My First Business Partnership Part 2: Finding a market

So you may have read 'My First Business Partnership Part 1' which was all about idea conception and knowing when and idea will stick. I wanted to go straight into costing but then I remembered something very vital..

So Lois and I had our idea and we had both gone through the checklist mentioned in the first post and felt confident. We now had to make sure we had a financially viable business. The very first point I like to take into consideration here is the cost of the product or service and then work backwards. How much is a customer likely to pay for it? There is no point in pricing your product at high enough to make your money back and cover costs but it's way out of reach for your market. This leads to a pre-thought however... you MUST know who you are aiming this product at in order to know how much people are prepared to pay for it! You must also do some research. So let's go from step 1.

1. Who is your market?

We knew from the start who we were aiming to. How did we know? Because they were us! We were quite clever in picking a market that was basically our age group, shared similar interests and were just like our friends. We had an instant idea of how much they would pay for things and how much we would be prepared to pay.

Now, you can go about finding your market in 2 ways. You can either do research as to who likes your product and looks for trends / patterns in gendre, age, interests etc... or you can go the easy way and pick a market, then choose a product to them (this is what we did). If you are passionate about your product or service, it is likely that you will already know who the general market is for that, because they are probably just like you. If you are not passionate about your product or service, I would question what you are doing!

I am going to follow along the lines of that you are passionate about the product and have an idea of your market, as this is what I personally recommend.

2. Do effective research

When I was in school we often got told to make questionnaires. We got told to ask how old people were, what they liked, how much they would pay for it and give them some tick boxes or multiple choice questions. NOW - I have only within the last year or two realised there is a huuuuuuge difference between leading questionnaires and effective ones. There is a reason why market researchers get paid well.

For instance, you see statistics on adverts and such that say things like '98% of women agreed that this makeup' bla bla bla... now, this seems impressive but then we have no idea what the other statements were on the questionnaire! Think about this. The other statements may have said 'I agree that this makeup makes me look 20 years younger'. They may not have ticked that, the option that is shown may have been the lowest option given. I hope that makes sense. Questionnaires can be LEADING. When you are researching your business at the start, you do not want to lead your participants in any way. You can be inclined to give leading questions and options for answers as it will make you feel good about your business idea.

DON'T DO IT!

You will only be fooling yourself.

Don't give tick box options for what they would be prepared to pay. Leave a blank line and let them come up with the answer themselves. This goes for a lot of the other questions, although tick boxes and mutiple choice can work better on some Qs. If you are interested in me doing a whole post on how to do an effective questionnaire please let me know. There is a very simple way using Google Docs that I can take you through step by step and have a questionnaire online which collates answers for you, so again if you feel that would be helpful please leave a comment.

3. Work backwards

Now, ideally, you will have asked a good amount of people from your market. I would suggest trying to get at least 50 filled in properly to find a pattern. So say you have found out that 70% of your market would pay £20 for a service, we know we need to work back from here. Within that £20 you need to factor in direct product costs (in our case the cost of makeup or tanning spray) the worker costs (in our case Lois who will be applying the MU or tanning will need to be paid a wage) and any ongoing marketing, promotional or running costs. This can be a little tricky to work out. Look out for part 2b which will explain how to work out your costings using a really simple formula.

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Sarah x