New Business Start up Free Business Advice London
02 Aug 2019
You may be contemplating setting up a business from scratch, or it may be you are reading this because you are thinking of launching a new product within your existing business. Initially, attention will be given to setting up a new business. Many of the problems faced in setting up a new business are similar to the ones you are likely to encounter when launching a new product.
Best Ways To Develop A New Business.
Of course, when it comes to the marketing, selling and distribution of the product it is much the same whether it is a start-up or an established business. While the assumption has been made that you are launching a new product, the points covered will also apply to businesses which are seeking to modernise and revamp existing product ranges or update their sales, marketing and distribution processes
There are two distinct but parallel processes which need to be addressed when setting up a new business and launching a product. One is very boring, the other incredibly exciting. They are equally important. Spending too much time on one at the expense of the other will cause headaches down the line.
The exciting process is the development of your new or improved, product or service and its launch into the public domain. Or maybe doing a better job of marketing or selling products that already exist. The boring one consists of deciding upon the form the business is going to take and setting up the bureaucratic functions.
Although the administrative functions and the sales and marketing functions are dealt with sequentially, in reality you will be dealing with both simultaneously as each will have an impact upon the other.
Sales Strategies For Startups
The main focus here is on businesses that are aiming at the retail market, although many of the comments regarding setting up the business initially are applicable to other endeavours as well.
Where Do You Want To Go?
We'll get the boring part out of the way first. Before doing that a bit of self-examination is in order. Ask yourself some questions. Why am I doing this? Where do I want to go with it? What do I see myself doing in five, ten or maybe fifteen years time? The answers you come up with are likely to shape your life for perhaps decades to come. It's best to be honest with yourself at the outset, as the form you give the business will influence its later development, and more importantly, your role within it.
Clear answers to these two questions will also make another part of starting your business easier. The pesky little annoyance of raising some capital. Whoever you decide to ask for some capital will be a lot happier coming up with the dosh if you have a clear idea yourself of what you want to achieve.
Let’s look at some of the reasons you may be setting up a new business and launching a product into the retail sector. Firstly, it may be driven by necessity. Many successful businesses have been started, sometimes reluctantly, by people in their fifties who have been made redundant and hit problems finding another job.
It could be that you get a real kick out of developing new gadgets. Dream about them being taken up by millions of people. Ask yourself this. Do I get my fun and fulfilment out of developing the product? Do I see my future in developing new products? If you answer yes to these two questions, you need to stop right there.
Do you want to deal with customers calling you and asking where their delivery has got to? Spend time chasing up errant suppliers? Filling in VAT returns? Hiring staff and then coping with all the little problems they bring along? We'll revisit this scenario further on, and look at ways it can still work successfully.
Perhaps you just can't stand working for and taking orders from someone else. Or feeling lost inside a giant corporation. You just want to be your own boss. Nothing wrong with that. Taking responsibility for your own life and income is a worthy endeavour. But what if it really takes off. Customers start clamouring for the products you are marketing. All of a sudden your life could feel even more circumscribed by the demands of others than it does at present.
The last category are those who just want to be successful by their own endeavour. They don't care what product they are selling. The process of starting from nothing and building their own business to its, and their, limits provides the motivation. People such as this may turn into the future captains of industry or alternatively into serial entrepreneurs. Growing a business to a certain size before selling it on.
How Not To Failure In Business
Don't Become a Failure Statistic
Whatever category you fall into you need to be aware of one simple fact why do so many new and existing businesses fail? It can be explained by two factors.. Lack of clear objectives and the lack of a plan.
This is why a small amount of time spent on self-examination is so important. If at the outset you have a clear idea of what you want to achieve, you can set about planning how to get there. Otherwise the winds of fortune are likely to blow you away to become just another statistic.
Decide On Your Business Model
Bearing this in mind, the first decision to make is what form the business is going to take. There are three realistic possibilities. A sole trader, a partnership or a limited company. If your ambitions are limited to no more than earning a living for yourself and employing no more than one or two individuals, setting up as a sole trader is simple. Decide on a trading name, open a bank account in that name and you're on your way. Any home computer will produce the paperwork you are likely to need.
HM Customs and Revenue will happily tell you all you need to know about dealing with tax and NI. Online filing of tax returns and self-assessment have made the job easy. With the software available to you, an accountant is probably unnecessary. There are also plenty of small freelance bookkeepers out there if figures fill you with dread.
Partnerships are similar to a sole trader, but consist of two or more individuals holding (usually) equal shares in the business. There are probably many two man bands out there that have never formalised their partnership and exist quite happily without any form of legal agreement.
