A business can succeed or fail for a number of reasons that have nothing to do with the business itself, but are due to outside factors in the environment.  So before you even think about the detail of your business idea, you need to understand the environment in which it will be operating in order to make sure that the environment 'needs' you business idea.  If there is no need, your business is likely to fail.  If this is a need, your business has a chance of succeeding.

What's Already Here?

The first thing to do is to carry out an audit of your local environment (local being defined as the community you want to buy your goods or services).  For most small businesses, this is a physical location generally relatively close to their home.  For example if you want to open a particular type of shop, or offer a particular type of service in your community such as gardening or cleaning.

This is what will be known as your 'market', named after the old notion of a market place being where everyone went to exchange their goods.  You need to know about your market before you get started.

This next video explains why:

_{Playing time: 2.54}

One of the first easy, inexpensive activities you can do to research your market is to do an audit of what is already here.

ACTIVITY:

You need to develop a map of your market.  This can be a physical map of where businesses are located, such as what shops are where, etc; or it can be a mindmap of virtual offerings so you have an idea of what is offered where within your locality.  You can take photos to illustrate your map, or collect other data to add and annotate your map, such as size of business, number of employees, etc.  Post your map in the 'My Location Wiki' and see how your location differs to others who live in different areas.

This activity forms part of your 'market research' in that it is researching what is already being offered in your market.  Some of what is offered might be potential competition to your idea, and others might be potential partners for your idea.  But before you can make any judgements, you first of all have to find out and map who is out there.  You will do more market research in the next section, but for now, let's keep focussing on 'the need'.

Finding your USP

Every product ought to have a Unique Selling Point or USP.  This is what makes the product different from every other product or service available.  For a service, that USP is often the person offering the service, i.e., you are offering it and you are unique, compared to someone else offering it.  This is why we choose one hairdresser, for example, over another – because we like the way that particular hairdresser cuts our hair despite the fact there are lots of skilled hairdressers. 

Sometimes the USP is price – you can provide a product or service much cheaper than can anyone else.  Or the USP could be a secret recipe, such as Coca-Cola. 

ACTIVITY:

Now that you have mapped out what is already here and can see how your idea might fit into the mix, consider what it is about your idea that is Unique.  See if you can come up with more than 5 USP's and present them as a mindmap or infographic.  Once you have identified what you think they are, you can move onto do market research to test out if you are right, and if they will be good enough to make your business idea succeed.  Post some of your USPs in USP Chat and see if others have similar ideas.  You can be similarly unique in different locations and still remain unique!

ENTERPRISE COmmunity projectS

If you are looking at a business enterprise to help resolve a community problem or issue, you might want to work through the 'Introduction to Community Projects' curriculum, particularly the elements around engaging with your community, checking the problem is shared, and involving the community in coming up with the solution.    

Alternatively, you might prefer to simply continue on this curriculum path and carry out market research only to see if your business idea is viable and will meet the community's needs.

Photo by rawpixel on Unsplash

Either way is fine.  You may also find that an idea that came up in another curriculum area is something you want to pursue as a potential enterprise idea - this is also fine.

If your business proves viable and takes off and grows, you will need to think about the ownership of the business, and if or how you want the community/customers to have a stake in the outcomes also.  The assumption at this point in time is that you will be working a  'sole trader' in launching your business idea, and that you will change the ownership (and governance structure) later as your business grows.    You don't need to make a decision about this yet - but you need to understand what the options are for the future.

TYPES OF BUSINESS OWNERSHIP

The four most common types of business ownership are sole proprietorship (sole trader); partnership; corporation (private or public); and cooperative.

This next short video gives a good overview of the four:

_{Playing time: 1.54}

At this point, you are probably operating as a sole trader/sole proprietor or as a partnership if you are working with a friend on your venture.  You may want to expand and register as a corporation (a proprietary limited company - pty ltd) and if you grow to the point that you sell shares on the stock market then you become a public limited company.  Alternatively you might want to consider establishing a cooperative, which means there is shared ownership such that everyone who spends money in the business can benefit from the business.

ACTIVITY:

Cooperatives are the least well known form of business structure.  Search on the internet to see if you can find a cooperative that is operating in your industry or market.  If you cannot, look at the coop retail chain for an example.  Explore how the ownership is shared, and what this means for the distribution of profits in the business.  Post your thoughts and findings in the Cooperative Forum to see what others have found often.

