Market research is an essential part of any business plan, whether a fledgling business or a multinational organisation. Knowing that there is a sustainable market for your product and understanding what your audience expects from you is vital to a successful business launch. Market research can generally be split into two categories; primary and secondary, and during this article I will explain both and discuss their respective merits and appropriate uses.
Secondary research makes use of existing data from whatever sources are available. There are government censuses, Mintel surveys, and many private market research agencies that allow access to their data; some of it for free. It can be hugely advantageous, especially as a place to begin. Secondary research more often than not, proves to be a solid base on which to develop your own primary research. It plays the same role as research in general does to your product launch, and should be seen as just as vital. Also, this is of course far cheaper and generally quicker than creating your own research from scratch.
The other side of that coin is that you have neither picked the panel to suit your exact needs, nor the questions. It is feasible that you can find some research somewhere that corresponds to what you are trying to achieve but it will almost certainly require some tweaking, and will not necessarily be the people you wish to interrogate; the use of qualitative research designed by someone else will almost certainly make the target specialised away from your goals. Another main issue with secondary research is that by the time it reaches you it’s often outdated; markets change so quickly in business that the only way to be truly current is through new research. This is not to rubbish the quality of secondary research.
Primary research is, essentially, the creation of your own research, whether a question that you ask to your friends and family or a survey put together alongside an agency and administered to a wide panel. Primary research will instantly let you feel more in control of your project; and that is the exact position you will find yourself in. You choose the questions and select your panel through qualitative research, allowing you detailed responses from individuals. You decide how, when and where your research is administered. You can ensure that your research is focussed: the number of participants and their backgrounds, the number and nature of the questions, the amount of time that your survey is available. This is the most accurate way to research a market sector that is specific to you and your product.
The down side
It is of course, more expensive, whether financially or on your time. If performing primary research alone it will take a lot of time, refining and will need some experience in producing quality questionnaires. It will also take time for your questionnaire to be completed if you don’t have direct access to a ready panel. Most of this can be avoided by using an agency, but at a cost higher than performing your research alone.
So what’s the best option?
Neither type of research will take you to your goal alone; however, a combination of the two will give you all the information you need. Using primary research alone, without first seeing what has or has not worked for other companies and possibly missing out on important data from research that you couldn’t afford to perform yourself, is likely to lead to irrelevant questions or missed opportunities. At the same time, relying solely on secondary research is likely to leave you with answers that are vague or inappropriate to your specific audience. The two compliment each other well, and when used in conjunction will give you a well rounded and accurate portrayal of the needs and opinions of your market sector.
Start up business owners absolutely can’t ignore the opportunities that are available online to market their small business. As great an opportunity as there is, it’s also a pretty daunting task for a new business – especially if you’re not an expert in getting attention on the web. The good news is, keeping it simple is one of the best ways you can ensure that your website is ticking all of the boxes and serving the purpose it needs to for potential customers or business partners.
Stefan Tornquist, Research Director of Marketing Sherpa, talks about improving your search rankings organically through relevant website content. As a small business owner, how easy do you find it to write copy and articles for your business? Is it something you can do yourself, or do you prefer to outsource this job?
Margin is probably the most crucial figure in any business. Tell me your turnover, your margin and your running costs and within seconds I can tell broadly whether your business is a triumph or a disaster.
In the past, I was obsessed with mark up. It sounds great saying product X is marked up 1,000 per cent and this one 500 per cent, but it doesn’t provide the immediate overview that margin does.
Margin is basically your gross profit as a percentage. This means you can quickly work out your gross profit on any amount of sales – which you should do every day.
How do you calculate margin? First work out your gross profit, which is selling price minus costs. Then simply divide this figure by your selling price and you’re left with your margin.
I run Karacha.com, an online shop that sells musical instruments. So, as an example, if I sell a violin for £200 that costs me £110 to buy from the manufacturer, my gross profit is £90. If you divide this by my sales price (£200), my margin is 45 per cent.
So what makes this margin number so important? Well let’s assume your margin is the same across all products and the business costs £200 to run per day, that includes a wage for yourself, rent, electricity, etc. Secondly, let’s assume your business sells £300 on Monday and £650 on Tuesday. This is where the margin comes in.
