Preparing to start a business. What to look out for
Mafpels trading blog
You have decided to set up your own business. You think you have a great, unusual, promising idea. But will it work? You need to assess how the market will accept your idea.
There are many aspects to consider before starting a business. But the first thing budding entrepreneurs should realise is that the most important factors are marginality and market size. These two are the foundation of the business. If the market is large and the margins are high, you will make money and not fail.
There are many aspects to consider before starting a business. But the first thing budding entrepreneurs should realise is that the most important factors are marginality and market size. These two are the foundation of the business. If the market is large and the margins are high, you will make money and not fail.
Market size
Any business is first and foremost about numbers. Your beautiful ideas are cool, of course, but you need to know how to count. You need to understand what you are offering and what your potential market size is. Let's think of the market as a cake. If it's big, that means you can make money by taking even a small bite. If the market is small, you are unlikely to make much money even if you are the biggest player. In theory, if you have no idea where you can get enough customers to make the business worthwhile, it is better not to open at all.
To calculate the size of the market, you can use data from government statistics, industry bodies, trade associations, business media, trade publications and web resources, as well as data from various surveys. The Mafpels management's marketers always carefully calculate these aspects to avoid unnecessary risks and losses at the start.
To calculate the size of the market, you can use data from government statistics, industry bodies, trade associations, business media, trade publications and web resources, as well as data from various surveys. The Mafpels management's marketers always carefully calculate these aspects to avoid unnecessary risks and losses at the start.
A common mistake newbies make is trying to sell products or services that are not very profitable. Remember: your business must have a high margin. Then it will cover a lot of your mistakes.
If you produce or buy something for 10 euros, it is not profitable at all to sell it for 12 euros. Even if you have very large batches. Try to sell at least 3-4 times the price. This does not mean that you will keep all the difference. You will have to pay taxes, invest in advertising, pay staff, etc. If you are a beginner and have a small business, you need a product with a maximum margin so that you can cover all your costs.
If you produce or buy something for 10 euros, it is not profitable at all to sell it for 12 euros. Even if you have very large batches. Try to sell at least 3-4 times the price. This does not mean that you will keep all the difference. You will have to pay taxes, invest in advertising, pay staff, etc. If you are a beginner and have a small business, you need a product with a maximum margin so that you can cover all your costs.
- Tip #1. When you have an idea for a business, ask yourself: "Who are we going to take money from? If there is no answer, the business may not happen. You might sell your service or product to a few people you know and that's it. If there aren't people to take a piece of the market from, then the business isn't there at all.
- Tip #2. Suppose there are other entrepreneurs already operating in your chosen market. How do you find out how successful they are? You can simply observe. For example, you want to open a coffee shop. Visit several similar businesses in the area where you want to locate your café. See how many customers they have. Become a customer yourself. See what the average cheque is in that café, count how many people actually enter the café. Then you can roughly calculate how much you can earn, what the costs will be, etc.
- Tip 3: Start selling your product or service before you even have it. Create a website, advertise on social media, advertise your product, collect applications - this way you can study the demand. You will find out how interested people are in your idea and how much they are willing to pay for it.
- Tip #4. Study data on your competitors. Find out how much they make, how much they spend on advertising, etc. Of course, no one is going to share this information with the first person they meet. You can act as a buyer of such a company. Various financial reports will be available to the potential buyer. You will be given fairly accurate figures, which you will need to check. This will give you a good idea of how much you will need to spend on staff, advertising, selling goods, etc.
- Tip #5. There are many communities, clubs of entrepreneurs. Their members are entrepreneurs in many different fields. They usually like to share their experiences, both positive and negative. Join such clubs, communicate. In a short time you will get a lot of information to think about.
These tips are the experience of the MAFPELS managers over a long period of time.
Marginality
Tips: How to know how much the market will accept your idea
Business is a mindset. Success in it depends largely on the decisions you make. If you are no better than your competitors, you will close down in the first year of operation. In order to make the most effective decisions, you need to rely on sufficient quality information. MAFPELS can provide you with research and data to help you better understand your market, your competitors and your customers.
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