You do not have to make a decision about this yet - but you need to be aware that you will need to think about it in the future if it looks like your business idea is viable and us going to grow into a successful enterprise.

What is Marketing?

Defining marketing is not that easy.  Not everyone agrees as to what the scope of marketing is, and some people would say marketing includes areas that other people would leave out. 

Essentially, marketing is about understanding the marketplace in which you want to sell your product or service, and then using that marketplace understanding to make your product or service a success. 

Sales is when you exchange your product or service for income.  A successful marketing approach can be measured by sales outcomes, but sales are not only dependent on marketing—other factors affect the customer’s decision to buy.

^{Playing time: 3.20}

Gary Veynerchuk argues that we are after people's attention, and one way to know how to find out what currently has their attention is through market research.  Researching the market involves understanding the Marketing Mix, so you can research each area and then make 'attention grabbing' decisions based on your findings.  

THE Marketing Mix

 The marketing mix is also known as the 4Ps, representing

• product
  
• price
  
• promotion
  
• place
  

The idea is that if you get the right mix of the 4, then your marketing will be successful.  Each one of the 4Ps is co-dependent, meaning that each P needs to consider the other 3Ps when decisions are being made. 

The Marketing Mix is exemplified in this next video:

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Product

There are lots of different decisions to be made when defining your product.

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When starting out with your business idea, the most important product (or service) decisions involve risk choices, ideas and evaluation, differentiation and market testing.    As a new business you will be launching a new product or service, or looking to launch an existing product or service into a new market. 

ACTIVITY:

Start by writing down what your product or service idea is.  You can edit this as many times as you want as you progress through the marketing mix and learn more about your market, but if you don't start with it written down, or 'doodled' somewhere, you will lose definition and focus as you develop the idea further.  This 'product/service definition' note is a working document and should be open at all times throughout this unit so you can constantly change it or refine it.  You could almost keep this as a post-it note on your wall so you can easily change it, update it or scribble on it as you want.

THE PRODUCT LIFE CYCLE

Your business will be at the beginning of the product life cycle. The product life cycle describes the evolution and eventual decline of a product in a market place.  Every product will go through a life cycle, although the length of time it spans and how steeply it grows can vary.  Each product will have its own life cycle journey.

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The product life cycle is so named because it is effectively the life of your product from birth to death.  The introduction stage is when your product is born; it first comes to market, and is launched.  This can take a few years to get going before the product really establishes itself and then hits the growth phase. 

In the growth phase, your product really takes off and sales increase rapidly with the product reaching all its target audience and establishing itself as a solid player in the market.  Once the product starts to plateau and reach its maximum market audience, it is reaching its maturity phase.  This is when the product is established, pretty much needs brand maintenance only, and you need to start thinking about what you are going to replace it with when it then moves into decline. 

Every product eventually moves into decline, if only because the market moves on and the next best thing emerges to replace it. 

For a video showing some examples of where products are in the life cycle, watch this: 

_{Playing time: 3.05}

Some versions of the Life Cycle model have 6 stages, with a pre-introduction stage of development, and a post-decline stage of decision, but the four core areas are the ones to consider for your product.

For many organisations, creating the next version of their product line ensures they have the next product emerging in its own lifecycle—so that this next product is in the growth and maturity phase as the initial product heads into the decline phase.

Understanding the product lifecycle is important to ensure your business venture is sustainable and that you have a through flow of products to keep you in business as your initial launch product heads into decline.

For your business idea/value proposition, have a look in the marketplace that you will be entering and find alternative offerings that are in the different stages of the product lifecycle.  You can use your own idea for the product in the ‘introductory’ phase, but find competitor products that are currently in the growth, maturity and decline stages.  Complete the Product Life Cycle Template with what you found out, and what you taken as evidence of your findings.  Save this in your portfolio.  Now go back to your product/service definition and see if you want to change it at all (or add notes to it) given what you have found out about the competition.

PRICE

Price is the 2^nd P in the marketing mix and is very, very important.  How much something costs directly affects our decision on whether or not we can afford to buy it. 

In economic terms, the relationship between price and the amount it impacts on purchasing decisions is called elasticity of demand.  Basically, the more ‘elastic’ a product is, the more its sales are affected by its price. 

So, for example, in a supermarket, when you do your weekly shopping, you might be tempted to buy a different brand of a good you normally buy because the new brand is on ‘special offer’ and half the price of your normal brand.

Think about the purchasing decisions you made in the last week.  How much did price impact on what you bought? 