However, if you are going to form a partnership with one or two or more individuals, the best advice is to get a partnership agreement drawn up that all parties are happy about. What to do if a partner dies, wishes to sell his or her share, or the business fails. These are situations which may need dealing with one day. It is best to be prepared.
How To Be Successful In Business
Forming a partnership can be a rewarding experience if you are both agreed that the business should not grow too large. It can be especially beneficial if the partners share an overall vision but bring complementary skills to the endeavour. Perhaps one is a brilliant innovator or super salesman while the other is the steady Eddie who deals with all the day to day administration.
A corollary of purchasing materials or goods for resale, is that at any one time you are likely to owe lots of money. A sole trader or the members of a partnership are personally liable for all their debts. Remember also that the members of a partnership are jointly and severally liable.
This means that if things really get bad, both partners are equally liable for the entire debt. It follows from this that if, say, one partner had no assets, the other partner would be liable for all the debts.
Which leads to consideration of limited liability companies. Surprisingly, limited liability as a concept was enacted into law to encourage entrepreneurs to set up businesses, and shareholders, literally part owners, put up the capital. Governments, alas, are not always so forward thinking. In effect, forming a limited liability company is to create a legal entity which is separate from the owner(s). Liability for trading debts rests with the company, not with the owners, who are thus protected.
Worth remembering though that if you, as the company, take out a bank loan or overdraft, the bank will ask for personal guarantees from the owner(s), putting you (them) straight back into the firing line. In the case of multiple ownership, these guarantees will be joint and several so the comments above apply again. The bank may well require a second charge secured on the house, just to make doubly sure.
Premises
Having decided on the form the new business is going to take, it needs to be located somewhere. Does it? More and more the answer to that is, no it doesn't. Or certainly not in the traditional sense. If you are contemplating acting as a wholesaler, selling a diverse range of goods, you will obviously need a warehouse for storage, order picking and distribution.
But what if you are just marketing a single product. Traditionally this would have entailed a manufacturing facility, storage and shipping facility and offices for all the staff. These things are very expensive, and when you are starting up, require large amounts of expensive capital to finance until the sales come rolling in.
Shift the Risk
Let's establish a basic principle of business life at this point. Starting up any business, or launching a new product if you are already established is a risky business. Yes, you will have carried out as much research as possible, but still there are risks involved. One of your prime tasks as a business manager is to shift risk.
It sounds a bit aggressive put like that, but all you are doing is minimising the risk to yourself and your fledgling business. Need a secretary? Why commit yourself to paying a weekly or monthly salary. Check out the services that are offered by a host of freelancers consultants working from their own home. For Sales and marketing help? Talk to an expert business advisor, who can provide a package of services and expertise tailored exactly to your needs.
Returning to the discussion above concerning warehousing, investigate the possibility of the manufacturer dispatching directly from the point where the goods are made. That will leave you to concentrate on what you do best.
Your overall aim is to move as much expenditure as possible from the column headed 'fixed costs' to the one labelled 'variable costs'. More on this later, but for now, your target when starting your business is to tie as much expenditure as possible directly to the level of activity, and particularly of sales activity. You're aiming to ensure that expenditure is kept exactly in step with income.
Even the smallest enterprise requires some systems. To ensure that accurate invoices are sent out immediately goods are dispatched. That sums received for those invoices are recorded accurately and categorised correctly ready for future analysis. That incoming bills are correctly categorised also and are paid on time – but not before.
It is possible to buy software that can encompass all of these functions and is relatively simple to use. But the best accounting software is only as good as the data that is input. If entering data is not your strong-point, get somebody else to do it for you.
One of the great things about the internet is the way it subverts traditional ways of doing business. The music industry felt it first. Book publishing is also heading to oblivion. There are still many firms out there who use software to produce their accounts, print out an invoice and then send it through the post. If it’s a B2B invoice, the data is laboriously reconfigured digitally on the clients system.
Business Plan Template
The Business Plan
Unless you're in the happy position of having your own capital sitting in your bank account, raising finance is going to be high on your agenda. Before you even contemplate approaching anybody else and asking for money, there is something which must be tackled first. The Business Plan.
Few people actually enjoy producing a new start up business plan. Fewer still have any enthusiasm for producing the most essential component of the plan. The cash-flow. Many times would-be entrepreneurs have been heard to say one or more of the following 'I fly by the seat of my pants', 'I always hit the ground running', 'I'm just going to wing it', 'it’s all about the product', 'I'm an entrepreneur, not a bean counter', etc etc. Ninety-nine times out of a hundred they are the first to fail.
