Generating cash

The Market

You will soon see that there is scope to make plenty of mistakes here. Mistake number 1: “My business is in the global marketing industry which xyz data report defines as a $22 bn market growing at 10% pa. If only we had 1% of that market, we would have a huge business and we would all be wealthy.”

Mistake number 2: “Anyone could be a customer of our business”. Does anyone really believe such things? Well, judging by the number of business plans that include such statements, there must be plenty of people who do. Third party, desktop market research definitely has a place in any business plan but only when it is set in a sensible context and the market niche is clearly defined.

Your product/service needs to appeal to businesses in specific sectors, in specific geographical areas, with specific characteristics. Start at the beginning – Who is your first  / next customer going to be? What are their characteristics? How many businesses are there with the same characteristics? Can you dominate the niche that contains all of those businesses?

Rather than being a jack-of-all-trades marketing to everyone, why not become the acknowledged expert in marketing to a specific segment of the market? Every business can be an expert if you define the field of business narrowly enough. Once you have become recognised in one specific market, there will of course be other related markets, which you can target from a position of increased strength.

Market research

So how are you going to determine which segment of the market will be most attractive? Third party desktop market research does have a place in business plans, but if it is used inappropriately it can lead to absurd conclusions lacking in any value. The reports are sometimes out of date in fast moving markets, but they do have a place in determining the future of the marketplace and so of your strategy in penetrating that marketplace.

Much more important, and much less used by businesses in determining their plans, is first-hand consumer/customer market research. It is amazing how many businesses, which spend large sums on desktop market research, spend next to nothing and no time on talking to their customers.

For most businesses, if you ask your customers and potential customers the right questions they will tell you how to run your business. From this type of research, you will even be able to extrapolate and predict with some accuracy what your total market size might be and what your revenues might be in the future which is one of the critical issues in a business plan.

One wise wag once said that if Henry Ford had asked his prospective customers what they wanted they would have agreed that a faster horse would be handy. Many technology companies in fast-moving markets may recognise this challenge and decide that it would be easier not to survey customers and prospects, since they have no idea what they want until they have it. I believe that this is a misconception for most businesses. You should communicate on a regular basis with your customers and build a marketing strategy to meet their needs.

Route to market

Once you have some idea of the market size and the market segments that you are going to target, you will need to focus on how to reach the market. It might surprise you to learn that most businesses do not suffer from lack of products or services, most don’t even lack a huge market. They suffer because they cannot find a bridge between the two. Are you going to build a brand?

It’s very expensive but very valuable once you have achieved it. Are you going to spend nothing on marketing and promote your business through other businesses by white labelling your products and services? Different ways to build the business – both very effective but with different costs and different outcomes. If you decide to build your own brand, how are you going to promote it – advertising above the line, below the line, PR, viral marketing (increasingly the medium of choice for online businesses)? How are you going to make sales? Are you going to have your own salesforce, are you going to use third party freelancers / agents, are you going to outsource all the selling?

Tricky and critical questions that need to be answered before anyone can write their marketing strategy. One suggestion is that you work out what the core of your business is – your expertise. You would be wise to keep this at the heart of their business, devote your scarce resources to this area, and outsource everything else.