You have the idea, but what are the steps needed to turn the idea into a business
I meet and communicate with many people who have an idea that they think can be turned into a payable business but do not know where to start, and many such ideas never become enterprises, which means no new economic boost or jobs, and we need both to take the focus from large organisations and ever increasing government bureaucracies.
So here are a few steps to convert ideas to enterprises.
Who will buy it?
Without sales there is no business and yet too many start ups have only an optimistic guess at sales income. To reduce the risk of early failure the target market has to be clearly identified, it has to have the disposable income to buy the product or service and it has to be one that the new business can communicate with and sell to.
Break that sentence down into its components and you will see the need for a whole lot of research, thinking and planning. The advantage of doing this is it is easier and less expensive to communicate the values of a product to a tightly defined market and much easier to attract them to the ‘storefront’ – whether that is an actual store, an internet site or a salesperson. Continue reading
This article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in October 2012 and is posted here by their kind permission.
Focusing on pricing will pay dividends to start up entrepreneurs
This entrepreneur asks where he can find help in setting prices for advertising space on digital displays and which procedures he should to follow before deciding on the right prices.
Setting the most appropriate price is important but not easy to do. It needs at least as much attention as any of the other ’4Ps’ of marketing. Start up entrepreneurs traditionally spend most of their effort on product development, put time and thought into marketing promotions and sales channels and not enough time and effort on pricing. Price is important in almost every buying decision so it can be as crucial as the product features in securing the sale. Continue reading
Humble shopkeepers can give lessons in marketing strategy
I recently read an article about the lives of Somali shop owners operating in a Cape Town township. They lived a very stressful life, with the continual fear of xenophobic attacks from community members, and the criminals who used the simmering xenophobia to provoke attacks and loot their stores. Insurance is not an option for them.
They described how they chose their location in the poorest sections of the communities. Residents have almost no income, and so travelling to a distant shop consumed too much of their discretionary spend, and they wanted the lowest prices for staples. Unit sales were small values, and at times a shopper would appear with a single coin. All he could buy with that would be one cigarette or a sweet. And he made the most of his purchase – choosing a sweet then changing his mind for a cigarette then rejecting the cigarette and choosing some gum.
The Somali shopkeepers treated him with dignity and patience, knowing that shopping was a rare treat for him. Many local shopowners would have chased him away. Going to a supermarket was simply not possible for this customer.
They chose their target market location carefully, selecting areas which put them in considerable danger and not very pleasant circumstances, but free of competition, and better able to service their customers. And then they gave wonderful customer service to even the least significant customer, treating him like a millionaire. How many entrepreneurs have been as visionary, and how many can say hand on heart that they treat all customers with equal respect and service? Continue reading
All start-up entrepreneurs should understand their business finances before they launch
By Ed Hatton
An entrepreneur is planning to start cattle farming, but has very little economic or entrepreneurial background as he works in the medicine field. He wants to know what the growth in capital ia that is needed by a business during its first year to sustain further development and growth.
This is question all start-up entrepreneurs should ask themselves. The focus is usually on the initial capital needed to start operations, but sustaining the business past the first year is equally important.
To answer the question we need to take a step back to the business plan for the new venture. This should start with how much the entrepreneur wants from the venture as a monthly income and / or capital gain. That will tell him how many calves he will have to sell each year if he makes assumptions of the sale price and cost of breeding, rearing and sale. The estimated yield will tell him how many breeding cows he will need. The size of the breeding herd and the capacity of the land to produce grazing and fodder will tell him how much land, labour and infrastructure he needs. These factors will determine his start up capital needs Then he needs to do the cash conversion cycle (from when cash is laid out to produce stock to the time cash is paid as a result of sales) and work out the operating cost of running the business during that period to establish his working capital needs.
This is a business like any other. The entrepreneur has to identify his target market and see what it needs, decide how to compete, then get the right product (breed and quantity) and distribution channel to sell his breeding stock, find the right production facility (land and infrastructure) and identify the right labour and management to handle the required volume. Continue reading
Responding to a need is a great way to start a business, but it is not as simple as it seems
An entrepreneur has recognised that government departments and some private companies often pay their suppliers very late, or make wrong payments. Together with her spouse who runs a human relations consulting firm which is fully accredited with ETDP-SETA, she has the knowledge and expertise to set up policies and train people to fix this problem and so improve service delivery. However she has not be able to form a strong sales and promotion strategy.
This woman dreams of becoming an entrepreneur while she runs the department which pays suppliers in a large company. She sees entrepreneurs struggling to get paid on time by government departments, local authorities and some large companies. She knows she could put the right policies, processes and training in place to turn the situation around. Her spouse could do the training and the combined service would enable departments to make payments on time. President Zuma, in his State of the Nation address suggested that this improvement in service delivery was vital, so the need for the service is there.