Lack of planning has many times been fingered as one of the two chief reasons businesses fail. The other being failure to monitor progress against the plan. So where to start. All you need is a spread sheet, a list and some time. See below for objectives.
Business Objectives For Growth
Annual Key Objectives Plan Form
Key Objectives
What needs to be done
By Whom
How The
Measures
By when
Cash Flow
The list consists of all the costs that you can think of, divided into three groups. The first group is capital costs. Things you have to buy outright at the outset. A computer or two (don't try to share the family computer), a desk, chair. Unless you have access to plenty of cheap cash, as many of these items as possible should be leased, or have the payments spread.
The second group is headed fixed costs. These are the sums which will be paid out each month irrespective of the level of sales. Rent, wages, business rates, leasing payments, hire purchase instalments etc. Also in this group will be any capital loan repayments including interest.
The title of the third group is variable costs. These are the costs which go up and down depending on the level of sales. There will be the sales costs themselves, unless you are going to employ your own sales personnel. In which case their basic salary and expenses will become a fixed cost every month, while commission or bonus will be a variable cost.
We need to consider product costs here. If your product is being manufactured for you, the cost will be totally variable. You will only need to purchase each month the number that you sell. If you are producing the goods yourself you will have both fixed and variable costs to consider. Labour costs go in the fixed costs column, while materials costs go in the variable costs group as the amount you buy will vary with the level of sales.
An aside here about product stocks. The ideal is to have no stock at all, it is money sitting idle. If you can find somebody to take responsibility for producing and holding stock for you, so much the better. The more flexible you make your production process the better.
While aiming to minimise stock-holding, have the plans in place for how to rapidly increase production, or purchasing of stock, if orders exceed expectations. Always discuss and ascertain with suppliers how rapidly they can react to your changing circumstances. Put undertakings in writing to minimise future misunderstandings.
Get to Grips With the Cash Flow
Let's assume that you know how to construct a spread sheet, because if you don't you really should learn and this isn't the place to start. There are plenty of books and evening courses available. Of course it is possible to give your lists to someone else and ask them to produce your cash-flow and budget. Don't! Don't! Don't!
It is only by becoming intimately aware of what should happen in your business in the future that you can check whether it is all going to plan or falling apart. A cash-flow is simply a picture of the amount of money coming in every month and the amount going out. At the beginning, unless you are very, very lucky (or clever), more cash will be going out than is coming in.
You will need around fourteen columns going across the page, the first for listing the cost categories and items, then a column for each of the twelve the months of the year from when you start, and finally a totals column. In the first column you list all the items in the fixed cost category, with its own heading, then all the items in the variable costs category. You then need a line which can be called receipts. You then just keep filling in the figures per month across the page for each of the items.
Remember it is a cash-flow and not an invoice flow. An invoice you receive one month won't be paid till the following month. For your outgoing invoices you should probably take the pessimistic view. They probably won't get paid for two months.
It is then a simple job to total each of the two categories, cash in and cash out. Formulae should be used for the totals. This will mean that individual figures can be changed and the totals will update automatically. If you then have another line running across the bottom, which subtracts the cash out from the cash in, you will see exactly how much working capital will be required by asking the spreadsheet to calculate a cumulative running total.
If you really want to be sophisticated, you can then fill in the interest on the working capital that will be required each month. If you then set up a column on the far right which shows the total for each category for the year, you will have a rudimentary budget for the first year.
Now you will see the advantages of doing this for yourself. It doesn't matter in future years if it is done by an accountant or an accounts employee. You will have a detailed knowledge of the financial workings of the business.
The instructions given here are rudimentary, but there is plenty of help available. In the appendix you will find the addresses of several websites which will show you in detail the processes you need to follow. They are not all the same as the one described above. It doesn't really matter what form your cash-flow spreadsheet takes as long as it works and you understand what it shows.
Having done this, we have the basis of half the business plan. Manipulation of the figures will enable you to finely tune your plans for the first year. One of the by-products of the spread sheet is the generation of targets you will have to reach each month. Expenditure targets, sales targets and income targets. Having got the cash flow right for the first year, the exercise should then be repeated for the second and third years. To complete this part of the business plan, write out the justification for each of your assumptions.
Sales And Marketing Support
Sales and Marketing
Attention can now be turned to the exciting bit. Sales and marketing. The main focus will be on consumer goods, being sold into the retail market.
To those entrepreneurs that come from a production, technical or creative background, sales and marketing can seem on one side to be a strange, arcane, almost mystical process. On the other hand it can be viewed as totally non-essential. After all, if you get the right product at the right price into the market place people will buy it, right?
