NatWest Business Builder: Understanding your finances
From market research to measuring costs and approaching potential customers, here’s how to successfully launch your business.
Ask a business owner to describe the early days of launching a business and you’ll generally receive the same response. A mix of superlative statements – “It was the hardest but most rewarding year of my life” – combined with awed incredulity at how they managed to pull it all off. But for new entrepreneurs not blessed with hindsight or a crystal ball, preparing a business for launch can feel overwhelming – and expensive.
So how can you get your business up and running successfully? We ask entrepreneurs to share their experience and tips.
Market research on a budget
“Buying data was very expensive, so our market research was all homemade,” says Gracie Tyrrell, who co-founded healthy snack brand Squirrel Sisters in 2015 with her sister Sophie using personal funds only. Their products are now stocked in nine major retailers, including Waitrose, Morrisons and BP garages. “We used SurveyMonkey to create surveys that we sent out to our friends and family on Facebook, and we held blind tastings in our homes.”
The surveys included questions around taste and packaging. “We wanted to know what people looked for, was it sugar-free or gluten-free?” The surveys were then forwarded to their friends, family and colleagues’ networks – creating a decent-sized data sample.
Friends and family were used for the blind-tasting tests, too, until the entrepreneurs were satisfied they had the data needed to pitch to buyers. “The results from the surveys and tastings backed up our claims, so we used this data, combined with stats we sourced from The Grocer and went to retailers,” says Tyrrell. “We didn’t tell them the surveys were from our friends and family.”
The pricing strategy and forecast
For many entrepreneurs, one of the hardest parts of preparing to launch is getting the pricing strategy right – which is an area that Antoine Baschiera, co-founder of rating agency for start-ups Early Metrics, knows only too well.
“We tested and we learnt, so our pricing changed tremendously as a result. Today we charge eight to 10 times more than we charged for a similar service when we launched four years ago.”
Baschiera advises all start-ups to be flexible and fluid in their pricing structures. He has adapted his pricing model, moving from a subscription-only model to one with various options. “Your pricing models should be driven by experience. As entrepreneurs, we start with an idea directed towards one market segment but then we discover new ones. You might start by selling software to bakeries and then realise the grocery shop could want it too.”
For, Yasser Khattak, founder of Den Automation, a smart switches and plug sockets company that allows users to monitor and control electricity usage from its app, pricing products has been a long journey that’s been moulded over the last few years. After initially benchmarking Den’s products against those similar on the market, Khattak took advice from the electrical wholesalers he would be trading with, while also talking to end users.
“We’ve never sat down and decided on pricing. We’ve been speaking to customers like Berkeley Group since 2015 and retailers like Currys and Argos since 2016,” he says.
“Introductions can help fast track things considerably compared with cold-calling”
Yasser Khattak, founder, Den Automation
Armed with this intelligence, Khattak and the team have opted for reasonable margin products they plan to sell at high volume. “For us it’s a switch and socket – we want to get it to a price point where it’s as close as possible to standard switches that aren’t even smart. We plan to bring the price down as fast as possible.”
Winning those first customers
When approaching customers pre-launch, coming across as credible is essential. While new consumer brands often struggle to be heard amid crowded marketplaces, for start-up B2Bs it’s usually a case of winning that very first big customer.
Business adviser Erica Wolfe-Murray suggests all start-up entrepreneurs take time to really understand their business story. “Many entrepreneurs find themselves starting companies without asking: ‘Why am I the best person to be doing this now?’” says Wolfe-Murray. “You need to really understand this – and the best way of doing so is to look very clearly at your whole life to here. It’s this story that your customers and clients want to hear and understand.”
Antoine Baschiera agrees. “Don’t just talk about how great your product is, show them the external validation,” he says. “No, you don’t have clients yet, but look at the combined skills of your founding team and the advisers and mentors that have trusted you at this early stage of the business.” The support from such people will help win over those first few clients.
Using your network
Your personal network can also play a crucial role when contacting prospects. Is there an opportunity of personal introductions via LinkedIn or Facebook?
“Introductions can help fast track things considerably compared with cold-calling,” says Khattak, who managed to secure pre-orders from five major UK electrical wholesalers, including YESSS Electrical, CEF (City Electrical Factors) and BEW Electrical Distributors, before launching in January this year.
“If I didn’t have the relationship with a retailer already, I would go into the store and look for a similar product, then look up the founder or key employees of that business and add them on LinkedIn. Once added, I would build a relationship with the person to see if they’d be willing to introduce me to a buyer from the retailer.”
Tim Prizeman, who’s worked with start-ups and scale-ups for the past 20 years, advises his clients to use their networks as much as possible.
“For any type of business, your network of contacts is a huge resource of help, advice, advocates, supporters, introductions and customers,” Prizeman says. “The key thing is not to appear needy. Ask for specific help, with a mixture of flattery and confidence – and start small. Who would turn this down? It opens the door to bigger help requests at a later date.”
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