Now make two lists of what you bought in the Price Impact Template:

1.     products where price made a big impact,

2.     products where price didn’t make such a big impact.

For example, food purchases might be impacted a lot by price, but your choice of where to rent and live might be less price sensitive and more location sensitive.  Clothing might be price sensitive for some types of clothes, such as t-shirts, but less price sensitive for other types of clothes, such as an outfit for going to a wedding.

Can you draw any conclusions about when price is an influencing factor from you by looking at your lists?  Save this in your portfolio.

Understanding Demand

So, the ‘demand curve’ represents the relationship between price and amount of product sold.

_{Source: https://inflateyourmind.com/microeconomics/unit-3-microeconomics/section-2-elasticity-and-the-slope-of-the-demand-curve/}

The shallowest curve D2 is the most price sensitive.  As the price changes, the number of products sold changes dramatically (40 units difference between the two prices).  This is the case for products where there are lots of alternatives and substitutes available, such as different brands of butter, or milk, or soap.  

The steepest curve D1 is the least price sensitive, in that a rise in price doesn’t alter the number sold that much (only 8 units difference between the two prices).  This is the case for products that are necessities, or luxury goods where there is a smaller market and people are not that worried about cost.  

If you want to look into elasticity of demand a bit more than we have here in the curriculum, check out this website - but it's not compulsory: 

https://inflateyourmind.com/microeconomics/unit-3-microeconomics/section-2-elasticity-and-the-slope-of-the-demand-curve/

But human beings aren’t always rational!

Economic theory assumes that people will make rational purchasing decisions, rather than emotional decisions.  Our brains are not always rational, though.  For example, we tend to think something is better if it is more expensive, even if it is not better.  This is called cognitive bias, and can be influenced by advertising and other communications. 

ACTIVITY:

Think of something that you buy where you could buy a cheaper version but don’t.  For example, do you always buy branded headache pills when you could buy the chemist’s generic brand that contains the same active ingredients? 

Why do you do this? 

Do you think, for example, the paracetamol in ‘Advil’ is better than the paracetamol in Priceline’s own brand? 

Make a list of items in the 'Buying Choice Template' where you spend more money on the more expensive brand when there is a cheaper option available.  For each item on the list, write the reason why you buy the more expensive brand.  Then research on the internet whether or not your reason can be supported by evidence!

In some ways, cognitive bias is like the placebo effect.  The placebo effect occurs when sick people feel better even though they have been given a ‘false’ medicine.  That is, a doctor may prescribe a ‘sugar pill’ and the patient thinks they have had real medicine, and because of their belief the patient’s brain makes them feel better.  With cognitive bias, we think we are getting more value for paying more money, and hence we enjoy the product or service more. 

An example of cognitive bias is when two groups of people drink the same wine but pay different prices for it.  The people paying a lot of money will say the wine is great and really enjoy it; the people paying less will say it is not very good and criticise it.  And if they did a blind tasting, the chances are they won't be able to tell which wine is dearer and which costs less! 

So how do you value what something is worth?

Essentially, something is worth what someone will pay for it at the time that you need to sell it and they need to buy it. 

If there are no buyers in the market, then the product or service is not worth anything, because it has no value to anyone other than to the seller.  In order for a product or service to be worth something, it has to have a value to someone other than the seller. 

ACTIVITY:

Consider everything that you own - include your clothes, household items, electronic items, etc; everything in your home, for example.  Everything in your bedroom probably has a value to you, but do you think you could sell any of it?  And if so, how much would it be worth?  Would it be worth as much to someone else as it is to you?  Probably not.....  so now you get how something may have a value to you but not to a potential purchaser.  This is why a lot of businesses fail - because the idea someone has is not something a potential purchaser values as much as you do.  You will test this out when you do your market research later.

From Demand to Supply

In economics, the other element impacting pricing in addition to the demand curve is the supply curve.  This looks at how many products you can make at each price point, or how many you would want to supply at each price point to ensure you are making a profit. 

For example, if your product is very labour intensive then the cost of producing one additional unit will be high; but if your product is mass produced, then the cost of producing one additional unit could be low.  Also, if you bulk buy components then it could be cheaper per product to produce larger quantities on a per product basis than it would be if you were to produce a smaller number.

_{Source: https://www.ducksters.com/money/supply_and_demand.php}

Economic theory tells us that we should produce the number of products required for the point of equilibrium, which is where the demand curve and supply curve cross.