Who has the need?
This business opportunity looks like a textbook case of identifying an unmet need and having the capacity to fill that need. But, and this is a lesson for all entrepreneurs, first ask who has the need. For instance consider out of order traffic lights. The motorist desperately needs them fixed, but the duty pointsmen earn their living from them. The roads department is judged on performance but has harsh budget restrictions, so they may have mixed feelings. The point is that answering a need may have to include appropriate strategies if the party with the need is different to the party who will pay. Continue reading
This article was written by Ed Hatton and first appeared in January 2011 Shop sa, the official magazine of the Stationery, Home and office products Association. The Association is fortunate to have a journal of this quality serving its members; it is a great and informative read.
Developing the sales team to gain a major competitive advantage
When you evaluate your business, listing your competitive advantages, or the even more specific Unique Selling Propositions (USPs), are they all price, product or service related? Are they sustainable?
About now some readers of this article may be thinking “Oops, I know I should look at that one day…” or “In my business everyone is the same, price on the day is the only difference…” If either of these thoughts reflects your position I suggest you stop reading and examine why your customers buy from you. If you really are a me-too business with no differentiation in the eyes of your customers, and yet you are still making sales, you are taking huge risks. If you don’t know why customers buy from you, then a change of circumstances outside your control, and perhaps even outside your awareness could have catastrophic consequences for your business.
Most competitive advantage positions relate to a product or a particular type of service. FedEx’s famous “When it absolutely positively has to be there overnight” or Debonairs “If it’s cold you don’t pay” are examples or service differentiators and Pastel’s “Nine out of ten Accountants recommend Pastel” or Audi’s “Vorsprung durch Tecknik” suggests product excellence. Price is often used – “Lowest price or we will refund the difference” is the essence of many price based differentiators. Commentators have used these slogans to show examples of USPs, and if your company can find a real and sustainable USP or two it will be in an exceptionally powerful position. Many companies have to settle for a more limited competitive advantage – being noticeably better than the competition even if that advantage is not unique.
How about developing the sales force to deliver a competitive advantage?
A team so professional, so knowledgeable and so able to solve customer needs that customers choose this company primarily to secure the services of the sales team. Services can be copied, product advantage is usually fleeting and the lowest price is the hardest of all to sustain, but the best sales force in a sector is a USP in the true sense of the word. What needs to be done to get to that position? Continue reading
….the simple plan
That they should take who have the power
And they should keep who can – Wordsworth
Will you be the growing business taking more market share? A defender of your customer base? Or one of those that lose ground to better planned and organised competitors? Do you have a plan to guide your business? Does it work for you?
Eisenhower famously said, “Plans are nothing, planning is everything”. The process of developing a good business plan will force you to think about your customers, competitors and the resources you need, and that thinking should drive your business in the future.
Assume you want to develop a plan for 2011 to defend your market share, or take new business. You may be tempted to download one of the excellent business planning templates and then concentrate on filling in the blocks. Some entrepreneurs, especially those starting out, will engage a cut-and-paste business plan developer. But there is a much better way: Simply follow Eisenhower’s advice and focus on the process of planning. Continue reading
If you are planning to open a new business you will need to think of many different things. Here are a few really key questions that you may not have thought about. If you cannot answer any one of these satisfactorily you may be taking unnecessary risks. With the horrifying failure rate of new start up businesses you would want to reduce risk as much as possible, so if any of these questions cannot be answered or leave you feeling uneasy, then my advice would be to attend to this urgently, even if it means delaying your launch.
Things to do: (The Good)
In downtown Johannesburg a fast food takeaway used to bake large pizzas, and sell them by the slice. Each time I bought a slice I noticed that the attendant chose the biggest available slice for me. As you can imagine, that made me feel really good. When a new pie was delivered for the oven the same rule applied – first sell the biggest slice. So the takeaway gained great goodwill and encouraged customers to come back. Maybe they sold 50 or 60 slices of pizza a day, that meant 50 or 60 customers feeling special, feeling valued. What was the cost of this? Nothing. That’s right, not a cent.
What can you do to make your customer feel special and valued? Continue reading
There was an inspiring story in the “It’s My Business” entrepreneurial supplement to the Sunday Times of 2nd May 2010. It described the business journey of Michael Rademeyer an entrepreneur in the clothing industry. The full article can be viewed online at the Times Live website. I have quoted from the article and acknowledge the fine work of It’s My Business and journalist Hendri Pelser on bring this incredible story to the public.
Back in 2006 the company he worked for closed down, as have hundreds in this troubled industry in the last decade. He joined another company who ‘had an unorthodox view on salaries – he didn’t get paid’. So, in an industry which has been battered by imports coming in at prices that local manufacturers can’t match, he did the intelligent thing and opened a clothing manufacturing company making jackets. Continue reading