The Product
The first, difficult step is to distance yourself from the product or service. Easy enough to do if you are a giant corporation, not so easy if you personally have developed the product from idea to reality. This is where an outside consultant can really help. They will not have the emotional investment that you have built up. Also, they will bring to bear their experience of marketing similar products to yours. It’s a great way of importing expertise into your business rapidly.
The first question a marketing expert will ask is 'who is going to buy this product?' From the answer to that question will naturally flow the answers to packaging, distribution, sales, pricing policy etc. This process is known as market segmentation. Some products have an almost universal appeal, most appeal to only a small segment of the total market place. Coca Cola is an example of the first. Lynx men's care products an example of aiming at a narrowly defined segment of the market.
Your Product in a Customer's Hands
How to distribute the product can be decided once the target market is decided. When talking of distribution what is meant is how will it reach the hands of the end purchaser, not whether to use Parcelforce or Eddie Stobart.
There are three main ways. Firstly direct to the public. This mainly now means via the internet. Although mail order from catalogues is still an important route, it is declining rapidly and few direct to purchaser firms rely on it completely, all having complementary web based divisions.
Secondly, you can persuade somebody else who already has a sales organisation to sell your product for you. Companies that have an established sales and marketing organisation are often looking for additional products to add to their product portfolio. If your main interest is in design or production, this can be a useful route to take.
Once again, the services of a sales and marketing consultant can be invaluable. They might already be in contact with just the company you need to 'piggy back' your product. If not, they will almost certainly know which companies to approach with a proposition.
How To Price A New Product
Selling to the Retailer
The third way is to set up your own retail distribution. There are different methods by which this can be achieved. The most expensive is to set up your own sales force. At one time, in the food industry, some firms had whole armies of salesmen (few women) selling into all the individual grocery shops. Nowadays, you could probably account for 75% of the grocery market with a couple of salespersons. One to cover the supermarket chains, the other the wholesalers.
For a small or start up business, recruiting and training a sales force is pretty much a non-starter. As mentioned above it is extremely costly and unless you employ an effective and experienced sales manager will almost certainly end in poor sales as well.
Independent retailers, however, do still exist in very large numbers in some product categories. Gifts, greetings cards, clothing, to name just a few. So how can a small business effectively reach small independent retailers? Firstly it can be done through wholesalers, who aggregate vast ranges of products together which they then sell to individual retailers.
The advantage of wholesalers is that you don't have to worry about contacting all the individual shops yourself. In fact, in many product categories, all the wholesalers could be covered by one person. The big disadvantage with wholesalers is that your product will be lost amongst the plethora of goods that they offer for sale. Their salespersons are misnamed. Basically all they can do is run through the firm's catalogue asking for a yes or no.
If your product is established in the market place this is not necessarily a problem. If you are launching a new product, it will often need an explanation of its unique features. Wholesaler's sales people do not have the time to specifically sell individual products. Nor, very often, do they have the inclination.
Retailer's Resistance to New Products
The attitude of retailers to new products is strangely ambivalent. On one hand they are aware that they need a constant supply of new items to stimulate the public to buy. On the other hand they are scared of buying something new. Underlying this is a natural reluctance to make a fool of themselves by buying something which doesn't sell. The talent of an experienced sales person lies in the ability to overcome this natural reluctance to buy something new and unproven.
Whole books have been written on how to sell. Billions of pounds, dollars, euros etc. have been spent on sending sales persons on training courses. Most of the ink and the cash has been wasted. Stated baldly a sales presentation consists of establishing rapport and trust, building a demand, introducing a time limitation, and forcing a decision. People who can do this are rare. People who can do this without ever becoming dispirited by the inevitable refusals are even rarer.
Trying to sell your new product yourself has the potential to pitch you into either despair or euphoria, but most likely, particularly if it is something you have never done before, the latter. A trained salesperson, apart from knowing who to approach, will have the ability to rapidly establish a relationship with strangers. If they have been handling other products of a similar nature, they might already have built trust and confidence with the buyers and retailers, because of previous good advice.
Selling Yourself
The title is deliberately ambiguous. Yes, there is going to be a discussion of how to learn sales techniques so that you can go out to sell your own products. It also refers the fact that the buyer 'buys' the person doing the selling as much as the product itself.
If you would like to learn how to sell, the best way is to be taught by an expert, before putting yourself in front of potential buyers. Then at least you won't be losing possible customers as you learn by trial and error. We'll start by looking at a couple of the basics which underpin any successful sales-person's presentations.
The traditional image of the sales person is of a talkative extrovert. Any would-be salesperson should eschew this picture straight away. One of the elements of a sales presentation is to overcome the buyer's objections. To do this you have to discover what those objections to buying and stocking your product are. You can only do this by listening not by talking.