The point of equilibrium indicates the optimum price where the number of products you will sell matches the number of products people in the market will buy. 

If you want to know more about this idea, have a look at the following site - but it's not compulsory: 

https://www.ducksters.com/money/supply_and_demand.php

ACTIVITY:

Consider how you are thinking about the supply side of your business idea and the manner in which you are considering launching your business.   Are you thinking of starting small and building, or launching with a big bang?  How will you be financing the development of your product/service, and hence how much will you need to sell each product for in order to return a profit?  Develop a mindmap of all the factors you need to consider with regards to how you are going to supply your product and save it in your portfolio.  You can revisit this as you progress with your business to make sure you have covered them all off!  Place it in the Supply Wiki for feedback from others.

Pricing Strategy

We are now going to look at pricing strategies. Watch the introductory video to understand  skimming strategies, penetration strategies and status quo strategies:

Playing time: 5.00

This video focusses on how the competitive position impacts the pricing strategy. 

This is also explained in the following article titled The Marketing Mix:  Pricing Strategies, published by learnmarketing.net available at:

 http://www.learnmarketing.net/price.htm

Pricing is one of the most important elements of the marketing mix, as it is the only element of the marketing mix, which generates a turnover for the organisation. The other 3 elements of the marketing mix are the variable cost for the organisation;

Product - It costs to design and produce your products.

Place - It costs to distribute your products.

Promotion - It costs to promote your products.

Price must support the other elements of the marketing mix. Pricing is difficult and must reflect supply and demand relationship. Pricing a product too high or too low could mean lost sales for the organisation.

Pricing Factors

Pricing should take the following factors into account:

1.       Fixed and variable costs

2.       Competition

3.       Company objectives

4.       Proposed positioning strategies

5.       Target group and willingness to pay

An organisation can adopt a number of pricing strategies; the pricing strategy will usually be based on corporate objectives.

The table below explains different pricing methods and price strategies with an example of each pricing strategy.

Price is also important because it determines how much profit you make. Your challenge, however, is setting the right price for your product and ensuring that your pricing strategy doesn't turn customers way.

ACTIVITY:

Rank the different pricing strategies in terms of how you would prefer to price your product/service when you launch your business enterprise.  For each strategy, work out what you would price your product/service at.  Save this all in the Pricing Strategy Template.  You can revisit this at any time and change it if you change your mind as you do more market research.  This isn't fixed in time - you can change it whenever you want, it is just a guide to make sure you are considering all the factors you need to.

PROMOTION

Promotion is all about communication, and communication is everywhere. Think about how many times you have been communicated with about products today.

We are constantly bombarded with communications about products to the point that we become unconscious to it.  And often we remember the advertisement but not what the product is!

ACTIVITY:

List down all the different opportunities you have had today to be communicated with about different products.  For example, radio advertisements, Facebook advertising, train/bus advertising, special offers in shops, email promotions, etc. etc. etc. See if you can get to 20!

Jon Gibson notes the following 4 key elements to consider when considering a promotional strategy:

Segmentation
Dividing the marketing into distinct groups so you know who you want to talk to and what message you want to deliver.

Targeting
Deciding which of these groups to communicate with, and how to talk to them in terms of which are the best methods to use to gain their attention.  These include advertising, personal selling, sales promotions, digital media, direct marketing and public relations activities.

Positioning
How the product or brand should be perceived by the target groups in terms of the brand messaging and corporate identity.

Messaging
Delivering a specific message in order to influence the target groups

_{Source:  http://www.marketing-made-simple.com}

PROMOTION STRATEGY

1.      Advertising – This mode of promotion is usually paid, with little or no personal message. Mass media such as television, radio or newspapers and magazines is most often the carrier of these messages. Apart from these, billboards, posters, web pages, brochures and direct mail also fall in the same category. While this method has traditionally been one sided, advertisement over new media such as the internet may allow for quick feedback.

2.      Public Relations & Sponsorship – PR or publicity tries to increase positive mention of the product or brand in influential media outlets. These could include newspapers, magazines, talk shows and new media such as social networks and blogs. This could also mean allowing super users, or influencers to test the product and speak positively about it to their peers. This type of advertisement may or may not be paid. For example, sponsoring a major event and increasing brand visibility is a paid action. Sending free samples to a blogger then depends on their discretion and opinion and is not usually swayed by payment.