Whatever your margin figure is, stick a zero and a decimal point in front of it, so for 45 per cent it would be 0.45. Now grab your calculator and hammer in 0.45 x £300 and you should get £135.
This is your profit for the day before daily costs. Previously, I said the business costs £200 a day to run, so unfortunately you have a loss. But do the same for Tuesday 0.45 x 650 = £292.50. On Tuesday you can pay your £200 bills and have £92.50 profit left over.
By knowing what you make on a daily basis you can make the necessary adjustments to ensure you make a good profit every day.
Turnover is vanity, profit is sanity
Too many people are scared off by the calculator – and businesses suffer because of it. As long as you know your margins, you’re always just 30 seconds away from a quick and accurate assessment of your business.
You could be selling £10k a day, think you’re the absolute dogs you-know-whats, but be making no profit. Every day, multiply that sales figure by your margin and see what you’ve actually made (don’t forget to take away your costs). It’s absolutely crazy, the amount of people who do not know their margin and therefore their daily profit, but can quote their turnover for the past 12 months.
Final thoughts. High costs and low margins lead to disaster: high margins and low costs could lead to a lovely yacht in the Caribbean. Good Luck.
For many of us new to social networking and closer to being within Gen X than Gen Y, it takes considerable time to learn the rules and etiquette of social media. And to be honest, many of those rules are only just developing now. As Penny Power explains in this video, we really can learn a lot from the younger generation about being open, random and supportive on social networks, rather than broadcasting our wants and needs to friends online.
Have you taken time to learn from young people around you? They might be able to help you fast track your business.
I’ve always felt that there were two types of startup – those with too much money and those with too little. I’ll leave the topic of too much money for another day, and instead think about the more common problem of having too little money.
When you’ve got too little money, the key is not to spend a penny you don’t need to, and to make sure that every penny you do spend is effective. That’s pretty much common sense, but I think that it’s worth drilling into much more deeply.
One of the pitfalls when starting a business is mixing up the keys to business success with the stuff that has to be done as you become successful. In start up mode, all your effort needs to go into the former and virtually nothing into the latter.
A business bank account, business cards, business premises and the services of an accountant can all be vital ingredients – but not if your business isn’t yet making any sales.
Your efforts and resources should go into working out your business proposition, finding customers and delivering that proposition to them. Make sure that you keep 100% accurate records, and probably set up a limited liability company to protect you from personal bankruptcy, but otherwise focus on starting to make sales and money.
When I set up SellerDeck (formerly Actinic), providing ecommerce services for SMEs, we had two vital objectives. We were trying to sell critical technology to small companies and ISPs, and we also needed to raise funds. I renamed my house “Actinic House” which was perfectly legal and cost nothing. I also joined the Institute of Directors and met all prospective investors in the IoD offices in Pall Mall.
These are the sorts of techniques that I would describe as “guerilla” – getting to your objectives by low cost and unconventional means. You can find all sorts of ideas both online and from other successful entrepreneurs. You won’t get them from the bank manager or the accountant, these techniques tend to be anathema to them. But it’s these that will help you to succeed, not having leather bound accounts.
Negotiating an English country road can be a nerve-wrecking affair. Plagued by single-track lanes, tight bends, and sudden dips, you can never be certain of what’s in store just around the corner.
Similarly, steering your business through a volatile currency market is a real challenge. The pound’s 25% fall in value against the euro over the last year has had major impact on UK businesses. In fact independent research for Moneycorp revealed the weak pound has had an impact on 92% of businesses trading internationally.
It is a tale of two sides. For importers cost pressures have heightened, but for exporters opportunities to profit have been plentiful. So as a country reliant on imports and exports, managing your exposure is crucial, but challenging. Unexpected rate movements can eliminate all important profits.
Despite the uncertainty now and in the future, there are a number of steps any company can take to manage currency exposure and get back in the driving seat. If your business is importing or exporting, and you need to manage the dips and swerves of an unpredictable pound, there are some simple steps to effectively managing exposure. For more info to help your business click here
Or should you have any questions about the currency market, please do post your question and we will get back to you.
Mark Deans, Corporate Dealing Manager, Moneycorp