Setting up a new business requires specific skills and attributes in order to grow a start up from an initial idea to a successful business.
There are six key elements to starting a new business, each one as important as the next in ensuring the continued success of your new venture. The first element, Analysing Entrepreneurial and Market Potential, focuses on the skills, capabilities and flare needed by the entrepreneur to develop the new business venture.
There is also a focus on the importance of information gathering to analyse the market that is being entered with the aim of starting to compile information for an informed business plan.
The Entrepreneurs Role in Relation to New Business Start Ups
The entrepreneur is the starter, the initiator, the driving force behind any start up business. A leader that is passionate, tenacious and determined to achieve success through their new venture.
With popular programs such as The Apprentice and Dragons Den regularly on our television screens, it is easy to pigeonhole entrepreneurs, but, not all business leaders sit behind a desk in a suit. Some of the most famous and inspirational entrepreneurs spend their time at a sketch pad like Walt Disney or cutting dress patterns like Cath Kidston.
Although the lives of famous entrepreneurs are filled with fortune, leading your own company is not without risk. Every good entrepreneur should expect bumps in the road and to have to overcome failure more than once during their career. Insufficient funds, poor planning and being over ambitious could all result in losing everything.
Perseverance is key to being a successful entrepreneur and despite having to overcome downfalls, the benefits of a successful start up will outweigh the risks.
Personal Development Plan
Easy as it may seem, not everybody is cut out to be an entrepreneur. The ability to get up from multiple failures is not something that everybody possesses. If you want to start your own business, benchmarking your own personal skills against those of successful entrepreneurs can be helpful.
Creating a personal development plan will stop you going ‘off road’ when it comes to your start up. Define what is important to you, what you wish to achieve, the strengths that will help you get there and the skills that you will need to develop along the way.
As well as assessing your own skills and abilities, a qualification such as the ABE Level 3 Certificate in Business Start-up can teach you everything that you need to know about becoming an entrepreneur and starting your own business.
Identifying Information Sources for the Business Plan and Market Analysis
You’ve assessed your own skills and characteristics, and you know that you have what it takes to be an entrepreneur. Now you need to start gathering information for your business plan and analysing the market in which your product or service will enter.
There are an enormous number of sources out there for information gathering both free and paid for. Varied forms of information gathering provide a well-rounded, in-depth pool of information allowing you to develop a detailed business plan and market analysis.
Information sources for your business plan:
- Demographic data – assess the demand for your business based on the area it will be launched in
- Software – searching for sample/template plans ensures that you won’t miss any vital information
- Business competitions – these allow you to test your business plan on real life people before it is seen by potential investors
- Start Up Websites – find articles specifically targeted at new entrepreneurs
- Government websites – companies House and HMRC
- Local Advisors – the advice isn’t always free but it’s still valuable, Accountants, Legal Personnel, Financial Advisors
- Bplans – get free business planning resources, sample templates, calculators and more
- Library’s- the Business and IP Centre at the British Library has resources specifically to support new entrepreneurs including access to specialist databases including Mintel
When collecting information for market analysis, you should consider primary and secondary sources, desk and field research and both qualitative and quantitative forms of data to build as detailed a picture of the market as possible.
Information sources for market analysis:
- News articles – TV, Radio, Newspapers
- Industry specific information – websites, journals, magazines
- Business data and statistics – The US Census Bureau, FedStats.gov, Small Business Statistics, EconomicalIndicators.gov
- Office for National Statistics
- Companies House
- Focus groups
- Telephone interviews
The Purpose of the Business Plan
Every business must have a business plan, without it, the new start up idea will remain as just that, an idea.
The effective management of the business will be detailed within the business plan. There should be a set of specific objectives, goals and the resources needed to achieve them. The business plan allows you to assess future opportunities, commit to a particular course of action and plan for different scenarios in order to manage risks.
A business plan is crucial to securing your funding. You’ll need to provide potential investors with income statements, profit and loss accounts, break even figures and any other evidence to prove that the company can operate efficiently.
In the long run, the business plan will also detail an exit strategy for when the time comes to cease trading.
Information Gathering to make Informed Business Decisions
Inadequate, out of date and irrelevant information will lead to the wrong decisions being made.
Information gathering needs to have a clear end goal in order to ensure that the time spent on it is not wasted. As with identifying sources of information, gathering the information itself requires a range of different types to provide the most well-rounded, informed outcome possible.
Qualitative data – detailed information including opinions and behaviours
Quantitative date – any information that can be measured, recorded numerically and turned into statistics
Any entrepreneur must remember, no matter how informed and prepared you are, the decision-making process may not lead to the exact planned or desired outcome. Due to the depth and quality of your research however, you should be aware of all possibilities.
The Importance of the External Environment and its Potential Impact on the Business
You cannot change or predict external factors that will affect your business, however; you can analyse them and be prepared.
Carrying out a PEST Analysis ensures that you are aware of all external factors that could affect your business and allows you to have plans in place should the impact have an adverse effect.
P – Political
E – Economical
S – Social
T – Technological
Dimensions of Market Analysis
David A Aaker’s model ‘Dimensions of Market Analysis’ aids your understanding of the attractiveness of the market that you are entering by considering the following 7 factors:
- Market size
- Industry cost structure
- Market trends
- Distribution channels
- Market growth rate and profitability
- Key success factors
These important factors allow you as the business owner to understand the opportunities and threats in your chosen market and how they relate to the strengths and weakness of your start up business.
Characteristics of the Competitive Environment
No matter which market you enter with your new product or service, the competition will be fierce. Understanding your competitive environment is crucial to your business being a success. As the entrepreneur and the driving force behind the business you need to know the market inside out; market size, growth rate, competitors, barriers to entry and any seasonal and cyclical trends.
Using Porters 5 Forces allows you to understand where the power lies within the market, giving you the opportunity to take advantage of your strengths and improve your weaker areas.
Identifying your competitors is key to understanding the environment around you. Both direct, competitors providing similar products and services, and indirect, those providing different products or services but to satisfy the same needs should be identified.
Once you have pinpointed your competitors, you can keep a watchful eye on them. Monitoring their products, marketing, and pricing strategies, for example, gives you real-time information on what works and what doesn’t in your market.
Stakeholders and their Importance and Impact on a Start Up Business
Simply put, a stakeholder is a person with an interest in a business, either internal or external to the organisation. Typically, stakeholders will be investors, employees, customers and suppliers to the business.
Stakeholders are a hugely important part of any business but particularly to those just starting out. Those that financially invest into the business provide the capital it needs to launch its products and services into the marketplace. Stakeholders are involved in the decision-making processes and bring a wealth of knowledge and guidance to the table.
So, now that you know everything that there is to know about the entrepreneurial and market potential for your new business, you’re ready to move on to the next stage. In element 2 you will refine your business idea and carry out further market research to ensure that it is of interest to your target customer.
If you are interested in starting your own business and want to know more about our ABE Level 3 Certificate in Business Start-up, contact us or leave your details and one of our advisors will get back to you.