You’re convinced you have a great idea for a start-up and you’re bubbling over with enthusiasm. It’s going to be great! You’ll be your own boss! But before you get carried away, it’s important to check how practical your idea is, particularly if you’re planning to rely solely on your new business or career for your livelihood. That means doing the right research.
Research Your Competition
Who is providing a similar service or product? If you intend to do much or all of your business online, then research your web-based competitors. If you’re intending to sell primarily to customers 
in your area, then you need to look in local directories and explore your area thoroughly.
Once you’ve identified your competitors, it’s time to look at exactly what they offer. Are they successful? Is there anything different about what you’re offering? How many other similar businesses have started up in the last few years, and have they failed or thrived?
Research Your Market
Is there space for you? If there are too many established businesses out there already doing what you intend to do, then you’re unlikely to succeed – unless you can think of a different angle.
Who is your target customer? How old are they, and how much money do they have to spend? What else are they likely to be interested in, and how will you draw them in and encourage them to come back for more? Look at local or internet business statistics, trade publications and existing market research – and consider doing some of your own, either by designing internet surveys or by leaflet dropping and knocking on doors.
Research Your Potential Pricing
Larger competitors are likely to be able to get bulk discounts and have lower overheads overall, and they’re also likely to have access to deals with delivery companies that won’t be available to you – so consider how much it’s going to cost to deliver your finished product to your customers. Then be brutally realistic and consider if you can sell your products at a price that’s going to cover all your costs and make you an income.
Research Complementary Income Streams
Could you get income from affiliation, adverts or links on your website, or sponsorship? Perhaps you could sell someone else’s products or services on your website, and vice versa, agreeing that the host company takes a percentage of the purchase price or a commission fee per sale. If you’re making your own aromatherapy products, for instance, then teaming up with an aromatherapist, complementary therapist or bath and shower product company could make good business sense.
Research Overheads and Expenses
How much will your stock cost, and how much will it cost to collect it or have it delivered? Will you need to employ someone – if so, for how many hours a week and at what rate? Rent or mortgage payments on your premises will probably be a major expense, and you should calculate your running costs carefully, including any tax, insurances, heating, power, water, phone and internet charges your business will incur. Will you need any furniture, storage or equipment? What about stationery and the printing of business cards or leaflets? A website and an internet marketing campaign? Advertising costs? Paying your National Insurance?
Inspire Confidence
This research may seem overwhelming, but it’s essential; without it, any business plan you make will just be guesswork, and any organisation or bank offering you finance, grants or sponsorship will soon spot gaping holes in your plan or wild and woolly estimates.
However, hard evidence, accurate costings and realistic projections will prove you’re well-prepared and business-minded, encouraging the people holding the purse-strings to put their faith in you and their money in your bank account. So put on your Sherlock Homes hat right now, and go investigating!
Find more help with accounting and finance for your London-based business in our information centre.