3.      Personal Selling – Opposite of the one directional promotional methods, direct selling connects company representatives with the consumer. These interactions can be in person, over the phone and over email or chat. This personal contact aims to create a personal relationship between the client and the brand or product.

4.      Direct Marketing – This channel targets specific influential potential users through telemarketing, customized letters, emails and text messages.

5.      Sales Promotions – These are usually short term strategic activities which aim to encourage a surge in sales. These could be ‘buy one get one free’ options, seasonal discounts, contests, samples or even special coupons with expiration dates.

PLACE

Place refers to how you get your product/service to the end user.  It is effectively about distribution.

Now this might not seem immediately important to you, particularly if you think you are offering the end user service yourself, or are planning on selling through the internet, but it is still very important. 

Where are you going to provide your service, for example?  If it is in people’s homes, you need to limit yourself to a geographical area that you can easily move within so you don’t waste time travelling.  If you are selling through the internet, how are you going to dispatch the goods to the end user?  Will you simply rely on the postal service, or will you use couriers?  Will you allow your product/services to be offered through other suppliers, for example through other retail outlets?  Will you sell through online marketplaces, such as eBay or Gumtree? 

Place is about how the transaction takes place, so you want to find the best place to distribute the product to your customers.  An introductory video to distributions channels is next to help you think this through: 

_{Playing time: 12.57}

ACTIVITY:

For your business product or service that you are launching, consider ‘place’ and how you are going to distribute your product to get it to market.  Plot how you will initially launch, and then how you hope to expand as your business grows.  Save your distribution strategy in your portfolio so you can revisit and change it as your business develops.  Post your ideas in the Distribution Strategy Forum to share with others and get feedback and ideas from them also.

Market Research

Carrying out research into your market involves multiple activities and multiple stakeholder groups.  As well as finding out about your potential customers, you also need to find out about the competition, the suppliers who will provide you with what you need in order to run your business, and other external factors that could impact your business, such as new trends, ideas or inventions that could affect what you do.

This next video gives a good overview of what market research is and how far it needs to extend.

_{Playing time: 2.14}

Confirm your Business Idea

Start by watching this video by Dan Martell about how to validate your business idea prior to launching your organisation:

_{Playing time: 5.47}

Dan Martell asks three key questions to help you validate your business idea:

1.     Do you have the problem that you are trying to solve for others?

This helps you to understand the mindset of the customer, which is key in building a successful enterprise.

2.     Do you have a pain killer?

Are you proposing something customers must have rather than something that is merely nice to have.

3.     Do you own passion about your idea?

Working through the problem should be what gets you excited, not the solution.

One of the key messages Dan Martell offers in this video is about getting feedback from the right customers.   You can do this initially through the use of a survey.  A survey is a questionnaire that is given out to people to complete, either in paper format or electronically over the internet. 

There are a number of internet survey packages that you can use to create an online survey, such as SurveyMonkey; or you can simply send an email asking people to respond.

ACTIVITY:

Before you even start to think about the questions you need to ask, think about exactly who you want to answer your survey. 

This short video explains how to find the right people to ask your questions to:

_{Playing time: 2.28}

Based on the advice in the video, complete the Survey Respondent Template.

·       Who will you ask?

·       what will you ask?

·       Where will you find your respondents?

·       What do expect as a result from the survey?

Market Research Plan

Now you need to pull all your learning together to come up with a good market research plan.  For this you need to really consider the goals you want to achieve with your market research. 

The Queensland Government has issues some great advice around identifying the goals of your market research campaign:

https://www.business.qld.gov.au/business/starting/market-customer-research/market-research-basics/defining-market-research-goals

Thinking carefully about your goals will help you design a research project that gets the accurate, useful results you need. 

When conducting research, be careful not to let your opinions and preferences affect surveys or the results. Never decide the conclusion in advance. Be prepared to find market information that is unanticipated, as this builds a more accurate picture of your target market and will be more useful to your business.

ACTIVITY:

Write out the goals of your market research so you have a definite and clear focus.  Keep these somewhere visible while you continue to develop your market research plan and save them in your portfolio.  Once you have your overarching goals, you can focus on breaking these down into objectives.  

So for example, one goal might be to establish if your business will be viable; so objectives for this might include whether people will buy your product at a price you can afford to provide it for; whether people already have a something that solves this problem for them; what it would take for people to switch if they do already have something, etc.  You can use the Goals and Objectives Template for this if you want to.