Imagine yourself in front of your first potential customer, with your brand new product in your hand to show them. 'Just look at this', you will say with great enthusiasm. 'Look at all its innovative features, it’s made by a brand new manufacturing process using specially developed materials, while its electronic circuits are at the very cutting edge of science.' Be prepared for an answer roughly along the lines of 'so what'.
Retail buyers are totally disinterested in almost all features of any new product. The only questions they have in mind relate to their business and their customers. Are my customers going to buy this? Is it worth my while to stock this product? If I allocate money and space to stocking this product is it going to repay my investment at a greater rate than what I am currently doing with the same money and space?
In sales jargon this is known as 'talking the buyers language'. In your presentation to the buyer, every feature of your product needs to be justified in terms of benefits to the buyer. Preferably in a back to front manner. By asking the buyer what his or her dissatisfactions are with his/her current situation and then showing how your product would overcome them because of its features.
In any business there is a hierarchy of authority. There is only one decision maker. A crucial part of a sales presentation is asking for a decision. If the person you make your presentation to isn't authorised to make the decision, you have just wasted your precious time, and probably annoyed the real buyer into the bargain. Always make sure that you only try to sell to the decision maker.
Finally, just a couple of points of how you end your presentation. The purpose of a sales presentation isn't to sell, it is to ensure that a decision is made. Yes or no. If it's yes, great. If it's no, also great. You can now find out why (NOT by just asking why, if you do, expect to be thrown out on your ear. There are subtle and inoffensive ways of doing this). When you have found out, you can overcome the objection and ask the question again.
There is only one point in time when the decision has to be made by the buyer. That time is NOW. Everybody, buyers in particular, hate making a decision. Especially saying 'no' to the person in front of them. They'll have a thousand and one reasons why they should put off making a decision immediately. As a sales person you have to give a watertight reason why that decision has to be made on the spot.
'Offer ends today'. 'I won't be back in the area for however long, they'll be sold out by then'. 'There are only a few of these special packs left'. Statements like these, and the million and one variation on them are legitimate tools to getting that vital decision immediately.
This survey of some basic selling techniques has barely scratched the surface of the weapons a trained sales person will deploy. If you still think you can learn how to do it, get the services of an experienced sales consultancy to train you or your designated sales staff. If perhaps these few examples have made you decide an expert might do it better, the answer is simple. Ensure a recognised sales and marketing consultant is involved at an early stage.
The Role of the Specialist Sales Agent
A Sales Agent is a self-employed individual who sells on behalf of a number of customers. They usually restrict the products they handle to a particular retail field.
This means that they are able to present each buyer and retailer that they encounter with all the products they sell. Some agents work nationally, i.e. they cover the whole country. More likely they will restrict themselves to part of the country.
This is to do with economics. Sales agents earn their livelihood by taking a commission on each order they obtain approx. 10%. They are not obtaining orders when sitting in a car driving. Very often you will only need to find one agent. If they do not cover the whole country, they will usually know of agents who cover other regions adjacent to them.
Trade Fairs and Other Methods
There are a few other methods for gaining distribution or selling direct to the public. Most industries have a trade fair for suppliers within that industry to exhibit their goods to potential buyers. They can be expensive, they are often tedious. Small newcomers tend to be allocated space on the periphery. Nevertheless, some trade fairs, such as the annual Gift and Fancy Goods Fair at the NEC do attract a lot of potential buyers.
Mail shots and telephone canvassing can largely be discounted as far as launching a new product. Telesales does have a use however for repeat business once a trading relationship has been established.
An often overlooked for channel of distribution for a new business is the large number of craft fairs and shows which are held up and down the country. County agricultural shows and the like. Having a unit for a few days at such a venue can be a very effective way of test marketing without a great deal of outlay.
Test Marketing and the Price
Small scale test marketing is very useful to establish some of the incidentals that make up your product such as packaging and presentation. It is also useful as a way of establishing the optimum price for your product.
Price is a subject which has vexed economists from Adam Smith and Karl Marx to whole university departments today. The Marxist view is that price is determined, or at least should be, by the cost of production. Patently it is not. The optimum price is arrived at by the interplay of a whole variety of factors.
Some are simple, and obviously how much your product costs to produce and put on the shelf for sale is a large factor from your point of view. It is not, however something that concerns the end user and purchaser. Their perception of what is the 'right' price might differ widely from yours, either upwards or downwards. What do similar products cost, does it appear good value, who else has got one, does it fit in with my lifestyle objective and so on almost ad infinitum.
