We work with SME’s and start ups and early stage businesses. We often find that in the initial enthusiasm of starting the business with the original ‘good idea’, some basics can get missed.
Our tips for 5 key initial things to think about are:
1.Why is this a good idea?
- Why didn’t someone else do this already?
- If your idea is so good and so obvious, consider whether anyone else has tried it and which market its as aimed at? If they did try it, make sure you know what happened and if it was not successful for them – why not?
For example many ideas for new fashion or clothing products come from personal experience or frustrations in not being able to find what you want. Have you considered how many people might view the conundrum the same way as you? Perhaps a range of hypoallergenic T shirts might seem a good idea to someone with very sensitive skin, but before progressing research market size and selling prices.
2. What is the Product USP?
- Why will this product shine out?
- Consider the nearest products and their USP.
- How would you convince a customer or a retailer to buy yours rather than the nearest competitor?
Most brands use words like: Value, Quality, Service, Design, Function. Consider these and know the difference between yours and the competitor. Something needs to be unique.
An example of this might be organic cotton clothing, consider whether there is a large enough market willing to pay the premium and how you will convince the consumer of the need for organic. Tipping the balance in favour of a consumer trend or ethical driver is not straight forward.
Consider why consumers may want to buy from you, what will it be about your brand which is unique or taps into your target customer’s purchasing drivers? Try to be authentic, think about how you will deliver being trustworthy, delivering the brand value you set out to.
What brands do you admire and what do they stand for? Is that why you buy from them? Considering this may help you to position your brand.
3. What is the right price?
- What will the consumer be willing to pay? Consider what the product delivers and what that is worth to the buyer.
- Its essential that early on you establish what the right selling price to the consumer is, in order to build into a sustainable business.
- Take into account that depending on how you are taking the product to market you will need to pay others their margin as well.
4. What is the market size?
- How many consumers will want this?
- This may seem irrelevant if you are selling on a small scale to start with, but nobody wants to start a business which has no future, so it is essential you research and know which market and competitors you are targeting and whether that market is growing or decreasing.
5. How to get it to market?
Considering the route to market carefully is vital because it impacts directly on the profit levels.
- Wholesale distribution – will help get your brand out into the market fast if you are lucky enough to sell to major stores or online stores. Make sure you include the right amount of retail margin for the retailer.
- Direct retailing online, – popular and straightforward for small businesses to get the product to market. However there are many hidden costs involved. Consider: website set up, product presentation, accurate, useful and convincing product copy, legal obligations for trading online, dealing with returns, dealing with out of stock situations, creating a good level of service for website customers.
- Consumer focused gift events – can be a good way to reach a target market without too many overheads, but the suitability of this depends on the product type. Consider price and margin and don’t under sell, which would upset any wholesale accounts you have who are selling with a full retail margin.
- Overseas markets – consider and research sales agents and distributors and what your margin is when you have paid commission and overseas trade fair expenses. Typical commission for agents in the fashion sector vary from 12-15%. In some regions you will need to pay show room fees as well. Most distributors will expect to make 20% margin.
- You also need to consider import duties and changes as a result of Brexit which could impact your proposed business success in certain regions, import duty can mean consumers cannot afford your, product.
Also to consider:
Costs, profit, operational costs, scaling the business, marketing and business guidance – all covered in our next updated blog.