Developing a list of questions

From your set of key objectives, you can develop a list of research questions that you will need to answer - this is basically what it is you need to get an answer to,  such as:

·       Is there a demand for my product or service?

·       What sales can I expect?

·       Who buys my products (e.g. age, gender, income, occupation, lifestyle)?

·       What is the best price for my products or services?

·       How should my products look, feel, taste, etc.?

·       What is the best location for my business?

·       Are other businesses offering similar products or services?

·       Is there sufficient demand for my product to make the business viable?

Once you have your research questions, you can start to think about what you need to ask people specifically in order to find out what you need to.   You would not, for example, ask someone 'what sales can I expect from you?' but you might ask them 'what would it take in order for you to buy this product?', or 'if it was cheap enough, would you buy this instead of what you currently buy?'.

ACTIVITY:

Develop a list of questions you want to ask in your market research.  Remember you identified different groups you wanted to ask earlier, so now think about what specific questions you want to ask each group.  This is a surprisingly difficult task as you will probably find that you miss things, or want to ask additional questions once you get the surveys back, but then it is too late.  So test out your questions on some friends and discuss them with your tutor/mentor first, and refine them as many times as you need.  You can post them in the Test Question Forum for others to have a go at if you want to.

There is additional information on writing questionnaires and surveys in the 'Investigative Insights' curriculum area.

Using Secondary Data

In addition to carrying out your own data collection, which is called primary data, you will also have access to secondary data. 

Secondary data is data that has already been collected and is available to you.  The data has been collected for another purpose, such as a census, but can still be very useful - particularly if there is data from a trade association associated with your business idea, such as tourism data for example.

Secondary data can also help guide your actions.  For example, the Nielson report on digital activity could give you insight about how to plan your digital campaign, rather than give you information about your product.  The site allows you to track changes over time as you can see previous months results.

ACTIVITY:

Have a look at the Nielsen digital trends site:

http://digitalmeasurement.nielsen.com/digitalmedialandscape/gender_report.html

Consider how you will digitally market your product based on the data and trends presented here; for example, note the increasing trend to view content on smart phones while the use of tablets remains relatively static - what does this mean for advertising your product or service?

This next video looks at finding data on the internet and looks at challenging stereotypes by finding data to support stereotypes or not.  What is interesting about this video is how many questions he can ask and get data about, simply by searching on Google. 

_{Playing time: 2.08}

ACTIVITY:

See if you can find any secondary data sets that relate to the market you are looking to sell into.  What insights can you gain from the data?  Are any of them so surprising they are hard to believe?  Can you use any of this data to help you make claims in your marketing, such as 1 in 10 people do XXXXX.  Post any insights you find on Unbelievable Chat and see if others find them believable or not.

What to do with your Market Research

So once you have all your data, what do you do with it?  Firstly you use it to refine your business idea to make sure you listen to the responses and adapt your idea to meet the market needs in order to succeed.  Secondly, you use the data to refine your marketing mix - the 4P's to help you launch your product.  Thirdly, if the data is negative, you listen to it and stop what you are doing!  There is no point in launching a business that nobody wants.  Market research stops you from doing this, so don't ignore it!

ACTIVITY:

Having carried out your primary and secondary data research, collate what you have found out and draw out the top 10 lessons for you from your research.  Complete the Market Research Findings Template with what you found out, and what this means for your business idea.  For example, you might find out that your idea will only sell if you price it at half what you intended to.  This means you need to find a cheaper way of producing your product, or you need to can it.  Once you have worked out what the data is telling you, decide whether this means your business idea can adapt to this feedback or needs to be dropped.  It is better to know if a business is going to fail before you launch it rather than spending time, money and effort launching it only to find out that it fails!

Now that you have considered your business idea in terms of the market it will serve, it is time to consider the idea in a wider context to look for external factors in the environment that could impact your business.  For example, if you were going to open a hairdressers and the Government passed a law to ban people from getting their hair cut more than twice a year, then it would impact on your business.  I know this is a stupid example, but it makes the point!

To consider your environment, you need to carry out what is called a PESTEL analysis.  This is an acronym that stands for: 

• Political
  
• Economic
  
• Social
  
• Technological
  
• Environmental
  
• Legal

POLITICAL AND LEGAL

ECONOMIC

SOCIAL

TECHNOLOGICAL

ENVIRONMENTAL

PESTEL ANALYSIS

Now that you have researched your market and the environment in which you will be operating, it is time to pull everything together in a business plan, and to put together a budget to see if your business is going to be viable.  You will draw on all of the activities you've completed so far in this curriculum area in order to do this.

