If you are a budding entrepreneur with a great idea, you are undoubtedly in the process of getting your head around your business plan and finding out who already rules the roost in your chosen market. You are also probably wondering how on earth you are going to pull the necessary funds together to get your amazing idea off the ground. Feeling overwhelmed by it all? Don’t worry – every entrepreneur feels the same at this point.
To try and help take the stress out of this stage of your business planning, we have put together this quick guide that gives you some tips on the methods to use when researching your market, and a few handy hints to get that much-needed initial burst of cash.
Researching your market
Marketing may be key to the success of any product or service, but to really make an impact in your chosen marketplace, you need to first know both what your competitors are doing and what your potential customers want. While this can be daunting, it really is necessary so that you can identify particular market segments to target, as well as creating a niche within a market for your product to work in.
So how do you go about researching the market you are going to take on?
Gathering primary data
Primary data is fresh information you find for yourself – or employ someone to collect for you – using tailored and fresh research methods. The aim is to do everything you can to get to know the market, and there are several methods that can really help you understand the landscape better:
- Check out the competition by browsing their websites and visiting them in person. Entrepreneur advises keeping an eye out for similar businesses based in a location similar to your prospective base of operations, then arrange a meeting with the owner for any advice they are willing to give. Always be on the lookout for similar businesses that are selling up, and do your best to find out exactly what went wrong for them so you can avoid their mistakes.
- Don’t forget to extend your research further afield; take a look at the websites of your national competitors to see if you’re inspired to hone your own product in light of their offerings.
- Use focus groups and group surveys. Carrying out either formal or informal interviews could generate ideas for ways in which you could improve your product or idea, and they’ll also help you understand the buying habits of certain demographics better.
- You could also use phone surveys – a relatively inexpensive method of collecting data – and direct mail questionnaires. For more on these methods, take a look at the article here once you’ve finished reading.
Gathering secondary data
Secondary data is already out there, collected and compiled, ready for you to use. While you may have to subscribe to an organisation or pay a fee to get hold of it, it’ll cost far less than conducting your own research. Here’s a quick run-through of some potential sources for secondary information:
- Look to the government for pre-published reports and statistics on almost everything, available for free from their statistics website. Having these on hand will show you how the market you’re targeting is currently performing, as well as any trends and customer habits.
- Commercial data companies often have this information (and variations on it), though usually for a fee.
- Contact any trade associations or bodies operating in your sector. They’ll either have their own publications to offer you, or they’ll be able to point you in the right direction to source the information you need – and even offer advice on finding sector-specific data.
- You can also find over 4,000 market research reports at the British Library Business & IP Centre.
Tip: Check that the information you’re using is up-to-date, as statistics change quickly and soon become inaccurate or irrelevant.
Getting funding for your idea
There are several routes you can take to secure the finances you need to get your idea off the ground. Here are a few important pointers to follow:
Research and Development (R&D) tax credits
If you need to carry out research and design for your business, it’s well worth finding out if you are eligible for government tax relief.
You may be entitled to government money if you meet certain criteria. For example, in some situations people from ethnic minorities or people with a disability are eligible for a grant. Even if you don’t fall into the above categories, look into grants as you may find there is something you are entitled to. You could use the business finance and support finder here to help you.
As long as you carefully and meticulously track your outgoings and don’t spend more than you can afford to pay back, taking out a credit card can give you access to those initial funds.
Lease and hire purchase
If you can’t afford to buy the goods you need to get your business off the ground outright, you can hire them for as long as you need, then make the purchase when you can afford to. It’ll cost more overall, but it is a good way to initially get your equipment together.
A loan from friends and family
For some, turning to friends and family for a loan is a necessary evil; for others, it’s the best way to get an interest-free loan. However you look at it, if you’re going to take this route be sure to have an agreement written up and make sure all involved are happy with the repayment terms.
As we discussed in a recent blog, A beginner’s guide to crowdfunding, this is a recent trend gaining popularity week on week. In essence, crowdfunding is an online platform that allows many different people to donate capital to your project in return for some kind of reward. While there are many different platforms available such as Kickstarter, Indiegogo and RocketHub, they all work in a similar fashion by allowing the project creator to create a profile including a video, then upload a short description of their project, an investment target, a list of rewards per donation and any other supporting images they feel will help convince potential investors.
In future blogs publishing in the next few weeks, we’ll be featuring crowdfunded projects of successful startups which were used for both financing and market research.
Another potential route to take is that of investment finance.
Also known as equity finance, investment finance involves selling a part of your business, or shares, to an investor. As well as providing some extra finance, they’ll also share any profits or losses your new business makes. Investment specialist and author Brian Cohen recommends this route in an interview with Entrepreneur, saying: “[When] entrepreneurs focus on the source of the funding – or what I’ve dubbed “Investor Raising” – a company is more likely to flourish. It’s the source of funds who can provide counsel, contacts and other benefits that in total value will dwarf the initial monetary investment.”
The government and business site GOV.UK advises that investment finance can be complicated and that you might want to get professional advice, but as a starting point here is an overview of the pros and cons:
- You won’t have to pay any interest on an investor’s cash.
- The investor may bring new ideas, skills and opportunities that’ll advance your idea.
- The business risks will be shared with another person.
- Your share in your own business will be reduced.
- You won’t have complete control when it comes to business decisions, although the opportunity to have a sounding board could prove beneficial.
- You can only sell shares if you are a limited company, not if you’re a sole trader or are in a partnership.
Want some more information about getting funding or running a business? Our knowledge hub and blog are full of helpful articles.