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Understanding your business

August 21st, 2009 | Business | Detlev Gessner | No comments

So, you are planning to start a company?

Congratulations! Welcome to the world of business.

The first step to start a company or business is situation analysis, or understanding your business. This is very important. With an incomplete knowledge of your business, you might end up in a bowl of soup, if not in an ocean.

Why on earth do you need a situation analysis? To understand your customers (who are your customers, where to find them and what is their relation to your product or service) analyzing the location of your business— you won’t do much good to setup a refrigerator manufacturing unit in Greenland, would you?

And finally, to understand the competition (sorry friend, that’s one part of business which you can’t avoid—you cannot have the fruit without facing the seed). While you hope for the best, you should always be aware of the factors that might lead to the failure of your business— that’s what you gain from understanding your business.

Before you actually startup your company, try to do a little bit of research in your own way about:

  • Who are your target/likely customers?
  • What is their age group?
  • Geographically where do these customers live?
  • What is the income of your customers?
  • How frequently are the customers likely to you your product/service?
  • What medium of advertising is most effective for your customers? (eg. if you are selling toys you can go for comic book or if your company is bigger, you can go for kids’ TV channels.)
  • Who are likely to influence your customers’ buying decision? (eg. If you are selling/manufacturing foodstuff for kids, your promotion should not only take care of convincing the kids, but also their parents—they are the decision-makers)

Your location

  • Does the location have enough footfall? Or is it that you’ll have to play solitaire throughout your working day?
  • Does the location have good public transport, and parking facilities?
  • Are the space-hiring and other costs (like electricity) reasonable?
  • Is the space available enough for your business? Is there scope for expansion?
  • How expensive is it to remodel the office space to fit your purpose?
  • Find out about the companies which closed down in this location and why they closed down.
  • Is it possible to run your business from your home? That would save you a lot of cost and time.

Facing the competition

  • Find out who are your competitors
  • Where are they ahead of you, where will you be ahead of them?
  • Which groups of customers go to your competitors? Why are they going there?
  • What are the pricings of your competitors? Are your pricings lower initially?
  • How do they advertise?
  • Are more new competitors likely to come?
  • What technological advantage do your competitors have?
  • Do your competitors have the advantage of a big brother (franchisor) backing them? Is it going to affect you?