1. Get to know your market
The starting point for any new business must be market research. Unless you produce something that people want to buy, you will not make any sales – and your business will fail. Successful businesses anticipate customers’ needs and wants and provide products and services to meet them (look at the level of pre-launch sales that Apple generates for each new iPhone or iPad, or that Bloomsbury Publishing achieved for each of the Harry Potter books). So, before you decide what you are going to make, spend some time talking to potential customers to find out what they want to buy. Later, you’ll need to expand on this research, but it’s your starting point. When planning your business you need to consider:
- Your potential customers’ needs and wants
- Whether and how you can provide products or services that meet those needs and wants
- The size of the market you plan to operate in
- How you identify and reach out to potential customers – and make sales
- What money, skills and other resources you have to make the business work – not just the skills to make the product but also the management and other skills needed to make your business grow. Are there gaps?
- What kind of start-up capital you need and where you can source it
- How you organise all this into a business
In doing your market research, you need to know the total size of the market – locally, regionally, nationally or internationally, depending on your ambitions. Then, you need to focus in on the part of the market that you are targeting and within that smaller market, you need to identify the numbers of people that you can realistically reach – your ‘addressable market’ – perhaps you are only targeting those who buy ceramic pieces at crafts fairs, which will be an even smaller part of the total market. Then you start the other way around – bottom-up:
- Visit a craft fair or market
- Identify a stand with products similar to your own
- Count the number of people visiting the fair
- Count the number of people who visit that specific stand
- Count how many of those visitors actually buy something from the stand
- Watch what they buy – and what they pay
- Multiply these numbers by the number of similar craft fairs across the country over a year to come up with a likely total market size
The true market size lies somewhere between these top-down and bottom-up calculations. You also need to understand your potential customers, talk to them.
What they like / dislike?
What they are prepared to pay?
What colours / fabrics / materials / shapes they prefer?
It will take you some time – and, frustratingly, as you gather new information, you’ll find that it contradicts earlier ‘facts’, so you have to revise your plan – maybe several times. But that’s simply the nature of a start-up.
A useful way of making sure that you cover all the areas you need to consider, including some you might not have thought about is to take part in a Start Your Own Business course. The Local Enterprise Offices run these courses at frequent intervals countrywide. And, at the end of each course, you will be encouraged to develop a formal business plan and will be directed to appropriate further supports and sources of assistance.
Add to the training you receive on the Start Your Own Business course by reading start-up books, you’ll find a selection in your local library and many more online. And flesh out your learning by talking to other craftspeople and designers. Look for those whose businesses are 18 months to two years’ old, their start-up experiences will be fresh in their minds and will be more relevant to you than someone who already has ‘hit the big time’. Add these people to your network; seek and take their advice when you need to make important decisions.
And then you simply need to go and do it!
When you are ready and when your research convinces you that there is a market for your product or service then consider the formalities of setting up a business.
2. Pricing & Sales
Pricing and costing your product or service are critical, which will lead you into the financial aspects of your business. Most entrepreneurs don’t want to go here – they prefer to leave this to their accountant (or worse, ignore it altogether). But finance is a critical part of your business – as critical as your skill as a craftsperson and designer. Ignore it at your peril. All you need is a basic understanding of the impact of transactions (sales, purchases, payments in and out, loans, credit terms, VAT), on your business – leave the complicated parts to your accountant.
You need to plan how to produce your product and service – and how to deliver it to your customers. In tandem, you must plan your marketing – to let potential customers know your product or service is now available and where and how they can buy it – which must be directed towards generating sales.
3. The paperwork
Choose your legal structure: sole trader, partnership or limited liability company
- Register for taxes
- Protect yourself against risk through insurance
- Build your team of advisers: accountant, lawyer, banker and others, as necessar
4. Plan where do you want your business to go
And last, you will need to document your plans for your business in a formal business plan. Even if you are lucky enough not to need to raise funding for your start-up, your business plan will guide you through the early stages of being in business. If, like most entrepreneurs, you do need to raise funding or are looking for grant-aid, you definitely will need a business plan to explain your business idea and to underpin your application for funding.