Test marketing is useful because it should enable you to determine the price point which will maximise your profitability. Generally speaking, when launching a new product, it is best to start with a higher price and fewer sales than a lower price and a higher volume of sales. It is usually far easier to gradually drop the price and ramp up production than it is to raise the price and cut back on production.
Advertising and Promotion
Advertising is a difficult area. Effective advertising tends to be expensive. Big national advertising campaigns are mainly aimed at brand awareness, rarely launching new products from start-ups. There may be some limited benefit to be had from trade advertising.
Far more cost effective from the SME point of view is word of mouth and self-generated publicity. Local newspapers, radio stations, magazines even the national press are always looking for copy to fill their pages or their hours on air. The small man or woman with a new project makes interesting reading. It only requires you to tell the media about your product.
Using the Internet
The new internet based social media can also be utilised. Unless you are a specialist in the field, however, this is an area for professional expertise. Similarly with selling via the internet, although there are two exceptions. eBay and Amazon represent a method of selling to the public which is being utilised by more and more small businesses. Unlike setting up your own website, eBay and Amazon require little if any professional expertise.
A simple website of your own which just advertises your product is cheap to set up and a good place to start, but time and effort should be spent to develop a good unique website which customers and buyers can interact with. A website needs a good domain name to help people find in on the search engines like Google, then you need to have other sites link to yours (backlinks) and article links from blogs and other sites writing about your products or services.
Once your website is set up it will require constant time and updating to ensure it ranks in the search engines and stays there too, choose a phrase or keywords you want to be found or known for, for example Novelty Mugs, Polka Dot Pottery, Business coach etc and ensure those words are on your site in your website title etc. Have a testimonial page, everyone needs re assurance when ordering from new websites.
But do bear in mind that setting yourself up in direct competition to your retail customers sometimes will not generate a friendly warm feeling. Especially if you undercut them on price.
Back to the Business Plan
Once you have decided on how you are going to sell, market and distribute your products, details need to go into your business plan. Firstly as a written description and secondly as amendments to your budget and cash flow.
Amendments to your cash flow and budget are inevitable. The more you get to grips with the details of your proposed business, the more questions will be raised. These will almost certainly change your preliminary estimates of potential costs and revenues. It is as well that spreadsheets have a simple way of inserting extra lines and columns.
Your business plan should cover the first and second years in detail. Beyond that your planning is likely to be a little more tentative, but you should nevertheless have outline plans in place that can become more detailed as you gain experience of the market place.
Funding
Once you are happy with your business plan produce a few copies. They should be as professional as you can make them. They are probably going to have to impress the most important person in your business life. That is whoever you are hoping to provide finance. Probably, but not necessarily, your bank manager.
It is common to think that banks are the only source of funds for new or expanding businesses. Not so, although some of the alternatives will probably want a share of the business. You are probably well aware of the hopefuls who drag themselves and their new products onto the BBC programme The Dragons Den in order to undergo the ritualised knock backs that are delivered to the nation's apparent delight.
There is nothing to stop you inserting small ads in the general and financial press stating your need for a backer to provide finance. Another recent addition filling the void left by the banks semi-withdrawal of funding for start up and expansion funding is the internet based Funding Circle. Its web address appears in the Appendix.
Funding Circle is a platform for crowd sourced funding. Basically you post a request for a stated amount of funds and a target interest rate you would like to pay. Members of the public can then provide a portion of that funding, which is split into units by Funding Circle. It is growing rapidly in popularity as a source of funds for small businesses.
Monitoring Performance
Once your new business is under way or your new product launched it is essential that you check progress against your plan. Initially, the shorter the intervals between making your checks the better. If sales are lower than expected or a particular cost higher, the sooner you are in possession of that fact the better. Few business or product launches take place exactly to plan.
The quicker you become aware of, react to and correct setbacks the greater your chance of succeeding. It is a simple matter to leave space on your spreadsheet to enter actual figures to enable comparison with estimated ones. As the business matures, the intervals that you make your checks on progress against target can be lengthened.
Other types of monitoring then come into play. Obviously the year-end profit and loss statement is an important analytical tool. If you became a limited liability company you will need to produce accounts via a chartered accountant and file a copy at Companies House. If you remained a sole trader or a partnership there is nothing to prevent you producing your own year-end accounts.
One of the most universally useful methods of analysing performance is the descending value report. This is merely a list of any category you choose in a descending order of volume, cost, efficacy and so on. For instance if you have a range of products, list each product in descending order of profitability or volume. If you have a dozen or so sales agents working for you, list their names in the descending order of sales volume.
