If you are thinking of setting up your own business one of the first things you will need to do, even before you prepare a business plan is carry out some research. Is there a market for your product or service? Who are your potential customers? Who currently serves their needs, in other words who are your competitors? What does your product or service offer that is better or different to what already exists?  And importantly, what are your potential customers willing to pay for your product or service? These are some of the questions you will need to answer.

Have you considered the full spectrum of competition? If you are planning to open a café, your direct competitors will be other cafes in your area. If your ideal customers are office workers then the local spar who offer meal deals should also be included as a competitor if you are hoping to target local lunchtime trade. In this example Spar would be considered as an indirect competitor.

If you are hoping to open an upmarket beauty salon, you need to find out if there is sufficient need for this service in your area? Where do your potential customers currently go for their beauty treatments? Are they willing to pay more for a higher quality service or are they happy to continue with their current service in order to pay a lower price? Maybe they currently travel some distance for the service you plan to offer and offering this service locally would offer you competitive advantage or perhaps there is demand for a new service not currently offered in your area. You need to find out what your potential customers place the most value on –  is it price, quality, location or something else.

You will need to carry out a mixture of desk and field research. These days the internet offers us a wealth of information but to find out what your potential customers are willing to pay or what their motivations are you will need to ask them.  You could do this by setting up a focus group, or by putting together a survey or questionnaire and asking people to complete it, or it might simply be a case of having a conversation with some of the people in your local area who you see as potential customers and asking the right questions.

Once you have gained the answers to your questions you will be better placed to outline your USP (unique selling point), and put together your prices (taking into account your costs and the maximum price your customers are willing to pay for your product or service.)  This would be a good point at which to  contact  suppliers  and  find out what costs you will bear. Is your product or service viable? Can you offer your product or service at a price which your potential customers are willing to pay and which delivers enough profit to make your business viable?  The answers to these questions will be critical when you start to prepare your business plan so take your time and do it thoroughly. If your business idea is not going to be profitable it is better to find this out prior to pumping lots of money into it. Conversely, the insight gained may push your idea in another direction altogether, and may turn out to be more profitable than you had imagined.

If you have a business idea but are struggling to move forward with it, CIDO can offer you a business adviser who will provide support and guidance each step of the way.  To book an appointment, call Kirsty on 028 3839 6520 or email Kirsty.watson@cido.co.uk.