For an overall idea about how to write a business plan, have a look at this video which looks at how and why you should have a business plan to help you succeed as a young entrepreneur: 

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The video outlines 9 steps to writing your business plan and implementing it.  You'll find you have most of the information you require already from having completed the previous steps in this curriculum area, but here you bring them all together and see how they align, and/or how you need to adapt them to make sure they all align.  Hopefully when you get to the end of this, you'll have your map for how to go forwards.

ACTIVITY:

Put together a business plan utilising the follow steps:

1.  Define your vision (what problem are you trying to solve?)

2.  Set goals and objectives for the business, short term (the next 12 months); mid term (the next 2-3 years); and long term.

3.  What is your USP (Unique Selling Point - identifying your business need)?

4.  Know your market (this includes your PESTEL analysis and competitor analysis)

5.  Know your customer (this includes your market research)

6.  Research the demand (and supply opportunities)

7.  Set your marketing goals (refer to the marketing mix)

8.  Define your marketing strategy (your marketing plan)

9.  Take action!  Time to get on with it......

CASHFLOW

You've probably heard the saying 'cash is king!' - and for every start-up business, it is.  Basically you need to make sure you have enough cash coming in to your business in order to pay the bills you have coming in.    New business enterprises are usually cash-poor in that they do not have enough cash in the business to make the product or provide the service they are providing before they can get the money in from customers.  

This next video explains the concept of a cashflow forecast and what contributes to each element: 

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Regardless of how good you business plan looks, if you do not have a good cashflow forecast, you will go bust!  

ACTIVITY:

Complete the cashflow factors template as a first step towards completing a cashflow forecast for your business enterprise for the first 12 months.  Your aim is to see how much cash you will need to find in order to keep your business afloat for the first year.  You will need to make predictions on sales, but should be able to predict expenses.  If you find your sales are not meeting your predictions, you might find you go bust.  Hence it is important to be realistic and use your market research to give a conservative sales forecast.

UTILISING TECHNOLOGY

Most cashflow forecasts can be created on Excel or another spreadsheet, and if you're clever, you can create cells that allow you to change parameters (such as number of sales and price of sales) to see how changing these impacts your income.

For an example of how to put together a cashflow forecast on Excel, have a look at this next video - it might seem quite long but it literally does build the spreadsheet from a blank sheet: 

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ACTIVITY:

Create the cashflow forecast above in Excel or another spreadsheet package of your choice, and see how if you change some elements it impacts on other elements.  You can use the Cashflow Template as a start.   Use this to see what the minimum sales and maximum expenditure you can tolerate per month in order to keep your business going.  This will allow you track how your business is doing month by month to make sure you are not going bankrupt.

When you consider that over 90% of start-ups fail, the odds are stacked against your first effort being a success - but that is okay provided you learned from the experience before you invested too much time, effort and money, and that you can take that learning forwards to your next iteration or idea.

Photo by rawpixel on Unsplash

This final section is for you to reflect on what you did  and why - even if you got everything right - your business plan is suggesting your enterprise idea is not viable.

ACTIVITY:

Firstly, go back and dissect your business plan.  Do each of the steps align easily or are you adjusting the outcomes of different steps to make the plan make sense?  It is very natural to do the latter, and while this doesn't mean your idea isn't viable, if the plan is not falling into place after all the work you have done in market research and environmental analysis, then this has to be telling you something.  Secondly, go back to the beginning and review your business need.  Was it really something shared by others enough for them to want to spend money fixing it - or were people just being polite?  If they shared the 'ownership' of the solution, would it have been different?  What could you have changed to have ensured the problem was more shared?  Thirdly, this whole process is likely to have challenged you personally; to have pushed you to engage with people and activities you probably never thought you would have.  Did you enjoy the process?  What would you do differently next time?  

Put together a reflection, either as a narrative, a podcast, a mindmap or an infographic of some sort to record your learning, drawing out an action plan for what you will do differently next time.  Share at least one key learning point in the Enterprise Learning Chat.

This is where we post any new resources or publications that we think might help you in your quest.  They are not compulsory.

This is where you can give us your ideas on how to improve this curriculum area for the next time we edit it.  Use the co-creation wiki below.

If you think you've finished, submit your work for review here and claim your certificate once approved.