This is a very effective way of recognising weaknesses in your business. It doesn't tell you why some products or agents are doing better than others, but it does alert you that something needs to be done. If you need an incentive to do this, try calculating the effect on your business of all your products or sales agents performing to the same level as the best.
Customers are Hard to Get
There are also a finite number of them. But sometimes you wouldn't think so. Some companies treat their customers as if they are an infinite free source resource. You're bound to get a certain amount of natural wastage. Shops that close because of a lease coming to an end. Maybe the owner retiring or selling up. One of your competitors proving more persuasive. As a supplier the utmost effort should be directed at nurturing and developing your customer base.
The two fundamentals here are good service and establishing two way communication. Good service means more than just delivering an order on time. Although, heaven knows, that's important enough and a common failure. But it does make a good example to analyse.
Firstly, do you you know how long it takes for orders to reach your customers after they're dispatched? If you use more than one carrier, which does the better job? Better to be proactive to discover shortcomings before dissatisfied customers point them out.
Contact a representative sample of customers around the country. Explain they have been chosen to check on service levels. Would they mind helping? Use phone not mail. By using the telephone you can set up another channel of communication as an adjunct to a salesperson calling. Ensure that always the same person contacts a customer. It's important the customer knows whoever makes the call by their first name.
The dedicated customer service person should introduce themselves by letter as well, including a photograph. Your aim is to have the customer see your company as a name and a face. Ask the customer if they would mind a couple of phone calls after an order is dispatched to check how long delivery takes.
Carrying out this exercise will also of course keep you informed of just how good your service levels are. It will show if deliveries are made quicker by one carrier rather than by another. It will also show up any regional variation in service levels.
The process of mutual help and information swapping, plus giving your company a human name and face, will cement a bond between you and the customer. It will also mean that in future if something does go wrong, they have a known contact point with whom a personal relationship has been formed. It's easy to be angry with a faceless voice. It's difficult to be hostile to a known face and name.
But how do you deal with the hostile customer who's order has gone astray. Simple. No matter what the customer might say, they actually do want the order. They also need the reassurance that your company sees them, and their order, as important. They also want action.
Do not waste time trying to check where the order has got to. Time for that later. Fill the order again and ship via a direct courier. The costs might mean that all the profit on that order disappears. But think of the investment to get that customer in the first place. Think of the profit that will be lost on all subsequent orders if the customer is lost. Think of the goodwill that you have bought and that will be talked about. Good reputations are expensively won but cheaply lost.
There are of course other ways you can put a human face on your business. A newsletter is simple. Photographs and biographies of staff. Reports on customer successes. News of new lines. Send it as email and its cost will be negligible. Its benefits priceless. If you don't have time to do it yourself, bring in outside help to do it for you.
To sum up, your aims should be:
1. Give your company a human face.
2. Build one to one customer/company relationships.
3. Make repetitive checks on service levels.
4. Build multiple channels of reciprocal communication.
5. Make sure your back office staff realise that everybody's wages are paid by the customer.
6. Make sure all staff are aware of their responsibility for the company's reputation.
Ideas for New Products
Coming up with ideas for new products is not easy. Very few human brains have an inherent bent for innovation. Pioneering previously unthought of new products is a pretty thankless task anyway. Too often, the pioneering inventor is not the one who benefits, and it may be many years down the line before the public is receptive enough to want the product.
Let's take a couple of well-known contemporary success stories and see what can be gleaned. Firstly James Dyson and his vacuum cleaners. Simply put, Mr Dyson took an old and widely used item and supposedly improved upon it. But he did far more than this. Firstly, he convinced a sizeable chunk of the public that his vacuum cleaners would suck up more dirt. Secondly, he persuaded the public that having to change a paper bag every now and then was a nuisance. Thirdly he made his machines look futuristic, which added to the technological mystique. Then he made them in weird colours so they were instantly recognisable. Lastly, he charged a hefty premium to buy them. One suspects that cost of product didn't figure very highly in his price calculations.
Why were they successful? Interestingly, there always had been a small market for very highly priced cleaners, which were sold by direct (door to door) salesmen. Mr Dyson knew that it was possible to sell highly priced vacuum cleaners. The main reason for Dyson's success however was that his cleaners arrived at the right time.
The launch coincided with a burgeoning market among young well to do people for hi-tech goods generally. A further factor in the products success was that it obviously wasn't a jolly old Hoover like Mum had always used. It enabled a whole sector of the market for vacuum cleaners to assign themselves to a tightly defined modernistic, young, educated life style and status simply by making the purchase of a specific item.
