after having gone through the above process you are still passionate and the answers to all the questions you have asked yourself are looking promising, then I think it's time you pursue your dream and get started!
It doesn't end here though, once you have made the decision that it's a viable idea to start your business you need to start thinking about the next steps that will actually make it happen which is the really exciting bit....such as deciding on a business name, visual identity/logo/branding package etc - I will cover that in Part 2.
Take deep breaths, be brave and follow your instinct!
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