Now let's consider various i-thingies. Once again, nothing innovative. There is not one thing in the Apple range which was pioneered. Phones, personal players, PCs, laptops, tablets. They are merely improvements(?) on what has gone before. Yes they work, but they come out of similar Chinese factories to competitors' products that sell at a quarter of the price and are just as reliable. None of them were particularly innovative.
In fact, Steve Job's greatest trick was to persuade the public that thinness mattered, and that how thin the product was should be almost the sole criterion of good design. Any review of a mobile phone will quote the thickness within the first one or two sentences. Happily for Apple, a similar international market segment to the one James Dyson appealed to was available for Apple's products. Rapidly, possession of an i-thingy became a badge of belonging to that same young, modernistic.... etc etc.
So what lessons can be learnt for us more humble mortals from these two examples. Loud and clear comes the message that you don't need to be a pioneer. You're on much safer ground identifying a growing market segment and redesigning an old product to make it desirable. If you are already selling some products you probably do not need to look far for something to improve and relaunch as a new product. It likely exists in your product range already.
Examine your current product range carefully. There will almost certainly be something there that can be updated, redesigned, improved and its market orientation changed.
But say you do not have any products at present. You want to start up on your own but you have nothing to sell. Where do you look for inspiration? You could do a lot worse than hanging on to someone else's coattails.
Let's look at all those i-thingies again. For almost every one of them there is a plethora of pouches, cases, stands, belt clips, solar chargers etc.
I don't think anybody is yet offering a hydro-electric, water turbine charger which just requires connecting to the tap, but it would not be surprising if there was. The great thing about this route is that most of your marketing is being provided for you by the primary product manufacturer.
You don't need to think of something that nobody else has thought of though. Can you produce it in a different colour, use better materials, extend the range of benefits offered, uprate the performance, change the appearance to appeal to a different market segment, package it better, and so on.
If you cannot come up with ideas of your own, try advertising for would-be inventors. Better still, seek the services of a sales and marketing consultant, who might already have spotted a hole in the market which needs to be filled.
NB. If you decide to start manufacturing a hydro-electric phone charger, remember where you got the idea from. There may well be the question of royalties. Further, in the instructions, do not include the phrase '...and now connect your phone to the tap'. Someone will.
Protecting Your Brand
Establishing yourself in the market place with your products is not easy. As soon as you make a mark, a current or potential competitor will note your success and start thinking how they can nick some of your business. Establishing and protecting a brand identity will help to curtail their efforts.
Most well known retail brand names have been established over a long period of time at great cost. It is relatively easy to register trade and brand names to prevent somebody else copying them exactly. The same with logos. Every town will have a design studio somewhere if you're not an artist, freelancers can also be found on the internet to do this for you. Ensure a uniformity of colours and typefaces across all paper and web pages for invoices, letterheads etc.
If you gradually expand the breadth and depth of your distribution, your name and logo will become better known. It is though, what that brand stands for in the minds of your final customers and your retailers that matters.
For small companies selling into the retail market, brand awareness by the retailer is just as important as brand awareness among the public. If you follow the advice given here, you will gradually attach the right qualities and reputation to that brand awareness. Good service, product quality and so on. These are all important.
What more than anything will enhance your brand awareness is constant innovation and improvement. If you make your company exciting and dynamic by constantly changing and updating your product line, you will do more to protect your brand than any court case over infringements of patents or copyright.
Yes, you will get imitators, but remember imitators can only copy what they can see. By the time they have brought their version to market you will have moved on. They will spend their time trying to catch up, meaning your products are always unique. That's what's meant by being the market leader.
Conclusion
It is impossible in a work of this length to deal in any great depth with all the subjects covered. The aim throughout has been to highlight and discuss the basic principles involved. Anybody with application and common sense can master the mechanics of setting up a business.
The areas where the greatest expertise is required are firstly in developing a product or service with unique features that will appeal to the buying public. The second is deciding the best way of getting that product into their hands. These are the two facets of launching your own business or product where buying in expertise is likely to have the greatest benefit.
Expert business advice and help in sales and marketing will not only ensure that you have the right product. It will ensure that the public will have a chance to buy it and give you the satisfaction of seeing your product being enjoyed and used by countless other people, perhaps throughout the country, maybe throughout the world.
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Kieran Perry is a trusted business advisor and sales coach working in London, offering business coaching, sales training, executive mentoring, and management consultancy to clients across the UK and Ireland.
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This article is not for resale or sharing and is owned with full rights to Kieran Perry UK. All comments, recommendations and advice is my opinion and is for information / reference only. This article is not a financial or personal recommendation. Please seek professional finance advice before making any financial commitments or decisions.